YEREVAN (CoinChapter.com) — Nigeria has seen a rapid increase in cryptocurrency use, drawing the attention of regulatory bodies to cryptocurrency tax laws. The Central Bank of Nigeria (CBN) still does not recognize cryptocurrencies as legal tender. However, the surge in digital asset transactions has pushed the government to take action. As a result, they are working on clearer regulations, which may include taxes under new cryptocurrency tax laws.
Cryptocurrency Adoption and Regulation in Nigeria
Nigeria’s interest in cryptocurrency has surged, especially since 2022. According to reports from Chainalysis, Nigeria ranks high in peer-to-peer (P2P) trading volumes, making it a key player in the global cryptocurrency market. Platforms like Paxful and KuCoin are commonly used for cryptocurrency exchanges, reflecting the widespread use of digital assets despite regulatory hurdles.
Data for “Invest in Crypto” search term in Nigeria Source: Google TrendsIn response to the growing demand, the Securities and Exchange Commission (SEC) of Nigeria published new regulations in May 2022. These regulations require digital asset exchanges (DAX) to obtain a license and meet specific capital requirements, such as maintaining a minimum paid-up capital of 500 million nairas.
Is Cryptocurrency Legal in Nigeria?
While the CBN does not recognize cryptocurrencies as legal tender, cryptocurrency trading itself is not illegal. In February 2021, the CBN banned commercial banks from engaging in cryptocurrency transactions to curb fraud and illegal activities. However, this has not stopped Nigerians from trading digital assets. Instead, P2P trading has grown, with Paxful reporting that Nigerians traded over $400 million worth of Bitcoin.
Cryptocurrency Tax Laws: Current Status
At present, there are no specific cryptocurrency tax laws in Nigeria. The Federal Inland Revenue Service (FIRS) has confirmed that the current legal framework does not include provisions for taxing gains from cryptocurrencies. However, proposed legislation, including the Finance Bill, could change this. If passed, it would impose taxes on cryptocurrency transactions, aligning Nigeria’s tax system with international standards for digital assets.
FIRS Chairman Zaccheus Adedeji recently addressed the Nigerian National Assembly, emphasizing the need to update tax laws to include cryptocurrency transactions. He pointed out that while there is no formal taxation framework yet, plans are in place to tax gains from cryptocurrency trading as capital gains in the near future.
Challenges in Cashing Out Cryptocurrency in Nigeria
Due to the CBN’s restrictions, cashing out cryptocurrencies into the local currency, the naira, can be difficult. However, some solutions have emerged. The Breet App allows users to sell their cryptocurrencies and convert them directly to naira. P2P platforms also remain a popular method for exchanging digital assets for fiat currency in Nigeria. These alternatives have become essential as traditional banking services are unavailable for cryptocurrency transactions.
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