Key Points
- Nigeria’s SEC plans to update digital assets regulations, introducing the Accelerated Regulatory Incubation Programme (ARIP) for VASPs.
- Nigeria’s shift from banning to taxing cryptocurrencies, with a 10% tax on gains from digital assets disposal introduced in 2023.
The Nigerian Securities and Exchange Commission (SEC) plans to revise crucial digital asset regulations. This move aims to bolster the regulatory framework, making it more comprehensive and adaptable to the intricacies of digital asset markets.
Regulatory Update and ARIP
As part of this regulatory overhaul, the SEC is rolling out the Accelerated Regulatory Incubation Programme (ARIP), a specialized compliance initiative designed for Virtual Asset Service Providers (VASPs). This initiative offers VASPs a structured pathway to comply with the country’s new regulatory standards.
A dedicated onboarding window has been established to facilitate VASPs’ participation in the ARIP. The SEC has also warned that it will initiate enforcement actions against any operating VASP that does not comply with the directives outlined in its Circular.
This regulatory update is part of Nigeria’s broader initiatives to enhance oversight of its rapidly expanding cryptocurrency market. This includes a proposal to increase the registration fee for crypto exchanges from 30 million naira ($18,620) to 150 million naira ($93,000) following the appointment of Emomotimi Agama as the new SEC Director-General.
From Ban to Taxation
Nigeria’s stance on cryptocurrencies has significantly shifted since 2021. Initially, the central bank banned banks from facilitating cryptocurrency transactions due to concerns over money laundering and terrorism financing. Despite this ban, cryptocurrency adoption continued to rise, prompting the government to pivot towards a taxation policy.
A timeline of this shift includes the Central Bank of Nigeria (CBN) issuing a circular in February 2021 directing banks and other financial entities to close accounts associated with cryptocurrency transactions. This was followed by an investigation into financial institutions providing services to cryptocurrency traders.
In February 2021, the Senate summoned the CBN and the SEC to discuss the potential impacts of cryptocurrencies on Nigeria’s economy and security. Later in the same month, the International Monetary Fund (IMF) supported the CBN’s stance, highlighting concerns that cryptocurrencies could facilitate illicit activities.
In April 2022, the SEC formally recognized digital assets as securities and issued comprehensive regulations governing the exchange and custody of cryptocurrencies within Nigeria. Discussions between the SEC and CBN regarding cryptocurrency regulation continued, as confirmed by the SEC.
In July 2021, the CBN announced plans to launch the “eNaira,” a central bank digital currency (CBDC), distinct from Bitcoin and other cryptocurrencies. Nigeria became the first African nation to introduce its digital currency, the “eNaira” in October 2021.
In December 2022, Zainab Ahmed — the Minister of Finance, Budget, and National Planning — disclosed provisions in the latest finance bill to impose taxes on cryptocurrencies and other digital assets. In May 2023, Former President Muhammadu Buhari signed the 2023 finance bill into law, instituting a 10% tax on gains from the disposal of digital assets.
Despite regulatory challenges, Nigeria continues to be a global leader in cryptocurrency adoption. The volume of crypto transactions in the country increased by 9% year-over-year to $56.7 billion between July 2022 and June 2023.
