YEREVAN (CoinChapter.com) — Nigeria is introducing a cryptocurrency tax to address its economic difficulties. The government aims to tax crypto transactions, claiming it could raise $81 billion. This follows Nigeria’s legal action against Binance for unpaid taxes.
Nigeria has Africa’s largest crypto market, with 47 million people using or owning digital assets. In 2021, the country reversed its crypto ban, leading to increased adoption. Nic Puckrin, founder of The Coin Bureau, said,
“Nigeria has one of the largest markets for retail OTC trading. Moreover, importers have often resorted to crypto to deal with volatile NGN exchange rates. … they are going to have a very hard time collecting that.”
Nigeria’s Crypto Regulations and Binance Case
The Securities and Exchange Commission (SEC) classified cryptocurrencies as securities in 2022. Since then, Nigeria has taken steps to regulate digital assets, including the 2023 National Blockchain Policy and legal proceedings against Binance.
The government is demanding $81.5 billion from Binance for alleged economic losses and $2 billion in back taxes. At the same time, eNaira, Africa’s first CBDC, and fintech firms like Flutterwave and Chipper Cash are expanding financial services.
According to Maksym Sakharov, co-founder of WeFi,
“Nigerian regulators understand the country’s place within the global cryptocurrency industry. Besides being the largest economy in Africa, it also has the highest crypto adoption level, making the prospect of taxing crypto transactions an economically promising move.”
He also pointed out that Nigeria’s policy enforcement is weak due to corruption.
Crypto Tax and Low Tax Compliance in Nigeria
Nigeria’s tax-to-GDP ratio is 6%, one of the lowest globally, according to the World Bank. In 2022, the Federal Inland Revenue Service (FIRS) collected 10.1 trillion Nigerian naira ($12.7 billion). Only 12% of the workforce contributed, with most revenue coming from VAT and corporate taxes.
Of 70 million taxable adults, only 9% paid income tax in 2022. The government sees cryptocurrency taxation as a way to tax the informal sector, which accounts for 65% of GDP. Many Nigerians use peer-to-peer (P2P) trading to avoid currency devaluation and inflation.
Maksym Sakharov said,
“While taxing crypto is not out of place, most crypto traders in the country have lost faith in the government and might find a way to bypass these taxation provisions. With the biggest exchange, Binance, not fully operational in the country, users have developed a thriving P2P and OTC desk to conduct their transactions.”
Nigeria’s Crypto Tax Collection Faces Enforcement Challenges
About 45% of Nigerians are unbanked, but 35% use crypto for remittances and savings. The government plans a 0.5–1% capital gains tax on crypto profits and a 10% VAT on exchanges. This tax could generate 200 billion Nigerian naira ($250 million) yearly.
Many traders are expected to switch to P2P platforms to avoid taxes. Nic Puckrin commented,
“Nigeria has a thriving P2P ecosystem, so if users wanted to evade having to pay the fees on centralized exchanges, they would just take it off the platforms. I also don’t think the government has the resources to enforce this or track down those who don’t want to play ball.”
Nigeria’s SEC guidelines for Virtual Asset Service Providers (VASPs) align with FATF recommendations, aiming to strengthen oversight. The Economic and Financial Crimes Commission (EFCC) is responsible for tackling financial crimes. The government is also digitizing tax processes, but its effectiveness in crypto tax collection remains uncertain.
