Crypto is a well-known term in Nigeria. According to a report from ConsenSys, a blockchain software development company, more than 50% of Nigerians know about cryptocurrencies. This is true, as one out of every three Nigerians has either a crypto app installed on their phone or owns some crypto in a wallet.
However, there is some controversy over the legality of crypto trading in Nigeria because while it seems restricted, people still trade it openly. There have also been cases of people having their bank accounts frozen to trade crypto. So, this begs the question: Is crypto legal in Nigeria?
This article addresses this issue. It will examine the history of crypto trading in Nigeria, its current state, and its impact on the country’s economy. It will also discuss the challenges and prospects that crypto faces in Nigeria.
What is Crypto Trading?
Crypto trading involves predicting the price movement of crypto coins and buying and selling them to make a profit. It is done on crypto exchanges that are centralized or decentralized and have peer-to-peer platforms. Some cryptocurrencies you can trade are Bitcoin, Ethereum, XRP, Solana, Litecoin, etc.
You can trade crypto in numerous ways, such as day trading (short-term trades), swing trading (holding for days/weeks), and HODLing (long-term investing). You can also engage in spot trading (buying actual crypto) or derivatives trading (trading contracts based on crypto prices). Crypto trading comes with high risks and high rewards.
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History of Crypto Trading in Nigeria
Early Adoption in Nigeria
Nigeria quickly became a hotspot for cryptocurrency adoption due to high inflation, unreliable banking services, and expensive remittance fees. Many Nigerians turned to crypto for cross-border payments, wealth preservation, and online trading. With a large youth population and growing internet access, Bitcoin, Ethereum, Litecoin, and other cryptos became popular investment tools.
Central Bank of Nigeria (CBN) Ban (2021)
In February 2021, the CBN banned banks from processing crypto transactions. The reasons were fraud, money laundering, and financial instability. The government feared that unregulated crypto could weaken the naira and encourage illicit activities. They also hate that they cannot control crypto in any way. Nigerian crypto users were forced to find alternative ways to trade, leading to the adoption of P2P platforms.
Public Reaction & Crypto Underground
While banned, Nigerians still traded crypto with P2P exchanges, and platforms like Binance P2P and Paxful gained fame and allowed their users to bypass banking restrictions. This resulted in a crackdown on the crypto community. Bank accounts were frozen, defaulters were arrested and prosecuted, yet crypto adoption remained strong.
SEC’s Initial Regulations
Before the ban, the Securities and Exchange Commission (SEC) made efforts to regulate cryptocurrencies by classifying them as securities or commodities. Because of CBN’s 2021 restrictions, the SEC paused its regulatory efforts. But in 2023, the commission reversed its decision, aligning with global trends to provide more precise guidelines for crypto businesses.
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Reversal of Crypto Ban (2023-2024)
December 2023 Policy Change
In December 2023, the Central Bank of Nigeria (CBN) lifted restrictions that prohibited banks from processing cryptocurrency transactions. This decision was taken to regulate the Nigerian crypto market rather than ruin it, but it would come with conditions.
SEC’s Updated Stance (January 2024)
In January 2024, the SEC made some significant changes to its view on cryptocurrencies and ended up being on the progressive side of the regulation. More to the point, the SEC put forth new guidelines for issuing cryptocurrency, in line, for instance, with the CBN’s policy switch. Thus, permission to operate the crypto businesses was restored once again.
New Banking Guidelines
The new CBN regulations allow banks to create accounts for crypto-related businesses but do not trade, invest in, or hold cryptocurrencies directly. They were to implement strict compliance measures such as Anti-Money Laundering (AML) and Know Your Customer (KYC) policies.
Government’s Rationale
The Nigerian government has lifted the ban due to a surge in the adoption of crypto, its economic benefits, and global regulatory trends. They decided to regulate crypto to combat fraud, increase tax revenues, and bring Blockchain technology to Nigeria.
Also Read: What Is a Bitcoin Exchange Traded Fund?
Impact of Crypto Trading on the Nigerian Economy
The effects of crypto trading on the Nigerian economy have been positive and negative. The positive effects are:
- Financial Inclusion: Cryptocurrencies offer millions of unbanked Nigerians financial services through peer-to-peer trading platforms.
- Employment and Income Generation: Crypto trading, freelancing, and blockchain-related jobs create more economic opportunities.
- Remittances and Cross-Border Transactions: Crypto provides a cheaper and faster alternative for Nigerians receiving money from abroad.
- Hedge Against Inflation and Naira Devaluation: Crypto-assets like Bitcoin serve as a store of value, reducing dependence on high-fee remittance services.
- Foreign Investment and Innovation: Nigeria has seen an incredible rise in blockchain startups and fintech innovations, which have boosted economic growth.
The Negative Impacts of crypto on the economy are :
- Regulatory Uncertainty: The restrictions on crypto trading from the Central Bank of Nigeria have been a stumbling block for crypto traders.
- Fraud and Scams: The rise of Ponzi schemes and crypto-related fraud has caused many Nigerians to lose money.
- Capital Flight: Large-scale crypto trading can lead to capital flight, which weakens the economy. Capital flight occurs when large amounts of money and assets leave a country and are invested in other countries.
- Tax Evasion and Loss of Government Revenue: Crypto transactions’ decentralized nature reduces potential revenue for infrastructure and public services.
- Economic Instability: High speculation in crypto markets can lead to financial instability.
The negative impacts of cryptocurrency in Nigeria are the challenges facing crypto, which lead to strict measures being placed on it.
Is Crypto Legal in Nigeria?
As of March 2025, it is legal to trade crypto in Nigeria because the government lifted its ban in December 2023. However, crypto trading for individuals, banks, and other financial institutions must be done within the frameworks laid down by the Central Bank.
Some of these guidelines are
- Crypto business accounts must be used solely for crypto business activities.
- Transactions in these accounts must be traceable to the company’s crypto-asset activities.
- Crypto exchanges that operate in Nigeria must be registered and remit taxes.
The Future of Cryptocurrency in Nigeria
Statista published a report that says Nigeria’s cryptocurrency market is projected to reach US$1.6bn in revenue by 2025, with 25.86m users and an 11.02% user penetration rate. This shows that Nigeria’s Cryptocurrency market is growing at a constant pace and has a promising future, but its success depends on
- The government’s ability to create a favorable regulatory environment.
- Addressing the challenges related to volatility, security, and technical limitations.
- The education of the general public and those working within the financial sector about the benefits and risks of the technology.
If done right, Nigeria could become Africa’s central hub for blockchain technology.
Conclusion
In Summary, Crypto now has the legality it needs to operate in Nigeria again, but this comes at the cost of obeying the rules and regulations set by the Nigerian government. Despite its challenges, the opportunities that come with crypto abound.
The future of crypto in Nigeria depends on clear regulations, public education, and security measures. With the massive adoption of crypto by the youth, Nigeria will be a leading blockchain hub in Africa.
