jakiro
1. Introduction
In February 2024, Nigerian authorities seized two executives of crypto-asset exchange Binance – Tigran Gambaryan and Nadeem Anjarwalla, which attracted widespread global attention.The incident was caused by the Nigerian government accusing the Binance platform of assisting in $26 billion worth of “unrecognized sources” in 2023, which involved money laundering, exchange rate manipulation (which led to the depreciation of Nigerian fiat currency Naira) and tax evasion.The Nigerian government has put pressure on Binance to pay huge fines and submit information on the country’s top 100 users and transaction history over the past six months.At the time, the incident was interpreted as a performance of Nigeria’s unfriendly crypto assets.
However, in the face of the rapid development of the crypto market, the Nigerian government’s attitude has undergone a shift from strict restrictions to gradual acceptance, and the regulatory framework and tax policies have also evolved.On the one hand, regulators are committed to establishing a sound legal system to maintain financial stability and investor protection; on the other hand, tax authorities have begun to include crypto assets in the scope of taxation to prevent tax base loss.According to Chainalysis’ 2024 Global Crypto Geographic Report, as the country with the highest crypto asset adoption index in Africa, Nigeria has important research value on the regulation and tax policy evolution of crypto assets.This article aims to conduct in-depth discussions on the tax provisions of Nigeria’s crypto assets based on the latest legal documents and regulatory trends in Nigeria, focus on analyzing the processing of income tax, value-added tax and other related taxes, and comprehensively sorting out the tax in combination with the regulatory framework.
2. Nigeria’s crypto assets regulatory framework
Nigeria’s regulatory system for crypto assets is formed in a dynamic balance between the Central Bank (CBN) and the Securities and Exchange Commission (SEC). Through legal basis and policy documents, a mixed regulatory system with SEC with legal supervision rights and specifically approves crypto assets-related businesses is built step by step. CBN ensures financial stability and compliance through the banking system.
The position of the Central Bank of Nigeria (hereinafter referred to as CBN) comes from the Central Bank Act 2007, which stipulates that only CBN can issue currencies and other virtual assets cannot have legal currency status.Based on this, CBN issued a notice on February 5, 2021 to specifically prohibit businesses related to crypto asset transactions, including account opening, payment processing, and cooperation with exchanges, and requires the closure of identified related accounts.However, with the development of global virtual asset regulation trends, CBN’s attitudes subsequently changed.In December 2023, the central bank issued the “Virtual Asset Service Provider (VASP) Bank Account Operation Guide”, which, on the premise of meeting the SEC registration regulatory requirements, allows banks to open accounts for VASPs on the premise of meeting the SEC registration requirements, and proposes guidance standards for AML/CFT compliance, consumer protection and risk management.This marks the gradual transition from the previous comprehensive ban to conditional acceptance, and the crypto industry has begun to be included in the regulation of the formal financial system.
At the same time, the Nigerian Securities Regulatory Commission (hereinafter referred to as the SEC) has focused on establishing a digital asset supervision path from 2020.In September 2020, it clearly stated that it would treat virtual assets as securities and proposed a draft rule that “digital asset issuance platform, custody and trading services” should be supervised by the SEC.Although its implementation is hindered by the CBN ban, the Rules on Issuance, Offering Platforms and Custody of Digital Assets, officially released in May 2022, clearly classify VASP, DAOP, DAC and DAX. If a digital asset is recognized as a securities, the issuer must register with the SEC and accept regulations on governance, information disclosure, capital and compliance requirements.This rule provides a preliminary regulatory framework for activities involving crypto assets in Nigeria, applicable to digital assets with securities attributes:
First, the rule defines “digital assets” and clearly states that it covers virtual asset trading platforms with securities attributes and digital asset custodians, and emphasizes that these entities should be regulated under the Investment and Securities Act 2025 (ISA 2025);
Second, according to the rules, any project that wishes to conduct an Initial Digital Asset Offering (IDAO) or to publicly sell digital assets in the market must submit an application to the SEC and obtain registration approval.Institutions that intend to operate a digital asset trading platform or perform custody functions must also register or apply for corresponding licenses in accordance with the SEC requirements;
Third, the rules establish a special category of “Digital Asset Custodians” and require the custodian to be a legal entity, with minimum capital requirements, technical capabilities, internal control mechanisms, and must fulfill information disclosure and regular audit obligations.The custodian needs to separate the client’s assets from his own assets and value the custodial assets every day;
Fourth, the rules introduce a regulatory sandbox mechanism.The SEC encourages relevant fintech companies to participate in the Regulatory Sandbox pilot mechanism led by them to test new digital asset products and services within a restricted range.The rules state that the sandbox mechanism provides a pilot environment for innovative projects with high uncertainty or no existing regulatory pathways;
In addition, the rule stipulates that all regulated digital asset institutions need to establish and implement an internal control system for anti-money laundering and anti-terrorism financing, including customer identity identification (KYC), suspicious transaction reporting (STR), record keeping and other mechanisms.These requirements are implemented in line with the “SEC Capital Market Participants Anti-Money Laundering and Counter-Terrorism Financing Regulations (2022)” to provide compliance references for digital asset-related activities.
It should be noted that in the Nigerian regulatory framework, “digital assets” and “crypto assets” are often used to describe value representations based on blockchain, but the two are officially defined as inclusion and included. Digital assets are usually used as a general term to cover various types of tokens (including crypto assets) and appear in the names of relevant regulations.For example, in the “Digital Assets and Classification and Processing Statement” issued by the Securities and Exchange Commission of Nigeria (SEC) in 2020, digital assets are divided into four categories, including crypto assets.At the same time, Nigerian regulations also clearly distinguish these “two assets”: According to the “Digital Asset Issuance, Trading Platforms and Custody Rules” promulgated by the SEC in 2022, virtual assets are defined as “digital performance of value that can be used for payment or investment purposes and can be digitally transferred and traded”, and do not include digital representations of legal currency or traditional securities, etc.This definition actually covers crypto assets such as Bitcoin.In contrast, the rule limits digital assets to “a digital token that represents an interest in assets such as debts or equity in the issuer.”It can be seen that in the Nigerian regulatory context, crypto assets usually refer to virtual assets as mediums of exchange or investment targets; while digital assets refer more to securities or equity digitized in the form of tokens (similar to the on-chain representation of traditional stocks and bonds).
III. Research on the basics of crypto tax system in Nigeria
Despite the increasingly clear regulatory framework for crypto assets in Nigeria, specialized tax laws and regulations for crypto assets are still developing.At present, the Federal Taxation Agency of Nigeria (FIRS) has not issued a comprehensive tax guide for crypto assets, but Nigeria’s Fiscal Act 2023 and the Nigeria Tax Act 2025 have included digital assets in the scope of taxation.Therefore, its tax treatment is mainly based on the universal principles of existing tax laws and infers the classification of digital assets in combination with regulatory agencies.The following will discuss the tax processing rules and its business logic of different types of crypto assets from three aspects: income tax, goods and service tax (GST, namely value-added tax) and other taxes.
(I) Income Tax
Nigeria adopts the principle of combining resident tax jurisdiction with regional jurisdiction for income taxation.The global income of Vagerian tax residents, or income obtained in Nigeria, is required to declare income tax regardless of source.This principle also applies to the income related to crypto assets, that is, whether an individual or a business person has obtained crypto assets transactions or business income in Nigeria, taxes shall be paid in accordance with the current income tax laws.According to the current tax law, the excess progressive tax rate is applied to personal income, with an annual income of 300,000 NZ and a maximum tax rate of 24% (annual income of 3.2 million NZ and a corporate income tax rate of 30%.The following will analyze the processing from the income tax perspective based on the different functional attributes of crypto assets:
1. Tax processing of payment-type crypto assets
Payment-based crypto assets (such as Bitcoin) are primarily used as a medium of exchange for goods and services, and although the Bank of Nigeria explicitly denies its status as a fiat currency, it may still face an income tax obligation as a tradable form of digital value, which is usually treated as an asset or property when generating income.
When an individual or entity disposes payment crypto assets and realizes gains, these gains are usually regarded as capital gains and will also be regarded as the tax base of personal income tax while paying capital gains tax.If an enterprise frequently engages in transactions of payment-based crypto assets and its activities constitute a commercial act, the resulting profits may be considered commercial income and corporate income tax is levied at the applicable corporate income tax rate.
2. Tax processing of crypto assets for securities-type crypto assets
Securities-type crypto assets represent the digital form of traditional securities (such as stocks and bonds), giving holders rights such as ownership, dividends, and voting rights.In the “Regulations on the Issuance, Trading Platforms and Custody of Digital Assets”, the Nigerian SEC has made it clear that such tokens should be regulated in accordance with securities and should also be handled in terms of taxation in accordance with corresponding financial products.
First, issuing securities-type crypto assets to raise funds (commonly known as STOs) is usually regarded as securities issuance, similar to the issuance of shares or bonds by a company.The funds obtained from the issuance are capital income to the issuer and are not included in the taxable income (equivalent to the formation of equity or liabilities).Secondly, the income obtained by investors during the period of holding securities-type crypto assets (such as profit dividends, interest, etc.) should be taxed according to the regular investment income: the dividend dividend may be subject to the withholding income tax, and generally Nigeria has a dividend withholding rate of 10%; interest income is also taxed based on the interest income.Finally, when investors sell securities-type crypto assets, if capital gains are generated, they will be subject to a 10% capital gains tax.
Overall, the tax treatment of securities-type crypto assets is regarded as traditional securities in taxation, while dividend and capital gains tax rules are subject to equity, and interest and bond tax rules are subject to debt rights, ensuring that crypto investments with securities attributes are consistent with traditional investments.
(II) Value-added tax
According to Nigerian law, the standard tax rate is subject to 7.5% of all taxable services provided in Nigeria unless expressly exempted by law.As early as 2020, the then Nigerian fiscal law expanded the definition of “service” and clarified that “service” refers to any matter except commodities, currency and securities.Crypto asset-related services are not listed as VAT exemptions by law, so they are taxable services in principle and a 7.5% VAT should be applied.Revisions to the Nigerian Finance Law 2019 and 2020 also clearly include the supply of digital services and intangible assets in the scope of VAT collection, such as e-commerce and non-resident digital services.From this we can see that VAT is only levied on the service fee part, and the amount of the digital assets itself is not directly included in the basis for VAT calculation.For example, if a transaction is paid on a crypto asset exchange, if the exchange charges a fee or commission from the user, this part of the fee will be paid at 7.5%, while the price of the Bitcoin itself is not subject to VAT.Tax authorities regard these handling fees as consideration for providing brokerage/transaction services, and therefore belong to taxable service income.
At the tax authority level, the Nigerian Federal Inland Taxation Bureau (hereinafter referred to as FIRS) has also made clear statements on the taxation of crypto asset trading services in recent years.According to the 2024 announcement and media statement from the Nigerian tax authorities, FIRS has required crypto asset platforms to impose a 7.5% VAT on the service fees it charges to Nigerian users.According to Nigeria’s current VAT law and FIRS official guidelines, a 7.5% VAT rate should be applied to the service fees related to crypto assets in accordance with the law.
It should be noted that when crypto assets are used as payment methods for general goods and services, the handling of VAT may be controversial: when using crypto assets to purchase goods or services, VAT must still be levied normally according to the nature of the goods or services.For example, if someone buys a computer with Bitcoin, the seller should issue a VAT invoice (7.5%) based on its value when selling the computer. Even if the payment method is Bitcoin, it will not affect the VAT to be paid for the transaction of the commodity.According to guidelines released by the Federal Inland Taxation Agency of Nigeria (FIRS) in recent years, services involving purely crypto assets may enjoy VAT exemptions to reduce transaction costs and encourage the development of digital assets.That is, if a service involves only assisting a customer in transferring crypto assets between wallets, the revenue of that service may be considered a tax-free financial service on VAT.However, this exemption is still in the practical observation stage, and the legal basis may come from equating virtual currency transfers with funds transfer services, thus being included in part of the list of tax exemptions for financial services in the VAT law.
In summary, in the general transaction process, the circulation of crypto assets itself is not subject to value-added tax, and the charges for related services must be taxed normally.For the purchase and sale of payment-type crypto assets themselves, if they are considered as commodities, value-added tax should be theoretically levied.However, given that many countries exempt VAT from VAT when viewing crypto assets as currency or financial instruments, Nigeria’s final position remains to be clarified.There are currently no clear official documents that indicate that transactions of crypto assets themselves require VAT payment, nor are there any clear official documents that indicate that “crypto asset transfer services” are generally exempt from VAT, which needs further clarification from the official.
(III) Capital gains tax
Nigeria revised the Capital Gains Tax Act in 2023, and for the first time, it clearly included “digital assets” in the definition of taxable assets.According to the 2023 Fiscal Act, any capital gains accumulated by an individual or enterprise in a tax year due to the disposal of digital assets shall be paid 10% of the capital gains tax on the net gains after deducting the allowable costs.The “assets” here cover options, debt, digital assets and general intangible assets. In other words, profits from selling virtual currencies such as Bitcoin and Ethereum, or profits from transferring NFT and securities-type crypto assets are all considered capital gains and should be taxed at 10%.
The implementation of the Fiscal Act 2023 makes Nigeria one of the earliest countries in Africa to explicitly tax the gains of crypto assets.According to the general principle of capital gains tax, taxpayers can deduct capital gains from the capital losses incurred in the year when making annual tax returns.However, fiscal law does not provide more detailed provisions on crypto assets, which may create uncertainty in tax treatment. For example, the key to calculating capital gains is to determine the cost basis of crypto assets, which is usually the entire cost paid when purchasing the asset, including the purchase price and any transaction fees.For crypto assets obtained through mining or airdrop, the determination of their cost basis may be more complex, and FIRS needs to issue more detailed guidance to clarify.
(IV) Other tax types
In addition to the above major taxes, other taxes and fees that may be involved in the crypto assets field are not prominent at present.Nigeria has no special consumption tax on crypto assets yet, nor does it impose any net wealth or estate tax on holding crypto assets.In addition, the stamp duty that may be involved in the transaction process is mainly levied on statutory documents and certain transfer procedures, and is not directly related to point-to-point crypto transactions.If crypto asset transactions are conducted through bank channels, ordinary bank transfers still require sporadic stamp duty, but this has nothing to do with crypto assets themselves.It is worth noting that the Nigerian tax department is strengthening reporting and auditing of crypto transactions.FIRS has developed technical means to monitor on-chain transactions and requires taxpayers to keep detailed transaction records, including dates, amounts, counterpartys, etc., to calculate taxes.The enforcement actions against unregistered crypto exchanges in 2024 show that authorities will crack down on tax evasion in the crypto space to consolidate the tax base.Therefore, although there are currently no new taxes tailored for crypto assets, well-established records and compliance reporting obligations actually constitute important tax management requirements.Taxpayers should ensure that they declare and pay relevant taxes in a timely manner to avoid incurring fines or even criminal liability.
4. Conclusion
Nigeria is undergoing a dynamic evolution in the regulation and taxation of crypto assets.From initially strict restrictions to gradual establishment of a standardized regulatory framework, the Nigerian government is striving to find a balance between financial innovation, risk control and tax equity.As the main regulatory bodies, the Central Bank (CBN) and the Securities and Exchange Commission (SEC) have clarified the operating specifications of virtual asset service providers (VASPs) by issuing guidelines and revising laws, and formally included digital assets in the scope of securities regulation, which laid the foundation for subsequent tax collection and management.
In terms of taxation, Nigeria’s tax on crypto assets is mainly concentrated on capital gains tax and value-added tax.According to the Financial Act 2023 and the Nigerian Tax Act 2025, capital gains generated by disposing of digital assets are subject to a 10% capital gains tax, which provides a clear legal basis for taxing investment income from crypto assets.In addition, the service fees provided by the crypto asset trading platform are clearly levied at 7.5% VAT.However, there is still a lack of detailed official guidance from the Federal Taxation Bureau (FIRS) for the specific handling details of the above tax collection and management, as well as other taxes theoretically related to crypto assets.
From a longer-term perspective, Nigeria’s exploration and practice in this field will provide valuable experience and reference for other emerging market countries.With the accumulation of international regulatory experience and the development of domestic practice, Nigeria’s crypto tax policy is expected to be further refined and improved, and a better balance between encouraging innovation in the digital economy and ensuring reasonable tax burden.
