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 Exchange (NGX) Limited returned to green territory on Friday, closing higher by 0.10 per cent after investor sentiment turned bullish.
Business Post reports that the market breadth index was positive yesterday after the bourse ended with 29 appreciating equities and 21 depreciating equities.
Linkage Assurance gained 10.00 per cent to trade at N1.43, Livestock Feeds appreciated by 9.93 per cent to N8.41, Mutual Benefits jumped by 9.84 per cent to 67 Kobo, UBA soared by 5.75 per cent to N36.80, and Oando grew by 5.59 per cent to N51.00.
Conversely, Red Star Express lost 9.91 per cent to finish at N4.82, Learn Africa depreciated by 9.85 per cent to N3.02, FTN Cocoa declined by 9.43 per cent to N4.80, Coronation Insurance slumped by 9.39 per cent to N2.22, and Ikeja Hotel slipped by 9.35 per cent to N9.70.
Customs Street grew yesterday as a result of buying interest in banking equities, which dominated the activity chart, according to data from the bourse.
Fidelity Bank transacted 62.3 million shares for N1.1 billion, Access Holdings traded 38.3 million equities worth N843.7 million, Tantalizers sold 32.0 million stocks valued at N99.2 million, Veritas Kapital exchanged 31.4 million shares worth N38.4 million, and Zenith Bank traded 22.7 million equities valued at N1.1 billion.
At the close of trades, a total of 397.2 million stocks worth N14.2 billion exchanged hands in 10,099 deals compared with the 310.5 million stocks valued at N6.3 billion traded in 10,182 deals a day earlier, indicating a decline in the number of deals by 0.82 per cent, and the growth in the trading volume and value by 27.92 per cent and 125.40 per cent, respectively.
The industrial goods and commodity sectors remained unchanged during the session, the insurance and consumer goods indices tumbled by 0.49 per cent and 0.02 per cent apiece, while the energy and banking counters went up by 0.50 per cent and 0.12 per cent, respectively.
The bargain-hunting activities of the market participants lifted the All-Share Index (ASI) on Friday by 104.19 points to 104,962.96 points from 104,858.77 points and the market capitalisation increased by N66 billion to N65.820 trillion from N65.754 trillion.
By Adedapo Adesanya
The last trading session this week at the NASD Over-the-Counter (OTC) Securities Exchange ended on a negative note with a 0.44 per cent decline on Friday, March 21.
The market capitalisation of the OTC securities exchange went down by N8.67 billion to N1.939 trillion from N1.948 trillion and the NASD Unlisted Security Index (NSI) ended the session at 3,358.61 points after dropping 15.01 points from the preceding day’s 3,373.62 points.
Trading data showed an increase of 50.7 per cent in the volume of securities transacted to 304,188 units from the 201,873 units transacted in the previous trading day, the value of transactions surged by 1,214.8 per cent to N10.2 million from N776,509.51, and the number of deals rose by 88.2 per cent to 32 deals from 17 deals.
Yesterday, FrieslandCampina Wamco Nigeria Plc lost N1.84 to trade at N37.17 per share versus Thursday’s closing price of N39.01 per share, Central Securities Clearing System (CSCS) Plc depreciated by N1.01 to sell at N22.84 per unit compared with the preceding day’s N213.85 per unit, and Afriland Properties Plc declined by 2 Kobo to close the day at N19.50 per share versus the previous session’s N19.52 per share.
At the close of trading activities, Impresit Bakolori Plc was the most active stock by volume on a year-to-date basis with 533.9 million units worth N520.9 million, followed by Industrial and General Insurance (IGI) Plc with a turnover of 69.9 million units valued at N23.7 million, and Geo Fluids Plc with 44.1 million units sold for N88.9 million.
Similarly, Impresit Bakolori Plc was the most active stock by value on a year-to-date basis with a turnover of 533.9 million units worth N520.9 million, trailed by FrieslandCampina Wamco Nigeria Plc with the sale of 13.2 million units valued at N511.8 million, and Afriland Properties Plc with 17.6 million units sold for N360.1 million.
By Adedapo Adesanya
The value of the Naira depreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, March 21 by N2.72 or 0.18 per cent to settle at N1,537.05/$1 compared with the preceding day’s N1,534.33/1$.
In the same official FX market, the exchange rate of the Nigerian Naira and the Pound Sterling and the Euro remained unchanged at N1,972.89/£1 and N1,657.81/€1, respectively.
At the parallel market segment, the local currency tumbled against the Dollar during the trading session by N5 to trade at N1,590/$1 versus Thursday’s closing price of N1,585/$1.
The pressure on the market continued as the Dollar strengthened in the international market, making currencies like the Naira weaker.
The continuous downward trend of the Naira has raised concerns about the effectiveness of recent injections into the market even as the Central Bank of Nigeria (CBN) channeled more than $55 million into the banks during the week.
In the cryptocurrency market, most tokens as prices inversed with the wider financial markets, which are down on tariff worries and decreased corporate earnings.
On the regulatory front, the US government is moving towards a market structure bill that has been touted as historic.
Solana (SOL) appreciated by 1.2 per cent to sell at $129.31, Dogecoin (DOGE) rose by 0.9 per cent to $0.1692, Ethereum (ETH) went up by 0.9 per cent to $1,988.34, and Ripple (XRP) added 0.8 per cent to close at $2.40.
Further, Bitcoin (BTC) expanded by 0.6 per cent to $84,293.76, Binance Coin (BNB) increased by 0.4 per cent to $631.94, and Cardano jumped by 0.3 per cent to end at $0.7134.
On the flip side, Litecoin (LTC) went down by 1.8 per cent to $91.25, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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