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Crypto Exchanges& Regulation in Nigeria

Top exchanges in Nigeria by Coincub criteria
Article review author
Jonathan Lea
Nigeria head image

Crypto Country Rating: 6.1/10

5/10
Institutional acceptance
Unconsolidated and lacking clear vision
6/10
Exchanges & Wallets availability
Leading exchanges wary of turmoil between state and population
8/10
Government regulation
Unclear and lacking strategy despite high crypto trading volumes of population
4/10
Defi acceptance
No real position taken as yet to DeFi
6/10
Financial services
Population wary of traditional financial institutions
8/10
Transparency
Personal data collection and identity needed
6/10
Spending crypto
Some retail and a high number of ATMs
5/10
Banks activity in crypto
Banks looking for guidance on crypto services

Bitcoin and crypto trading in Nigeria

Using crypto in Nigeria

Following a pattern of many small countries that see crypto as a financial opportunity to take a lead, Nigeria has opened up its system to huge volumes of peer-to-peer crypto transacting. According to one report, it had the highest proportion of residents using cryptocurrency than anywhere in the world – with very high trading volumes. However, the government is struggling to clarify its position on runaway crypto adoption and even controversially advised its banks to ban crypto activity.

Spend

Nigeria is more about using crypto for transactions, becoming a kind of surrogate banking service in a country that bypasses high transfer charges. Many world brands operating in Nigeria accept bitcoin, amongst them, Microsoft.

Gifting Crypto

There appears to be no tax on trading or gifting crypto. Situations may differ between jurisdictions across the country.

Law and crypto trading in Nigeria

Way back, in an effort to regulate the runaway interest in crypto, the central bank tried to restrict banks from facilitating crypto, but this attempt went largely ignored. Although bitcoin and other crypto coins are not considered legal tender or fiat currencies, as issued by banks, there is a growing level of acceptance generally. Lately, the central bank has again tried to curb the crypto craze and the result was many frozen bank accounts and customers bypassing banks by using online trading systems. On the whole, the government wants to capture crypto potential and is looking for a more cohesive strategy or rules and regulations.

Legal Latest

A consolidated crypto strategy is very much needed and being continually advocated at all levels. A pilot scheme is currently underway to run a government-backed digital currency to bring onside all those who distrust banks and financial institutions and turn instead to unregulated cryptocurrency trading. Nigeria’s Securities Exchange Commission issued regulatory guidelines in 2020 but this is merely a clarification on how the regulator intends to view cryptoassets going forward. Nevertheless, the guidelines are seen by many to be a step in the right direction.

Taxing cryptocurrencies in Nigeria

Tax

Nigeria has a less-onerous tax regime than many countries and the rates of taxation are not high. There appears to be no taxation of crypto gains within the standard income tax requirements. As yet, the vast volume of crypto activity in Nigeria is centered around peer-to-peer transactions – a form of surrogate banking rather than profiting from gains. Taxation and regulation in Nigeria are awaiting a clearer strategy.

Tax Relief

No tax on crypto would appear to be relief enough.

Tax when moving residency

Whether crypto gains or any other profit, moving to become a resident of another country would require adherence to that country’s tax laws.

Tax for Mining

Mining is beyond the scope of most individuals and calls for significant investment in time, money and equipment. With no tax to pay on crypto, there would seem to be no tax on mining.

Crypto financial services in Nigeria

Fin services/retirement account

Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. There is little certainty on this at present.

Fin services/Banking interest

Banks and banking are very much viewed with some suspicion or at least disdain by the majority of Nigeria’s population, especially amongst the poor. Banks have yet to be able to play a part in the development of crypto in Nigeria, rather they are being bypassed by peer-to-peer transactions of crypto through online platforms. A government lead may bring banks back into favor.

Fin Services/DeFi

Decentralized Finance is behind the rapid interest and growth of cryptocurrency and is underpinned by blockchain technology. As yet Nigerian financial institutions are lagging in their consolidation of this new technology.

Crypto regulation in Nigeria

Security

It’s always a good idea to check the levels of security, protection and insurance of any crypto service provider, including exchanges and wallets. Nigerian-based exchanges may offer more recourse to action if things go wrong, and a more immediate level of customer support, whilst overseas-based exchanges can provide a wider choice of services and perhaps greater speeds of affiliation and transaction.

Transparency

Transacting crypto online requires personal details and proof of ID – so you can forget about the myth of anonymity that surrounds bitcoin and other crypto.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

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