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Carla Moretti
With almost two decades of experience in the fast-paced financial industry, Carla has established herself as a powerhouse and an innovative leader.
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    It is estimated that more than 22 million Nigerians, which is 10.33% of the country’s entire population, own cryptocurrency. In a recent report carried out by KuCoin, one of the most popular Nigerian crypto exchanges, more than a third of the citizens of the nation between 18 to 60 years of age invest in cryptocurrencies themselves. 

    That said, Nigeria as a nation shows massive cryptocurrency adoption potential as these figures only account for the 51% of its citizens that have access to the internet. 

    That said, Nigeria’s massive cryptocurrency adoption comes more from its citizens rather than the government. 

    In February 2021, the Central Bank of Nigeria issued a circular stating that crypto assets are not legal tender and advised caution in dealing with them. 

    The Central Bank also directed all Deposit Money Banks (DMBs), Non-Bank Financial institutions (NBFIs), and Other Financial Institutions (OFIs) to identify entities and persons transacting in or operating Nigerian crypto exchanges and close such accounts immediately. 

    As far back as 2017, the Central Bank of Nigeria expressed non-acceptance of crypto assets in Nigeria and urged banks to avoid crypto transactions. 

    These events emphasize the CBN’s distrust of cryptocurrencies. That said, the CBN created its centralized cryptocurrency called the eNaira, which shows that the Central Bank may not have issues with crypto as a whole but its lack of centralization and control. 

    Government Regulation of Cryptocurrencies in Nigeria


    As already stated, crypto activities in Nigeria have been riddled with hostilities from the Nigerian government since inception. 

    Since 2017, the Central Bank of Nigeria has been vocal about its opposition to crypto assets and crypto activities in the country. 

    Steps have also been taken to ensure that all crypto-related activities are done outside the traditional banking system. Banks have been ordered to desist from dealing with crypto exchanges and any crypto-related businesses as well as the freezing of any account associated with crypto-related activities. Defaulting banks have been fined for not adhering to the CBN directive. 

    While cryptocurrencies are not illegal in the country, the Central Bank does not approve of them. 

    Despite the stance of the Central Bank of Nigeria, on May 15, 2022, the Securities and Exchange Commission officially recognized digital assets and securities. It issued regulations on the exchange and custody of cryptocurrencies in the country. 

    According to the SEC, all virtual assets including cryptocurrencies are securities and must be duly registered by the issuer or sponsor. 

    The registration process for virtual assets is in 2 phases. The first phase involves an initial assessment filing to satisfy the burden of proof, while the second phase is for filing proper registration directly by the issuer or sponsor. 

    With the recognition of cryptocurrencies as securities, all Digital Assets Token Offering, Security Token ICOs, Initial Coin Offerings, and other blockchain-based offers within Nigeria both by Nigerian or foreign issuers targeting Nigerian investors are subject to the regulation of the Securities Exchange Commission. 

    Digital assets that existed before the implementation of the regulatory guidelines were given 2 months to submit the initial assessment filing or documents for proper registration. 

    This means that all crypto assets traded on a Recognized Investment Exchange or issued as an investment are subject to SEC Rules and Regulations

    That said, in May 2023, President Mohammadu Buhari signed the Finance Act 2023 into law. With the introduction of this law, a 10% capital gains tax was introduced on digital assets including cryptocurrency. 

    While this is a shift from the initial stance of the government towards cryptocurrencies, it is an indication that the Nigerian government has plans to further regulate crypto-related activities in the country.

    Institutional Acceptance of Cryptocurrencies in Nigeria 

    CBN Orders Banks to close accounts article

    The love-hate relationship between the Nigerian government and cryptocurrencies in the country has resulted in scepticism about the acceptance of digital assets by many major institutions. 

    A circular from the Central Bank of Nigeria released in February 2021, stated that all commercial banks and other financial institutions were banned from transacting with any cryptocurrency exchange or crypto-related businesses. 

    They were also directed to identify and freeze the accounts of individuals or businesses that deal in cryptocurrencies or run cryptocurrency exchanges. 

    The Central Bank claimed that the use of cryptocurrencies violated existing laws since they are not legally recognized. 

    It also stated that the anonymity of cryptocurrencies made it vulnerable to illegal uses like money laundering and terrorism financing. 

    In response to the CBN directive, commercial banks began to identify and deactivate the accounts of individuals’ inflows or outflows from crypto exchanges. 

    This move by the Central Bank of Nigeria has made a lot of institutions sceptical about openly stating their interests or investments in cryptocurrencies and crypto-related transactions. 

    Although there have been some subtle steps by the government towards the acceptance of cryptocurrencies like the introduction of the e-naira and taxation of crypto assets. The ban on commercial banks and institutions transacting with crypto exchanges and businesses has not yet been lifted. 

    So while there is a widespread adoption of cryptocurrencies by individuals and small businesses especially in the wake of the rapid weakening of the naira, it is unclear whether institutions and organizations are adopting cryptocurrencies. 

    While several institutions may be interested in the prospects the crypto market holds, this interest is not voiced in public to prevent their accounts from being frozen by banks.

    Exchanges and Wallets Availability in Nigeria

    Cryptocurrency usage in Nigeria keeps growing despite the confusing stance of the government on cryptocurrencies. Research shows that the volume of crypto transactions in Nigeria between July 2022 and June 2023 grew by 9% to $56.7 billion. 

    This interest in cryptocurrencies, especially stablecoins increased within the last 6 months due to the plunging of the value of naira. 

    Despite the various instructions from the Central Bank of Nigeria regarding cryptocurrencies and the activities of crypto exchanges, the use of crypto in the country has steadily been on the rise. 

    In a press release on February 28, 2018, the Central Bank of Nigeria stated that cryptocurrencies like Bitcoin, Monero, Litecoin, etc., and crypto exchanges were not licensed or regulated by the CBN. 

    It also stated that investors and dealers in any kind of cryptocurrency in Nigeria were not protected by the law. 

    In 2021, the Central Bank of Nigeria issued a circular to Deposit Money Banks, Non-Financial Institutions, and other Financial Institutions instructing them to close the accounts of persons, crypto exchanges, or entities involved in crypto transactions within Nigeria. 

    They were also instructed to cease any form of dealings in crypto assets and the facilitation of payments for crypto exchanges. 

    To enforce this new directive, the CBN launched investigations into financial institutions offering services to crypto traders. 

    However by March of the same year, the CBN clarified its position on the ban stating that individuals were not prohibited from buying and trading crypto, they were just prohibited from doing so through any Nigerian bank of Fintech. 

    By April 2022, 6 banks were fined N1.3 billion for non-compliance with regulations on accounts of cryptocurrency traders. 

    That said, by May 15, 2022, the Nigerian Securities and Exchange Commission (SEC) recognized digital assets as securities and issued regulations on the exchange and custody of cryptocurrencies. 

    Despite the back and forth with the government, crypto exchanges continue to thrive in Nigeria. 

    Several global crypto exchanges like Binance, Huobi, Kraken, OKX, Luno, BitGlobal, Bitget, Bybit, KuCoin, etc. are fully operational in Nigeria. 

    The only constraint most of these exchanges have is the inability of users to fund their crypto accounts directly from their bank accounts. However many of these crypto exchanges have found a way to tackle this problem through the use of P2P marketplaces. 

    Nigeria is also home to several crypto exchanges like NairaEx, Patricia, Quidax, and Prestmit. These local crypto exchanges are fully operational. 

    Aside from these organized crypto exchanges, the Nigerian social media space is filled with several individuals and small businesses offering crypto buying and selling services.

    The Relationship Between Banks and Cryptocurrencies in Nigeria

    Nigerian Bank's Offices

    The relationship between banks and cryptocurrencies in Nigeria is an unstable one.

    Since the CBN directive to banks in February 2021 with the instructions to desist from rendering services to crypto exchanges and any crypto-related business, the banks in Nigeria have not been receptive towards cryptocurrency. 

    All Deposit Money Banks, Non-Financial Institutions, FinTech, and other Financial Institutions in Nigeria do not offer crypto-related services. 

    In obedience to the instruction of the CBN, most of the banks froze the bank accounts of individuals or entities involved in crypto transactions.

    The CBN closely monitored the banks to ensure that financial institutions were adhering to the instructions. 

    By April 2022, about 6 banks had been fined 1.3 billion for not complying with the regulation on the accounts of crypto traders. 

    That said, the Securities and Exchange Commission now recognizes crypto assets as securities that it regulates. The Nigerian government has also introduced the taxation of cryptocurrencies. 

    Despite this, the Central Bank of Nigeria has yet to withdraw its previous instruction to banks in the country. 

    And despite being subject to taxation, commercial banks still do not support crypto transactions. 

    It is not clear if the CBN intends to change this anytime soon.

    State of Decentralized Finance in Nigeria

    Business Man viewing financial data. Image: Unsplash

    Nigeria is number one in the adoption and interest in DeFi in Africa. This is the same for all Web3 sectors. 

    In Nigeria, more local start-ups taking advantage of DeFi have emerged than in any other nation on the continent. 

    It tops the global charts for interest. 

    Data from Google Trends on the 10th of September 2022, revealed that Nigeria is the nation with the highest interest and search for the term “decentralized finance”. 

    This is above nations like Canada, Singapore, and Hong Kong. 

    Also, a lot of DeFi platforms have experienced a spike in traffic from Nigeria and other African countries but this accounts for just 10% of their total traffic

    In Nigeria, however, there are 2 groups to consider when it comes to cryptocurrency acceptance: the Nigerian government and the people. 

    DeFi adoption is happening fast among the popular and business entities but is greatly resisted by the Nigerian government via the Central Bank of Nigeria. 

    The Apex Bank’s distrust of the crypto industry applies to decentralized finance as well. 

    This resistance by the government seems to push the Nigerian populace towards DeFi solutions which provide freedom from the restrictions placed on centralized exchanges in the country.

    Nigerian Crypto Exchanges Financial Offerings Scope

    The government regulations of cryptocurrencies and Nigerian crypto exchanges are still evolving. 

    At the moment, the only regulation in the industry is that all cryptocurrencies are classified as digital assets in Nigeria to enable the products to be taxed. 

    There are no laws that prevent crypto exchanges in Nigeria from offering specific products like margin trading or futures trading or the amount of leverage permitted. 

    This means that all crypto trading platforms can offer any type of product under the law. 

    That said, due to the instructions of the Central Bank to traditional banks in Nigeria that prevent them from facilitating crypto transactions, exchanges in the country cannot trade cryptocurrencies for the Nigerian Naira directly. 

    Any bank account discovered to be facilitating such transactions will be closed immediately. 

    This has forced crypto exchanges in the country to find alternate means for converting crypto to Naira such as gift cards, payment vouchers, Nigeria crypto cards, and P2P trading. 

    For example, the Luno crypto services were forced to close their services to Nigerian traders to adhere to CBN’s directives but then it opened up again offering payment vouchers.

    Nigeria Cryptocurrency Regulatory Compliance

    In May 2022, the Securities and Exchange Commission (SEC) of Nigeria created a frame for cryptocurrency regulation in Nigeria and published an in-depth 54-page document titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets” on its official website. 

    The document details a guideline for crypto service providers in Nigeria and lays out instructions on how financial institutions may interact with digital assets. 

    Under the Securities and Exchange Commission’s (SEC) new rules all Nigerian crypto exchanges must get a permit that gives SEC access to their records. 

    They must also obtain a virtual asset service provider license as well as adhere to KYC/AML laws.

    In line with this, Nigerian crypto exchanges like NairaEx, Quidax, and Patricia require users to complete identity verification by either inputting their BVN number (Bank Verification Number) or by uploading identity documents such as the Nigerian Identification Number (NIN) or international passport.

    Using Crypto in Nigeria

    Cryptocurrencies are not recognized as legal tender by the Central Bank of Nigeria and the Apex Bank banned commercial banks from engaging or facilitating cryptocurrency transactions. 

    This has made using crypto in Nigeria a lot more difficult. For instance, there are only 2 Bitcoin ATMs in Nigeria.

    However, indigenous crypto exchanges like Quidax allow Nigerian users to fund debit cards generated on the platform with cryptocurrencies to spend them as fiat money. But in most instances, Nigerians will have to convert their digital assets to gift cards or vouchers and then sell those for Naira to be able to use their crypto as currency. 

    The adoption of cryptocurrencies in Nigeria hasn’t grown to the point where retail stores accept crypto payments directly. 

    Alternatively, some Nigerians simply store cryptocurrencies in a Nigerian crypto wallet, and then when they want to use the asset they utilize P2P trading platforms to exchange them into Naira. 

    In general, to use crypto most people in Nigeria will have to convert them to other assets that can be exchanged to naira directly or use a Nigerian crypto card when available.

    Closing Thoughts

    Nigeria’s crypto relationship is a complex one, requiring traders to study crypto guides for Nigerians to navigate the industry properly. 

    On one hand, the government restricts commercial banks from facilitating crypto transactions and on the other, it states that digital assets are taxable.

    This has left a lot of Nigerian traders confused about the government’s position on cryptocurrencies. 

    That said, one thing is clear, Nigeria’s adoption of crypto is growing fast but this is primarily amongst the citizens and private entities, not the government.


    Most frequent questions and answers

    Cryptocurrencies have never been illegal in Nigeria, however, the CBN instructed all commercial banks in the country to desist from facilitating crypto transactions. 

    This did not imply that cryptocurrencies were illegal in the country but that the CBN wanted no part in the cryptocurrency industry.

    Nigeria ranks 6th globally in terms of crypto-related use and is one of the African nations driving crypto’s growth in the continent.

    No bank supports cryptocurrency in Nigeria as the Central Bank instructed all commercial banks to stop and close all accounts used for crypto transactions. 

    However, Nigerian crypto traders still use bank accounts for crypto transactions but via P2P trading or crypto to gift cards to naira transactions.

    These types of transactions do not directly use bank accounts for crypto-related activities.

    Currently, 10.34% of Nigerians are crypto users.

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    Skrumble.com provides all its content for informational purposes only, and this should not be taken as financial advice to buy, trade, or sell any investment instruments or products, including but not limited to cryptocurrencies, or use any specific exchange. Please do not use this website as investment advice, financial advice, or legal advice, and each individual’s needs may vary from that of the author. Investing in financial instruments, including cryptocurrencies, carries a high risk and is not suitable for all investors. It is possible to lose the entire initial investment, so do not invest what you cannot afford to lose. We strongly advise conducting your own research before making any investment decisions. This post includes affiliate links with our partners who may compensate us.

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