The Nigerian government is planning to introduce an executive bill in its bid to reform its revenue administration, and this will incorporate provisions for the growing cryptocurrencies. This strategic move comes at a time when there was a crackdown on crypto activities in 2024, although an official ban on cryptocurrency transactions was lifted in December, 2023.
For the entire year the government had been preoccupied with regulating cryptocurrency operators through tackling challenges including devaluation of the local currency, Nigeria naira, tax evasion, and even terrorism financing.
FIRS Chairman Advocates Regulation
The Executive Chairman of the Federal Inland Revenue Service (FIRS) of Nigeria, Zacch Adedeji, revealed over the weekend that the initial steps for this executive bill is underway, and it will be taken to the National Assembly soon. In achieving these objectives, the bill seeks to reform Nigeria’s revenue administration regime as well as provide a legal framework for the regulation of cryptocurrencies.
In a statement released by his special adviser on media, Dare Adekanmbi, Adedeji emphasised the necessity of acknowledging the cryptocurrency ecosystem. “We cannot deny the existence of the cryptocurrency ecosystem; it has become a significant aspect of our economy. Yet here in Nigeria, we currently lack any legal framework to govern cryptocurrency operations,” he explained.
As a result, Adedeji calls for a regulation that aims at unlocking the crypto bonanza without compromising the stability of the economy. “This is an area of our economy that must be covered by laws, which is why we are working with the legislators,” he stated.
The given crypto regulations are a part of numerous reforms to expand the country’s non-oil revenue sources since Nigeria has historically depended on oil royalties. These reforms are targeting some loopholes that are common with most of the current revenue laws as being archaic. Adedeji pointed out, “Our goal is to streamline revenue collection and ensure tax laws are straightforward and reflect our contemporary circumstances. For instance, the Stamp Duty Act dates back to 1939, long before there was any internet functionality. We must modernise these laws.”
Crypto Firms Take Initiative on Taxation
This has added further complexity to the existing debates, some of the crypto firms have been keen on collecting Value-Added Tax (VAT) on transaction fees. For instance, a renowned cryptocurrency trading platform, KuCoin, sent a communication to its clients stating that starting from July 8th, 2024, the exchange shall be charging a 7.5 % VAT on all transaction fees for Nigerian customers. In its communication, KuCoin clarified, “For a transaction of 1,000 USDT worth of BTC with a fee of 1 USDT, the tax applicable would be 0.075 USDT, leaving a net transaction amount of 998.925 USDT.”
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Chimezie Chuta, the founder and coordinator of the Blockchain Nigeria User Group, stressed the need for the formal legislation explaining that taxes cannot be collected from unregulated entities.’ He stated, “It’s impossible for the government to collect tax from a non-licensed entity, which strongly indicates that regulation is on the horizon.”
Nigeria’s Growing Crypto Market
Nigeria has emerged as one of the leading peer-to-peer (P2P) cryptocurrency markets globally. According to Chainalysis, the nation had a staggering $56.7 billion in crypto transactions between July 2022 and June 2023. Emomotimi Agama, the director-general of the Securities and Exchange Commission (SEC), confirmed this growth, stating, “Reports suggest that Nigeria’s crypto transaction volume soared to $56.7 billion, marking a nine percent increase compared to the previous year.”
In the past year, there was a bid to tax them through the Finance Act of 2022 whereby profits from digital assets such as cryptocurrencies were subjected to the 10% tax. But, this provision has not been implemented fully.
Regulatory Framework Under Development
Despite the lifting of the ban on crypto transactions in December 2023 by the Central Bank of Nigeria, The SEC has been at the forefront of developing a comprehensive legal structure governing cryptocurrency. The commission has vowed to track trading activities of VASPs that includes crypto ATMs, exchanges, P2P platforms, and custodians.
In this regard, it was recently revealed that the SEC is planning to launch a new policy for digital asset issuance and trading platforms to implement new rules in the rapidly growing crypto market. Late in June, Nigeria’s Minister of Finance, Wale Edun, charged the newly appointed SEC board to effectively and meticulously address the challenges of crypto regulation.
Senator Ihenyen, who heads the blockchain and virtual assets practice at Infusion Lawyers, commented, “Nigeria cannot afford to continue pushing digital assets underground, especially considering our economic and security priorities. Our regulatory bodies must collaborate to guarantee consumer protection and investor safety.”
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