Barely two years after imposing the ban, the Nigerian government has reintroduced cryptocurrency in the country
In February 2021, the Central Bank of Nigeria (CBN) issued a circular to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.
The CBN further warned local financial institutions against dealing in crypto-assets or facilitating payments for crypto exchanges.
The apex bank cited concerns over money laundering, terrorism financing, cybercrime and the volatility of cryptocurrencies as reasons for the ban.
The directive received significant backlash from the Nigerian public and the cryptocurrency community, as many saw it as a hindrance to technological advancement and economic growth.
However, just two years later, the government has taken a surprising turn by introducing taxation on cryptocurrencies.
The federal government however tax cryptocurrencies in the new Finance Act. One of the provisions of the 2023 Finance Act is taxing proceeds from cryptos and other digital assets.
Other taxes captured in the new Act include personal income tax, the tertiary education fund tax, customs, and excise tariff.
In December 2, 2022, Zainab Ahmed, minister of finance, budget and national planning, says there is a provision to tax cryptocurrency and other digital assets in the latest finance bill.
On May 28, 2023, former President Muhammadu Buhari signed the 2023 Finance Act into law before he exited office on May 28, 2023. The Finance Act introduced a series of tax reforms to modernize Nigeria’s fiscal framework.
Of the provisions in the Act is the introduction of a 10% tax on proceeds from the disposal of digital assets, including cryptocurrencies.
The move means Nigeria recognizes digital assets’ increasing influence and economic prospects while ensuring the tax system aligns with the changing landscape.
The 2023 Finance Act is comprehensive legislation seeking to enhance fiscal transparency, boost revenue generation, and promote economic growth.
The Act seeks to rein in revenue from recognized digital assets like cryptocurrencies and bring them into the purview of taxation. Also, the Nigerian government wants to create a level playing ground to ensure that they contribute to Nigeria’s revenue generation and development.
The move demonstrates Nigeria’s readiness to adapt to its fiscal policies, realities and accelerate technological advancements and the changing landscape of financial transactions.
The determination to impose a tax on the proceeds of digital assets shows the government’s recognition of the economic promise of cryptos. There has been remarkable growth in the global cryptocurrency industry in recent years.
By taxing proceeds from digital assets, the Nigerian government seeks to capture a part of the economic value made from these transactions, contributing to the country’s overall revenue drive.
By doing so, Nigeria joins the league of jurisdictions currently taxing digital assets, including the United Kingdom, the United States of America, Australia, India, Kenya and South Africa.