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 Dipo Olowookere
The Nigerian equity market showed no signs of slowing down, as it further appreciated by 1.30 per cent on Friday on the back of sustained buying pressure.
Unlike the preceding sessions, investor sentiment was bullish yesterday after the Nigerian Exchange (NGX) Limited ended with 43 price gainers and 26 price losers, implying a positive market breadth index, the first this week.
UPDC gained 10.00 per cent to close at N4.40, Academy Press also appreciated by 10.00 per cent to quote at N7.70, Haldane McCall improved by 9.97 per cent to N3.97, Zichis soared by 9.94 per cent to N15.60, and Wema Bank added 9.84 per cent to settle at N31.25.
Conversely, Meyer lost 9.92 per cent to sell for N16.80, Trans-Nationwide Express also crashed by 9.92 per cent to end at N7.90, C&I Leasing slipped by 8.53 per cent to N5.90, Omatek dipped by 7.34 per cent to N2.02, and eTranzact decreased by 5.28 per cent to N17.05.
When the bourse closed its doors to business, the All-Share Index (ASI) rose by 2,884.81 points to 225,722.49 points from 222,837.68 points, and the market capitalisation grew by N1.858 trillion to N145.335 trillion from N143.477 trillion.
A look at the activity chart showed that market participants transacted 627.6 million shares worth N44.5 billion in 55,232 deals during the trading day compared with the 667.9 million shares valued at N38.1 billion traded in 53,062 deals a day earlier.
This indicated that the volume of transactions went down by 6.03 per cent, the value of trades went up by 16.80 per cent, and the number of deals jumped by 4.09 per cent.
Access Holdings closed the session as investors’ toast, with a turnover of 75.6 million units worth N2.4 billion. UBA transacted 43.1 million units valued at N2.3 billion, Wema Bank exchanged 41.5 million units for N1.3 billion, Zenith Bank traded 38.4 million units valued at N5.2 billion, and Universal Insurance sold 29.5 million units for N35.9 million.
By Aduragbemi Omiyale
Mr Taiwo Oyedele has set some goals he intends to achieve as Nigeria’s Minister of Finance and Coordinating Minister of the Economy.
While taking over from his predecessor, Mr Wale Edun, on Thursday, the tax expert assured that he has no plans to overturn some of the reforms already put in place by the former occupier of the seat.
In a message on Friday, he emphasised that, “Our immediate task is to consolidate these gains, deepen ongoing reforms, and ensure they translate into tangible benefits for all Nigerians.”
He promised to ensure fiscal discipline by embracing transparent and prudent management of public resources, while also harmonising revenue administration, broadening the tax base, reducing the burden on the vulnerable population, and supporting economic growth.
Mr Oyedele further said his other strategic priorities include creating a predictable and investor-friendly environment anchored on policy coherence, consistency, and clarity; and aligning efforts across all tiers and institutions to maximise policy impact.
He also said efforts would be made to deepen collaboration with the private sector and other key stakeholders for data-driven policy design, co-implementation, and feedback for continuous improvement.
According to him, “Good policy design alone is not enough; success will be defined by execution. We are committed to disciplined implementation, accountability, and measurable results.”
“I look forward to working with colleagues across government, the private sector, and all Nigerians as we move from reform to result, accelerate growth and build a more stable, inclusive, and prosperous economy,” he stated.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange further appreciated by 0.23 per cent on Thursday, April 23, with the Unlisted Security Index (NSI) adding 8.99 points to close at 3,969.96 points against the previous day’s 3,968 points.
The rise in the share price of Central Securities Clearing System (CSCS) Plc by N2.86 to N69.34 per unit from N66.48 per unit raised the market capitalisation of the NASD bourse by N5.38 billion to N2.380 trillion from N2.375 trillion.
Yesterday, there were two price losers, led by Food Concepts Plc, which lost 29 Kobo to sell at N2.65 per share versus N2.94 per share, while UBN Property Plc dipped by 22 Kobo to N2.03 per unit from N2.25 per unit.
During the session, the volume of securities traded declined by 97.9 per cent to 451,522 units from 21.5 million units on Wednesday, the value of securities depreciated by 52.32 per cent to N23.6 million from N49.5 million, and the number of deals depreciated by 3.6 per cent to 27 deals from 28 deals.
At the close of business, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by CSCS Plc with 59.5 million units exchanged for N4.0 billion, and Okitipupa Plc with 27.8 million units traded for N1.9 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units sold for N1.2 billion.
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