Nigeria to enforce crypto taxation under proposed law: Report

The Nigerian Securities and Exchange Commission (SEC) is revising regulations to enable cryptocurrency taxation.

Bloomberg reports that the bill, now under review by lawmakers, is expected to pass this quarter.

The details 

• According to Bloomberg, the SEC said the move to tax crypto is the regulator’s way of exploring more ways to earn revenue. 
• Beyond taxation, the bill proposes additional levies on transactions conducted through regulated exchanges in Nigeria.
• The SEC also aims to expand its crypto licensing framework, enabling Nigerians to trade on centralized exchanges where transactions can be more easily monitored and taxed. 
• The SEC has not disclosed the tax percentage or the expected revenue from these levies.

Key quotes 

Bloomberg reported that the SEC is developing rules to “ensure that all eligible transactions on regulated exchanges are brought into the formal tax net.”  

• The report also says:

The SEC “acknowledges the substantial amount of tax revenue that will accrue from cryptocurrency transactions.” 

Before now 

• Crypto regulations in Nigeria have begun to pick up pace despite a widespread crackdown on crypto last year. 
• In 2023, the Central Bank of Nigeria opened the door to the asset class by issuing a circular to Nigerian financial institutions, permitting them to serve exchanges provided they are SEC-licensed. 
• Although the requirements appeared more restrictive than innovative upon closer examination, the overall response to the rules was one of relief — signaling that the country is gradually embracing crypto.

P2P clampdown

• However, as the naira rapidly devalued, Nigerian authorities cracked down on peer-to-peer exchanges, blaming them for the currency’s decline.”
• The country arrested two senior executives of Binance, the largest crypto exchange by trading volume, and charged them with money laundering and tax evasion.
• In June 2024, the SEC started its regulatory drive. It expanded its accelerated regulatory incubation program (ARIP) to include digital assets and allow virtual assets service providers (VASPS) to register and operate within the sandbox. 
• The move, meant to fast-track the onboarding process for VASPs, saw two exchanges — Busha and Quidax — receive provisional licenses to operate in the country. 

Zoom out 

• Kenya is another African country with crypto taxation rules, though they are seen as restrictive and harsh.
• In 2023, the country introduced a 3% digital asset tax (DAT) as part of its amended Finance Act, which sparked widespread protests. 
• DAT was introduced in addition to existing taxes and levies on crypto: a 1.5% digital service tax on exchanges, a 16% value-added tax, a 15% capital gains tax, and an income tax calculated on the tax band for profits made on trades.