Economy
Navigating the Winds of Change: Crypto Trading in Nigeria Faces New Tax Realities
In the dynamic landscape of Nigeria’s economy, crypto trading has emerged as both a refuge and a challenge amid currency devaluation and economic uncertainties. According to a recent report by New York-based blockchain research firm Chainalysis, Nigeria’s crypto transactions witnessed a substantial 9% year-over-year growth, reaching an impressive $56.7 billion between July 2022 and June 2023. This surge can be attributed to a growing number of Nigerians beginning to trade crypto like bitcoin and stablecoins, particularly during periods of extreme drops in the value of the naira.
From Ban to Tax: The Unpredictable Trajectory
The crypto boom in Nigeria gained momentum as citizens sought alternatives to hedge against the devaluation of the national currency, exacerbated by bold economic reforms implemented by President Bola Tinubu. Notably, the scrapping of a costly petrol subsidy and the removal of certain exchange rate restrictions contributed to the weakening of the naira.
In response to these economic challenges, Nigeria’s young and tech-savvy population turned to cryptocurrencies, leveraging peer-to-peer trading options offered by crypto exchanges to navigate around the 2021 ban on crypto transactions imposed by the country’s banks and financial institutions.
However, as the crypto market flourished, the government took an unexpected turn in 2023. In a surprising move, the Buhari-led government introduced a new law to tax gains on digital assets, including cryptocurrencies. This shift marked a departure from the 2021 ban and showcased the government’s willingness to explore crypto taxation as a potential revenue source.
The crypto tax, embedded in a series of amendments to the 2022 Finance Act, imposes a 10% tax on profits from digital assets. This involves not solely cryptocurrencies but also non-fungible tokens and other tokenized assets, as elucidated by Adewale Ajayi, a partner at KPMG. The implementation of this tax, nevertheless, surprised numerous individuals in the crypto community, instigating discussions on the absence of a well-defined policy framework and stakeholder participation in the decision-making process.
Challenges and Debates: Navigating the Road Ahead
Obinna Iwuno, the president of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), expressed bewilderment at the sudden imposition of a tax without a comprehensive policy framework. He highlighted the necessity for cooperation between the government and stakeholders in the cryptocurrency realm to guarantee impartial and well-informed decision-making.
Opponents contend that, although levying taxes on cryptocurrency is not inherently erroneous, excessive taxation could impede the development of an industry that is still in its early stages. Davizoe Effiong, CEO of BEI Consultancy, warned against the potential negative impact on crypto adoption, suggesting that capping the tax profit at 5% could strike a balance between revenue generation for the government and sustaining the growth of the crypto ecosystem.
One key challenge highlighted by crypto traders, such as Wale, is the need for the government to formalize and legitimize the crypto industry. To effectively implement the tax, there must be collaboration with international exchanges and the licensing of crypto traders. The government’s recent directive to Binance Nigeria Limited to cease soliciting Nigerian investors is indicative of its efforts to regulate and control the crypto space.
The crypto community awaits the release of guidelines from Nigeria’s tax authority, the Federal Inland Revenue Service (FIRS), in collaboration with the Joint Tax Board. As the regulatory landscape evolves, questions loom over the enforcement of the tax and its potential impact on the promises made by President Bola Tinubu’s administration, which expressed a bullish stance on crypto and blockchain technology.
Conclusion
In summary, the trajectory of cryptocurrency trading in Nigeria mirrors an intricate interaction among economic circumstances, governmental directives and the ambitions of a technology-savvy populace. While the country contends with the imperative for fresh income streams, the cryptocurrency sector stands at a juncture, weighing the prospective advantages of taxation against the hazard of impeding its advancement. The coming months will reveal how Nigeria navigates these challenges and whether the crypto tax becomes a catalyst for industry maturation or a hurdle to widespread adoption.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south for the fourth consecutive session after it shed 1.18 per cent on Friday, March 13.
The unlisted securities market recorded a loss despite closing without a price decliner, and ending with two price gainers led by Geo Fluids Plc, which gained 1o Kobo to sell at N3.10 per share compared with the previous day’s N3.00 per share. Industrial and General Insurance (IGI) Plc appreciated during the session by 2 Kobo to trade at 54 Kobo per unit versus Thursday’s closing price of 52 Kobo per unit.
When the market closed for the day, the market capitalisation lost N29.83 billion to close at N2.489 trillion compared with the N2.519 trillion it finished a day earlier, and the NASD Unlisted Security Index (NSI) crashed by 49.84 points to 4,160.46 points from 4,210.31 points.
Market activity improved yesterday, as the volume of transactions rose 179.5 per cent to 10.4 million units from 3.7 million units, but the value of trades declined by 68.4 per cent to N29.9 million from N95.0 million, while the number of deals weakened by 11.5 per cent to 46 deals from 52 deals.
Central Securities Clearing Systems (CSCS) Plc remained the most active stock by value on a year-to-date basis with 38.4 million units worth N2.4 billion, Okitipupa Plc followed with 6.4 million units traded at N1.1 billion, and FrieslandCampina Wamco Nigeria Plc transacted 6.3 million units for N584.3 million.
Resourcery Plc ended the trading session as the most traded stock by volume on a year-to-date basis with 1.1 billion units valued at N415.6 million, trailed by Geo-Fluids Plc with 130.8 million units valued at N504.5 million, and CSCS Plc with 38.4 million units worth N2.4 billion.
By Adedapo Adesanya
The Naira continued to claw back some gains against the Dollar in the different segments of the foreign exchange (FX) market, as its value was strengthened on Friday.
In the black market, it gained N10 against the United States Dollar yesterday to close at N1,400/$1 compared with the preceding day’s rate of N1,410/$1, and at the GTBank forex counter, it chalked up N6 to close at N1,385/$1, in contrast to the N1,391/$1 it was traded a day earlier.
Similarly, in the Nigerian Autonomous Foreign Exchange Market (NAFEX), it appreciated against the greenback during the session by N5.28 or 0.38 per cent to quote at N1,366.23/$1 versus Thursday’s closing price of N1,371.51/$1.
It also improved its value against the Pound Sterling in the official market on Friday by N21.81 to settle at N1,812.99/£1 compared with the previous day’s N1,834.80/£1, and gained N13.86 against the Euro to sell at N1,568.03/€1 versus N1,581.89/€1.
Pressure eased further on the FX market as the Central Bank of Nigeria (CBN) continued interventionist operations this week, selling Dollars to banks to boost liquidity after a $500 million boost last week.
This was complemented by inflows from foreign investors, exporters and non-bank corporates, among others, while Nigeria’s gross external reserves remained above $50 billion, the highest since 2009.
The Governor of the apex bank, Mr Yemi Cardoso, also eased fears of a Naira devaluation, saying the country’s financial system has been strengthened by reforms.
Regardless, external pressure looms as the US Dollar strengthened globally due to its war with Iran, now ongoing for three weeks.
Meanwhile, the cryptocurrency market was largely down as traders and investors continue to align with current realities.
The market is adapting to the conflict in real time. Early in the war, every headline produced an outsized reaction because nobody could price the tail risk. Now, traders have a framework where strikes happen, oil spikes and bitcoin dips only to recover again.
Cardano (ADA) depreciated by 3.8 per cent to $0.2623, Dogecoin (DOGE) lost 1.7 per cent to finish at $0.0948, Ripple (XRP) slumped 1.5 per cent to $1.39, Solana (SOL) dropped 1.4 per cent to sell for $87.33, Binance Coin (BNB) went down by 1.3 per cent to $653.58, Bitcoin (BTC) declined by 1.1 per cent to $70,670.63, and Ethereum (ETH) decreased by 0.9 per cent to $2,078.78.
However, TRON (TRX) appreciated by 1.7 per cent to $0.2941, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Adedapo Adesanya
The price of the major crude oil grade, Brent crude oil, closed above $100 on Friday for the second consecutive session, as the Iran war heads toward its third week, with oil tanker traffic through the Strait of Hormuz still effectively at a standstill.
It gained 2.67 per cent or $2.68 during the trading day to close at $103.14 per barrel, while the US West Texas Intermediate (WTI) crude oil grade appreciated by 3.11 per cent or $2.98 to settle at $98.71 per barrel.
Brent futures were up about 10 per cent for the week following the 27 per cent rise seen last week, which marked the biggest weekly gain in oil prices since the COVID-19 pandemic in 2020. WTI futures, which saw their best week since 1983 last week, ended the week more than 8 per cent higher.
US President Donald Trump said American forces launched a major bombing raid on Iran’s strategic Kharg Island, targeting military facilities on the key Persian Gulf outpost while warning Iran that its vital oil infrastructure could be destroyed if shipping in the Strait of Hormuz is disrupted.
The terminal accounts for roughly 90 per cent of Iranian crude shipments, loading millions of barrels per day onto tankers bound largely for Asian markets.
The US and Israel’s strikes in the conflict have largely targeted Iranian military and nuclear infrastructure. Oil facilities elsewhere in Iran have been hit, but Kharg’s massive storage tanks, jetties, and pipelines had remained untouched until the latest strike.
Iran’s new supreme leader, Mojtaba Khamenei, vowed to keep fighting in a message delivered via state television.
There have been a number of attacks on foreign ships in or near the Strait, feeding into concerns that a prolonged war could translate to a global economic shock.
Prices are rising despite the US and its allies rolling out some measures to keep a lid on energy costs.
The International Energy Agency (IEA) has agreed to release 400 million stockpiled barrels, the largest such action in history.
The US has issued a 30-day waiver for India to purchase sanctioned oil from Russia. President Donald Trump is considering loosening rules under the Jones Act that require American ships to transport goods between domestic ports, including oil and gas, in an effort to lower costs.
Traders are continuing to monitor developments in the Middle East.
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