As Nigeria’s new cryptocurrency tax regime takes effect this January, the government’s push for revenue is colliding head-on with an industry still waiting for clear rules. The industry yet again finds itself caught between aggressive government policy and regulatory uncertainty.
While authorities push to collect revenue from digital asset transactions, most crypto exchanges still operate without formal licenses, highlighting what experts call a “revenue first, rules later” approach that threatens to stifle the very market it aims to formalise.
Ayotunde Alabi, CEO of Luno Nigeria, a prominent crypto exchange, identifies the core issue as an enforcement credibility gap. “When taxation moves faster than licensing and market conduct rules, you create uncertainty over who is ‘in scope,'” he tells WT.
This ambiguity, he warns, unfairly raises costs for serious operators and may push users toward informal peer-to-peer channels, defeating the goal of a transparent, taxable market.
The Nigeria Tax Administration Act 2025 mandates that individuals pay personal income tax on crypto gains. For platforms, called Virtual Asset Service Providers (VASPs), non-compliance brings severe penalties, including an initial fine of NGN 10 M (~USD 7 K), followed by NGN 1 M (~USD 700.00) monthly, with their operational licenses at risk.
However, this firm tax directive exists alongside a regulatory process moving, as one industry stakeholder puts it, at a “snail’s pace.” Over a year after the Securities and Exchange Commission (SEC) launched a regulatory sandbox, only two local exchanges, Quidax and Busha, hold provisional licenses.
Dozens of other startups remain in limbo. Notably, a similar effort in South Africa, another African crypto hub, yielded 59 operating licenses in April 2024, highlighting contrasting momentum.
This misalignment creates a practical dilemma for businesses. Regulators state that failure to pay tax can lead to license withdrawal, but most firms cannot secure a license in the first place. Alabi explains that for platforms, true “compliance” now requires navigating two parallel tracks.
On one track is tax compliance, he notes, which entails registering with authorities and building systems to produce audit-ready reports that map customer gains to naira values. On the other is regulatory readiness, which he explained as demonstrating progress in the SEC’s onboarding pipeline and maintaining robust internal controls, even while a full license remains out of reach.
For the average user, Alabi says compliance is “practical and boring.” It means keeping basic records of transactions and using platforms that can provide formal statements. “The key point,” he stresses, “user response will be driven less by the existence of tax and more by the usability of tax compliance. If filing and record keeping feel impossible, activity will not disappear; it will move.”
A Pattern of Enforcement Before Clarity
Nigeria’s relationship with cryptocurrency has been a rollercoaster of harsh crackdowns and tentative acceptance. In 2021, the Central Bank of Nigeria (CBN) banned banks from servicing crypto exchanges, only to reverse the policy in late 2023.
The most dramatic enforcement action came in early 2024. Nigerian authorities detained two Binance executives for months, accusing the global exchange of manipulating the naira’s value and facilitating illicit flows. The government also directed telecom providers to block access to Binance and other major platforms.
These blocks remain partly in place today, creating a contradictory landscape where the state simultaneously pursues taxes from an industry it actively restricts. This top-down approach has defined Nigeria’s strategy. The SEC has proposed a NGN 1 B (~USD 700 K) capital requirement for VASPs, a sum critics call prohibitive.
For operators, the core complaint is sequencing. The tax law explicitly states that failure to comply can lead to license revocation. But for the majority of companies still awaiting approval, this threat feels abstract.
“How will they implement the tax regime coming next year without proper operator licences when only two exchange platforms are licenced?” financial analyst Rume Ophi asked in November.
Nevertheless, the responsibility for reporting and enforcement will fall heavily on the exchanges. They are required to maintain seven years of customer transaction records, report suspicious activity, and provide periodic customer reports to the tax authority. However, without a clear, accelerated pathway to licensing, critics fear the state lacks the structured mechanism to verify these obligations at scale.
What Comes Next?
The government views crypto taxation as a fair step toward recognising and integrating a booming sector. Between July 2024 and June 2025, crypto transaction values in Nigeria reached an estimated USD 92.1 B. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has called the new regime “fair, balanced, and globally competitive.”
But industry leaders stress that taxation alone is not a regulatory framework. For the policy to build confidence rather than drive activity underground, clarity and coordination are needed immediately.
To turn this into a confidence-building move, the Luno Nigeria boss argues Nigeria needs an explicit licensing timetable and aligned reporting requirements between the SEC and the tax authority. The goal, he says, should be a system where “one dataset satisfies both” regulators.
Looking at the next three to six months, Alabi predicts a fragmented response from Nigerian crypto users. He expects more “platform shopping” as users seek venues that provide clear documentation for tax purposes. He also anticipates a short-term spike in informal peer-to-peer trading if the tax rollout is perceived as punitive or unclear.
“The cautionary signal is sequencing and coherence,” Alabi says, assessing the message sent to global investors. “If taxation is implemented while licensing remains unclear or slow, global firms interpret that as ‘revenue first, rules later,’ which increases perceived policy risk.”
To turn this into a confidence-building move, he argues Nigeria must publish an explicit licensing timetable and align the reporting demands of the SEC with those of the tax authority. The goal is a system where “one dataset satisfies both.”
For Alabi, the path forward hinges on specific, technical fixes. He says Nigeria’s framework must immediately achieve four things: precise definitions of taxable events, clear valuation standards, proportional enforcement with a realistic transition period, and a trustworthy dispute resolution process.
“Without these,” he implies, “compliance becomes viewed as a risk, not a responsibility. That perception alone can push activity underground.”
His long-term prescription involves three critical actions over the next twelve months: finally operationalising the SEC’s licensing pipeline at scale, building a standardised crypto tax reporting model, and creating a “pro-innovation compliance compact” with the industry.
The economic upside of aligning these pieces is significant. As Alabi puts it, “Formal rails improve investor confidence, reduce fraud exposure, and widen the taxable base without suffocating the market.” The alternative is a continued cycle of uncertainty, where the government’s reach for revenue risks pushing the very economy it wants to tap further into the shadows.
