The State of Crypto Regulation: Nigeria
Nigeria gradually transitions from a anti-crypto state to one embracing blockchain technology & regulating digital assets.
Note: You can get the latest regulatory overview of every country on the planet here using Umoja Labs’s BRAF-based map below (Blockchain Regulatory Assessment Framework).
…and access cryptocurrency ownership and blockchain protocol-based financing (i.e., tokenized real world assets) by country
The Regulatory TLDR
- Policy & Regulation Status: Developing Regulatory Environment, with Blockchain Regulatory Assessment Score of 40.63/100.
- Number of Cryptocurrency Owners: ~12M (~5.75% of Country)
- Summary: Regulators embrace the potential of blockchain technology but very critical of cryptocurrency secondary markets and crypto exchanges.
The Nigerian Crypto Ecosystem
Overall, there are an estimated 12.86 million cryptocurrency owners in Nigeria, representing approximately 5.75% of the country’s populations. On Umoja Lab’s BRAF (Blockchain Regulatory Assessment Framework), Nigeria is rated a 48.25 out of 100, indicating that it is a “Developing Regulatory Environment” that is becoming more clear on where blockchain technology and cryptocurrency sit with regards to expected compliance measures.
A Regulatory Overview
Cryptocurrency adoption and interest have been growing rapidly in Nigeria, driven by factors such as inadequate financial services, high inflation, the depreciation of the national currency, and a young demographic. While cryptocurrencies are not recognized as legal tender by the Central Bank of Nigeria (CBN), they are not illegal either. The CBN banned commercial banks from engaging in cryptocurrency transactions in 2021, but there are no laws or provisions criminalizing the use of cryptocurrencies. As a result, cryptocurrencies are widely traded on cryptocurrency exchanges in Nigeria, and peer-to-peer trading is popular.
In May 2022, the Securities and Exchange Commission (SEC) of Nigeria published regulations for digital assets, bringing cryptocurrencies under its purview. Under these regulations, crypto exchanges operating in Nigeria are required to obtain a permit from the SEC and comply with certain requirements. The regulations also define digital assets and provide clarity on their legal status in the country.
Cashing out cryptocurrencies for fiat in Nigeria can be challenging due to the distance between the banking sector and cryptocurrencies. However, there are options available, such as using a crypto-to-fiat mobile application or a cryptocurrency broker. P2P marketplaces also facilitate the exchange of cryptocurrencies for local currency.
In terms of taxation, there is currently no specific tax law regarding cryptocurrencies in Nigeria. However, the Federal Inland Revenue Service has stated that cryptocurrency transactions are taxable as capital gains. The Nigerian government plans to tax cryptocurrencies and digital assets in the future if the proposed Finance Bill is approved.
The future of cryptocurrency in Nigeria will be driven by trends such as cryptocurrency as a medium of payment and investment. Cryptocurrencies are expected to be used not only for retail trade but also for cross-border payments and remittances. Nigerians see cryptocurrencies as a store of wealth and a means of preserving their investments in the face of inflation and currency depreciation. With regulatory bodies in place and proposed legislation, cryptocurrency investments in Nigeria are expected to gain legitimacy and confidence.
Taking a Deeper Dive
The Nigerian government has approved a national blockchain policy as part of its efforts to transition to a digital economy. The policy aims to create a blockchain-powered economy that supports secure transactions, data sharing, and value exchange between people, businesses, and the government. While the policy document has not been made public, the government has directed regulators, including the Central Bank of Nigeria and the Securities and Exchange Commission (SEC), to develop regulatory instruments for the deployment of blockchain technology across various sectors of the economy.
The approval of the national blockchain policy reflects Nigeria’s growing interest in blockchain technology and its potential to drive economic growth and innovation. Nigeria has emerged as one of the fastest digital asset adopters in the world, with a significant number of its population using cryptocurrencies for various purposes, including remittances and online transactions. The government’s move to embrace blockchain technology suggests that it is now looking to harness its benefits while maintaining regulatory oversight.
The policy’s focus on secure transactions, data sharing, and value exchange aligns with the core features of blockchain technology. Blockchain is a decentralized and transparent ledger that enables secure and immutable transactions. By leveraging blockchain technology, Nigeria aims to enhance trust and security in transactions between individuals, businesses, and the government. This could have significant implications for sectors such as finance, supply chain management, healthcare, and governance, where trust and security are crucial.
The government’s directive to regulators to develop regulatory instruments for the deployment of blockchain technology indicates its commitment to creating a favorable regulatory environment for blockchain-based innovations. This is essential for attracting investment and fostering the growth of the blockchain ecosystem in Nigeria. The involvement of regulators such as the Central Bank of Nigeria and the SEC suggests that the government recognizes the need for a coordinated approach to blockchain regulation, considering the potential impact of blockchain technology on the financial system and the need to protect investors.
The approval of a multi-sectoral Steering Committee to oversee the implementation of the policy highlights the government’s recognition of the cross-cutting nature of blockchain technology. Blockchain has the potential to transform various sectors of the economy, and a coordinated approach involving multiple stakeholders is necessary to ensure effective implementation. The Steering Committee will likely play a crucial role in coordinating efforts across different sectors, facilitating collaboration between government agencies, industry players, and other relevant stakeholders.
Overall, the approval of the national blockchain policy in Nigeria signals the government’s commitment to embracing blockchain technology and leveraging its potential for economic growth and innovation. By creating a favorable regulatory environment and promoting collaboration between different stakeholders, Nigeria aims to position itself as a leader in blockchain adoption and drive its transition to a digital economy.
Emerging Trends & Themes
Several recurring trends and themes can be observed across the articles. First, there is a growing interest and adoption of cryptocurrencies and blockchain technology in Nigeria. The country has a large population of tech-savvy and pro-blockchain youth who are eager to adopt digital assets. Nigeria ranked among the top countries in terms of cryptocurrency adoption, particularly in peer-to-peer trading. This growth is driven by factors such as inadequate financial services, high inflation, the depreciation of the national currency, and a young demographic.
Second, there is a regulatory push to establish clear guidelines and regulations for cryptocurrencies and digital assets in Nigeria. The Securities and Exchange Commission (SEC) has published regulations for digital assets, bringing cryptocurrencies under its purview. Crypto exchanges operating in Nigeria are required to obtain a permit from the SEC and comply with certain requirements. The government has also approved a national blockchain policy, indicating its commitment to embracing blockchain technology and creating a favorable regulatory environment.
Third, there are challenges and opportunities in the regulatory landscape for cryptocurrencies and blockchain technology. The Central Bank of Nigeria has banned banks from engaging in cryptocurrency transactions, creating a challenging environment for crypto exchanges. However, there are no laws or provisions criminalizing the use of cryptocurrencies, and cryptocurrencies are widely traded on exchanges and through peer-to-peer trading. The government’s approval of the national blockchain policy and the SEC’s regulations provide opportunities for legitimacy and confidence in cryptocurrency investments.
Fourth, there is a growing interest in central bank digital currencies (CBDCs) in Nigeria. The Central Bank of Nigeria has launched the eNaira, a CBDC that aims to increase financial inclusion, facilitate remittances, and reduce informality in the economy. The eNaira is not a cryptocurrency but a digital form of Nigeria’s national currency, the naira. It is stored in digital wallets and can be used for payment transactions.
Overall, the emerging trends and themes in Nigeria’s cryptocurrency and blockchain landscape indicate a growing interest in digital assets, a push for regulatory clarity, and the potential for CBDCs to drive financial inclusion and innovation.
Forecasts for the Crypto Regulatory Future
The discussed news items have significant implications for the regulatory environment for blockchain and cryptocurrency in Nigeria. The approval of the national blockchain policy and the SEC’s regulations for digital assets indicate the government’s commitment to embracing blockchain technology and creating a favorable regulatory environment. These developments provide clarity and oversight for digital asset offerings and custodians, bringing legitimacy and confidence to cryptocurrency investments in Nigeria.
However, there are still regulatory challenges and opportunities that may arise in relation to cryptocurrency, decentralized finance, and blockchain technology. The ban on banks and financial institutions from engaging in cryptocurrency transactions creates a challenging environment for crypto exchanges and hampers the integration of cryptocurrencies into the traditional financial system. The lack of clear regulations and guidelines for taxation and reporting of cryptocurrencies also poses challenges for individuals and businesses involved in cryptocurrency-related activities.
The government’s launch of the eNaira, a central bank digital currency, further complicates the regulatory landscape. While the eNaira aims to increase financial inclusion and facilitate remittances, it also raises concerns about privacy, centralization, and the potential impact on the banking system.
Looking ahead, the regulatory future for blockchain and cryptocurrency in Nigeria is likely to be shaped by ongoing discussions and collaborations between regulatory bodies, industry players, and other stakeholders. The government may introduce more stringent or relaxed regulations based on the evolving needs of the industry and the potential risks and benefits associated with cryptocurrencies and blockchain technology.
The regulatory challenges and opportunities in Nigeria’s cryptocurrency and blockchain landscape highlight the need for a balanced and coordinated approach to regulation. Clear and comprehensive regulations are necessary to protect investors, ensure financial stability, and foster innovation in the industry. At the same time, regulations should not stifle innovation or hinder the growth of the blockchain ecosystem. The involvement of regulatory bodies such as the Central Bank of Nigeria and the SEC in the development of regulations reflects the recognition of the potential impact of blockchain technology on the financial system and the need to strike a balance between regulation and innovation.
In conclusion, Nigeria has seen significant growth in cryptocurrency adoption, and while there are regulatory challenges, the future looks promising for the cryptocurrency industry in the country. The approval of the national blockchain policy and the SEC’s regulations for digital assets indicate the government’s commitment to embracing blockchain technology and creating a favorable regulatory environment. The launch of the eNaira, a central bank digital currency, further reflects Nigeria’s interest in digital assets and its potential to drive financial inclusion and innovation. However, there are still regulatory challenges and opportunities that need to be addressed to ensure the sustainable growth and development of the cryptocurrency and blockchain industry in Nigeria.
Read more here:
- An overview of cryptocurrency regulations in Nigeria
- Nigeria Approves National Policy to Create ‘Blockchain-Powered’ Economy
- WHAT DOES NIGERIA’S BLOCKCHAIN-FRIENDLY REGULATORY CHANGE MEAN FOR BITCOIN ADOPTION?
- Nigeria Cryptocurrency
- Nigeria regulator says local Binance operations ‘illegal’
- Nigeria Announces Crypto Laws To Regulate, Standardise Digital Assets, Bitcoin Falls
- Tokens but not crypto: Nigeria SEC prepares new digital asset rules
- Nigeria’s markets regulator publishes rules on crypto assets
- Nigeria SEC to Avoid Cryptocurrencies in Digital Assets Push
- Triple-A data says 22 million Nigerians own crypto: here is why that figure is far fetched
- Five Observations on Nigeria’s Central Bank Digital Currency
- Nigeria’s eNaira CBDC: What Went Wrong?
About the Author
Robby Greenfield has over a decade of experience in blockchain and financial engineering. He has served as an industry leader in deploying decentralized applications in emerging markets, such as Sub-Saharan Africa, the Asia Pacific, and LATAM. Robby has worked with renowned blockchain firm ConsenSys, co-deploying innovative solutions and collaborating with organizations like the U.S. State Department, the World Bank, the UNOPS, Oxfam International, and Care International. Currently, he is the CEO of Umoja Labs, a Coinbase and Mercy Corps-backed Web3 fintech providing payments and credit infrastructure across Sub-Saharan Africa.
