The government of Nigeria has officially acknowledged the increasing adoption and economic importance of digital assets and has expressed its intention to leverage their potential for revenue generation. This decision aligns Nigeria with other jurisdictions such as the United Kingdom, the United States of America, Australia, India, Kenya, and South Africa, which already impose taxes on digital assets.
On December 2, 2022, Zainab Ahmed, the Minister of Finance, Budget, and National Planning, announced that the latest finance bill includes provisions for taxing cryptocurrency and other digital assets.
Bitcoin and other cryptocurrencies have been subjects of debate and regulatory scrutiny worldwide, and Nigeria has been no exception. In February 2021, the Central Bank of Nigeria (CBN) issued a circular instructing deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close the accounts of individuals or entities involved in cryptocurrency transactions within their systems. The CBN also cautioned local financial institutions against engaging in crypto-assets or facilitating payments for crypto exchanges. The ban was prompted by concerns over money laundering, terrorism financing, cybercrime, and the volatility of cryptocurrencies.
However, just two years later, the Nigerian government has taken a surprising shift in its stance by introducing taxation on cryptocurrencies. This move marks a notable evolution in Nigeria’s position on digital assets.
The timeline below highlights significant events over the two-year period that influenced Nigeria’s perspective on cryptocurrencies:
– February 5, 2021: CBN directs banks to close accounts involved in cryptocurrency transactions.
– February 9, 2021: CBN initiates an investigation into financial institutions providing services to cryptocurrency traders.
– February 11, 2021: The Senate invites the CBN and the Securities and Exchange Commission (SEC) to discuss the impact of cryptocurrencies on Nigeria’s economy and security.
– February 18, 2021: The International Monetary Fund (IMF) supports the CBN’s actions, citing potential illegal activities associated with cryptocurrencies.
– February 22, 2021: The SEC emphasizes the need for cryptocurrency regulation.
– February 26, 2021: Vice President Yemi Osinbajo calls for a regulatory framework for cryptocurrencies instead of an outright ban.
– March 21, 2021: The CBN clarifies its position, stating that individuals are not prohibited from buying and trading crypto but not through Nigerian banks or fintech platforms.
– April 15, 2021: The SEC announces ongoing discussions with the CBN regarding cryptocurrency regulation.
– April 26, 2021: The Economic and Financial Crimes Commission (EFCC) urges caution before investing in Bitcoin.
– July 22, 2021: The CBN reveals plans to launch the “eNaira,” a central bank digital currency (CBDC) distinct from Bitcoin and other cryptocurrencies.
– October 25, 2021: Nigeria becomes the first African nation to introduce a digital currency, the “eNaira.”
– April 7, 2022: The CBN imposes a ₦1.3 billion fine on six banks for alleged non-compliance with cryptocurrency trader account regulations.
– May 15, 2022: The SEC recognizes digital assets as securities and issues regulations on cryptocurrency exchange and custody in Nigeria.
– May 28, 2023: President Muhammadu Buhari signs the 2023 finance bill into law, which introduces a 10% tax on gains from the disposal of digital assets, including cryptocurrency. The law takes effect from May 1, 2023.
