Cryptocurrency Transactions and Tax Implications in Nigeria

Introduction

Cryptocurrency has emerged as a popular investment tool and means of conducting transactions globally. However, many investors and traders often overlook the tax obligations associated with buying, selling, and utilizing digital assets. In Nigeria, the taxation and regulation of cryptocurrency have evolved significantly in recent years, particularly with the enactment of the Finance Act 2023 and ongoing regulatory developments from the Securities and Exchange Commission (SEC).

In 2024, the SEC introduced the Accelerated Regulatory Incubation Program (ARIP)—a framework designed to streamline the onboarding process for Virtual Asset Service Providers (VASPs) and other digital asset investment service providers. ARIP enables these entities to operate under the SEC’s direct supervision, promoting transparency and accountability.

Additionally, President Bola Ahmed Tinubu recently signed the Investments and Securities Act (ISA) 2025 into law, repealing the previous ISA of 2007. This new act marks a major milestone by officially recognizing and regulating digital assets and cryptocurrencies as securities, thereby bringing them under the purview of the SEC.

This article explores the current tax implications of cryptocurrency activities under Nigeria’s tax and regulatory framework.

Definition

Cryptocurrency,” otherwise known as “crypto asset,” means a digital representation of value that can be digitally traded and functions as (1) a medium of exchange, and/or (2) a unit of account, and/or (3) a store of value, but does not have legal tender status in any jurisdiction.  

A crypto asset only fulfills the above functions by agreement within the community of users.  Cryptocurrencies rely on cryptographic techniques and blockchain technology to facilitate secure peer-to-peer transactions without the need for third-party intermediaries like banks. These assets can also be used to generate value through tokenization and decentralized finance (DeFi) platforms.

Taxable Events

Below are the cryptocurrency-related activities that may trigger tax liabilities in Nigeria:

1. Selling (Crypto to Fiat)
   When digital assets are converted into fiat currency (e.g., BTC to NGN), any resulting profit is subject to tax.
   Example: Buying Bitcoin for ₦500 and selling it for ₦1,000 generates a ₦500 gain.
2. Trading (Crypto to Crypto)
   Exchanging one cryptocurrency for another (e.g., BTC to ETH) is a taxable event, as it increases the portfolio’s value—even without fiat conversion.
3. Spending
   Using cryptocurrency to pay for goods or services (e.g., buying pizza with Bitcoin) also triggers a taxable event.
4. Income
   Receiving cryptocurrency as payment for goods, services, or employment is considered taxable income. The value of the crypto at the time of receipt is used for tax assessment.
5. Mining, Staking, and Masternode Rewards
   • Mining: Minting new coins and verifying transactions on the blockchain.
   • Staking: Participating in transaction validation on proof-of-stake blockchains.
   • Masternode rewards: Incentives for performing specific roles on a blockchain.
     Income from these activities is taxable. However, expenses such as the purchase of mining equipment may be deductible if they are wholly, reasonably, exclusively, and necessarily necessarilyincurred for business purposes.
6. Airdrops and hard forks:

• An airdrop occurs when a cryptocurrency user is given a particular crypto asset for free, often as part of a promotional campaign or network upgrade. Usually airdrops are distributed to gain widespread support or dominance for a particular digital asset project. Either through active participation of an individual on social media or even automatically because a taxpayer holds or has transacted on some of the project coins.
• Hard forks: Hard forks occur when developers introduce new rules that make the new chain incompatible with the old one, which often leads to the creation of a new cryptocurrency.  Examples:  Bitcoin Cash (BCH) was created from Bitcoin (BTC) in 2017, and Ethereum Classic (ETC) resulted from a split with Ethereum (ETH).

Applicable Taxes

The Federal Inland Revenue Service (FIRS) has clarified that existing tax laws apply to cryptocurrency transactions. These include:

1. Capital Gains Tax (CGT)

Cryptocurrencies are treated as property, not currency. The Finance Act 2023 amends section 3a of the Capital Gain Tax Act by including “digital assets” in the list of chargeable assets. Thus, gains from their disposal are subject to Capital Gains Tax at a rate of 10%.

Example: Buying BTC for ₦2,000,000 and selling it for ₦3,000,000 results in a gain of ₦1,000,000, which attracts ₦100,000 in CGT.

2. Income Tax

Crypto earnings (from mining, staking, or payment for services) are taxable as income. The crypto’s market value at the time of receipt should be declared for income tax purposes.

Example: Receiving 0.5 BTC for freelance work must be reported at the market value of BTC on the date received.

3. Value Added Tax (VAT)

The application of VAT to cryptocurrency transactions has gained traction. In 2024, FIRS announced a 7.5% VAT on service fees related to crypto transactions.

In July 2024, KuCoin implemented a 7.5% VAT on transaction fees for Nigerian users, in compliance with FIRS directives. Note that this VAT applies only to transaction fees, not the full

Conclusion

As Nigeria’s digital economy continues to evolve, it is critical for individuals and businesses involved in cryptocurrency to understand and comply with their tax obligations. Regulatory clarity is increasing, with cryptocurrencies now recognized as securities under the ISA 2025, and with Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges coming under SEC regulatory oversight from June 2025.

To remain compliant and avoid penalties:

• Stay updated on developments from FIRST andSEC.
• Maintain accurate records of crypto transactions.
• Seek professional tax advice when necessary.

PREPARED BY JACOB DIPO FAMODIMU-—LLM, ABR, GCTI, ACTI and Notary Public

PROFESSIONAL CREDENTIALS

Jacob Dipo Famodimu is a notary public of the Supreme Court of Nigeria and an associate of both the Chartered Institute of Taxation of Nigeria (ACTI) and the Business Recovery and Insolvency Practitioners Association of Nigeria (ABR).

Source: BarristerNG