Nigeria’s new crypto tax policies may not drive the revenue it needs

In February, Nigeria sued Binance for unpaid taxes and introduced new cryptocurrency taxations in an effort to boost its faltering economy, but it may not have the intended effects.

As the 53rd largest economy in the world, Nigeria is predicted to enjoy the highest average GDP growth between 2010 and 2050, according to Citigroup. However, the country’s economic development has faltered in recent years, forcing the government to introduce significant tax reforms, a minimum wage framework, and more. 

The country claims pursuing unregulated crypto exchanges like Binance can provide more than $81 billion to refill its coffers, aided by introducing a tax on cryptocurrency transactions.

Still, according to Nic Puckrin, founder of The Coin Bureau, this tax won’t be a clear-cut solution: “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 corruption hinders crypto taxation

Nigeria is home to Africa’s largest cryptocurrency market. A reported 22% of its population (about 47 million people) owns or uses crypto assets. Since the country reversed its ban on digital currencies in 2021, the Nigerian government has not been slow in responding to the growth and adoption of cryptocurrencies.

Nigeria’s Securities and Exchange Commission (SEC) issued its Rules on Digital Assets in 2022, recognizing crypto as securities and providing guidelines for exchanges and custodians. 

The government seems serious about getting key gains from crypto transactions and recently instituted proceedings against Binance, seeking to compel the exchange to pay $81.5 billion for economic losses it claims were caused by the exchange’s operations in the country and $2 billion in back taxes. 

The government’s 2023 National Blockchain Policy (2023) seeks to integrate blockchain into public services, signaling long-term crypto alignment. The CBN’s eNaira, Africa’s first CBDC, and fintech startups like Flutterwave and Chipper Cash have expanded financial inclusion within the country, reaching 64% of adults in 2023. 

Maksym Sakharov, co-founder and board member of WeFi, outlined:

“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.”

Sakharov continued, “However, the country is known for its poor implementation of market-changing policies like this.” While Nigeria seems keen to move forward with taxation on transactions, it often fails when it comes to implementation, owing to high levels of corruption. 

Nigerians primarily use peer-to-peer (P2P) trading platforms to counteract the effects of the country’s currency depreciation and high inflation. This level of crypto adoption, however, hasn’t produced significant GDP growth — but it has supported Nigeria’s digital economy, which contributed 18.4% to GDP in Q4 2023. 

A tax on all your crypto 

According to the World Bank, Nigeria’s tax-to-GDP ratio is one of the lowest globally at 6%. Nigeria’s Federal Inland Revenue Service (FIRS) reported collecting 10.1 trillion Nigerian naira ($12.7 billion) in 2022, with only 12% of the labor force formally employed and contributing taxes. VAT and corporate taxes dominate revenue, while personal income tax compliance is weak. 

With only 9% of Nigeria’s 70 million taxable adults paying income taxes in 2022, this move to tax individual cryptocurrency transactions may have an ulterior motive — collecting taxes from the informal sector and unbanked population. The informal sector in Nigeria makes up 65% of the country’s GDP, and currently operates primarily outside of the government’s tax net. 

Maksym continues: “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.”

Related: Nigerian SEC tightens crypto marketing rules

With 45% of Nigerian adults unbanked but 35% using crypto for remittances and savings, taxing crypto transactions is a clear move toward tapping into the informal economy. The proposed 0.5–1% capital gains tax on crypto profits and 10% VAT on exchanges could generate up to 200 billion Nigerian naira ($250 million) annually.

However, the risk of over-taxing cryptocurrency users could push them toward using unregulated P2P platforms, undermining compliance.  

Nic Puckrin, founder of The Coin Bureau, says the government will struggle to collect taxes.

“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 crypto tax proposal does reflect a broader push to formalize the digital and informal economies while addressing fiscal pressures. Success hinges on balancing regulation with innovation — while ensuring compliance.

Excessive taxation would stifle adoption, but prudent, well-implemented policies may expand the country’s revenue and enable further financial inclusion.

Nigeria could strengthen enforcement by adopting blockchain analytics tools​. India collaborated with Chainalysis to integrate these as tools for tracing taxable transactions. The country’s recent SEC guidelines for virtual asset service providers (VASPs) already align with FATF recommendations, enabling better oversight of formal exchanges. 

Anti-corruption initiatives like digitizing tax processes and expanding the Economic and Financial Crimes Commission’s (EFCC) mandate could reduce leakages. The EFFC’s mandate states that it seeks to support Nigeria’s mission to become a country free of economic and financial crimes. ​By combining tech-driven transparency measures with public education on tax benefits, Nigeria may gradually build trust and compliance in its crypto economy. 

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