Nigeria’s president, Bola Ahmed Tinubu, signed a law that recognizes digital assets. According to the Nigerian constitution, the law becomes enforceable once the president has signed it, and therefore, cryptocurrencies are now treated as securities in Nigeria.
The law, officially titled Investments and Securities Act 2024, brings the sale of cryptocurrencies under the jurisdiction of the Nigerian Securities and Exchange Commission (SEC). This is part of a larger plan to bring a digital economy to Nigeria and to make it a hot spot for crypto finance now when many countries are imposing additional regulations on crypto.
Why are Regulations Put in Place?
Cryptos are already used in Nigeria for crypto eSports betting, online transactions, or as a way to store value. However, the previous law regulating the matter, the ISA Act of 2007, doesn’t mention crypto. The new law, therefore, creates a legal framework for treating cryptos as securities and does so for investment contracts as well.
The law grants SEC regulation authority over the use of crypto, which is commonplace in countries that have such regulations at all. It also deals with the problem of Ponzi schemes, which often use cryptos in their efforts to entice new followers.
SEC Statement
The SEC has come out with a statement about the new regulations and their role in handling the new and booming crypto market. The director-general of the SEC, Emomotimi Agama, said:
“The ISA 2024 reflects our commitment to building a dynamic, inclusive, and resilient capital market. By addressing regulatory gaps and introducing forward-looking provisions, the new Act empowers SEC to foster innovation, protect investors more efficiently, and reposition Nigeria as a competitive destination for local and foreign investments.”
The SEC has also emphasized that the new act brings Nigeria’s regulations up to date with that of the International Organization of Securities Commissions (IOSCO).
Regulatory Drive
Nigeria has increased regulatory measures around crypto for the past couple of years, as have many other countries in the world. Another part of this effort is the attempt to tax the revenue made from crypto assets. The government made claims about these plans, but they didn’t make it into this law.
As is the case with crypto regulations in other countries, these bring stability to the market, but there are investors who don’t believe the government has a place in crypto. Now, when crypto is widely accepted, they are treated similarly to traditional financial assets.
Expected Outcomes
The government has outlined a few outcomes as the goals of these regulatory changes. In a few months, once the law has been in place for long enough to show, these effects will be measurable.
The most important of these are enhancing market integrity, boosting investor confidence, and systemic risk management. Not all of these depend on one law or on the treatment of cryptocurrencies alone. However, the law is a step in the right direction for the planned modernization of the Nigerian financial sector.
The State of the Nigerian Crypto Market
The Nigerian crypto market has experienced significant growth in recent years. In 2024, it was valued at over $400 million. It’s expected that it will increase by about 13 percent by 2028. In terms of transactions – the value is about $56.7 billion between July 2022 and June 2023. It’s a growth of about nine percent per year.
About 70 percent of these holdings are modest – less than $100 per holder. At this point, about 34 percent of Nigerians have some crypto holdings in their portfolio, and that number is expected to increase as well.
The Binance Lawsuit
Binance, one of the largest crypto exchanges, has faced legal challenges in Nigeria for the past couple of years. In 2023, the Nigerian SEC declared its operations in the country to be illegal. This has led to legal issues, controversy, and accusations of tax evasion and currency manipulation.
In February 2024, Nigerian authorities arrested Tigran Gambaryan, Binance’s head of financial crime compliance. The authorities also filed a lawsuit against Binance. Many feel that the regulations put in place now are partly there to prevent similar issues in the future and bring clarity to the industry.
To Sum Up
Nigeria has introduced a new law regulating crypto. The law legalizes the use of cryptos as securities and charges the SEC with regulating the industry. The goal of such a measure is to regulate the crypto market and provide more stability. At the same time, it will bring in more investments into the country.
Nigeria has a substantial crypto market, but most assets are held in small accounts run by individual investors. The market is expected to grow in the years to come due to the wider crypto acceptance and overall growth in the economy. Nigeria is in the middle of a lawsuit against Binance, a crypto exchange, and the law has been partly introduced to address that controversy.
