FG Lifts Ban On Cryptocurrency, Introduces Taxation Instead

Bitcoin and other forms of cryptocurrency have long been a topic of debate and regulatory scrutiny worldwide, and Nigeria has been no exception.

In February 2021, the central bank of Nigeria bank cited concerns over money laundering, terrorism financing, cybercrime and the volatility of cryptocurrencies as reasons for a circular to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.

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The CBN further warned local financial institutions against dealing in crypto-assets or facilitating payments for crypto exchanges.

The directive received significant backlash from the Nigerian public and the cryptocurrency community, as many saw it as a hindrance to technological advancement and economic growth.

However, the government has now taken a surprising new turn by introducing cryptocurrency taxation.

The government said it recognized the growing adoption and economic significance of digital assets and aimed to harness their potential for revenue generation. The federal government surprised many by announcing its decision to tax cryptocurrencies.

By doing so, Nigeria joins the league of jurisdictions currently taxing digital assets, including the United Kingdom, the United States of America, Australia, India, Kenya and South Africa.

On December 2, 2022, Zainab Ahmed, minister of finance, budget and national planning, says there is a provision to tax cryptocurrency and other digital assets in the latest finance bill.

By May 28, 2023, President Muhammadu Buhari signed the 2023 finance bill into law. The law introduces a 10 per cent taxation of gains on the disposal of digital assets including cryptocurrency. The law is in effect from May 1, 2023.