Nigeria moves gingerly to tame Africa's biggest crypto market

Nigerian authorities are warily moving to regulate Africa’s largest cryptocurrency market in long-delayed efforts to create legal certainty in a field still fraught with fraud and volatility.For years, regulators and government officials have viewed cryptocurrencies and other digital assets with suspicion despite their popularity in the country. Nigeria ranked second globally after India in 2023 and 2024 on a crypto adoption index compiled by Chainalysis, a global crypto research firm. Over the past year, a more regulated sector has slowly started to take shape, even as fraud remains a concern for police. The director-general of the country’s Securities and Exchange Commission (SEC), Emomotimi Agama, confirmed in August that the regulator was pushing ahead with efforts to create clarity around the use of digital assets. That month, the SEC announced that it had granted “Approval-in-Principle” to two exchanges to begin operations. The first licensed companies — Busha Digital Limited and Quidax Technologies Limited — have since launched. “We believe this regulatory move is a positive start that will benefit the market in the long run by building trust and stability,” Buchi Okoro, co-founder and chief executive of Quidax, said.

“The SEC approval sent a clear signal to potential crypto investors, emphasising their focus on customer protection.”

However, the government’s regulatory push is being bogged down by scepticism and widespread fraud and investment scams, with many grifters in play. In December, Nigeria’s Economic and Financial Crimes Commission (EFCC) said it arrested 792 suspects — including scores of foreigners — in a single operation in the affluent Victoria Island area of Lagos “for their alleged involvement in cryptocurrency investment fraud and romance scams.”

A romance scam is when a fraudster pretends to be in love with a target in order to fleece them.

The previous month, the SEC issued an advisory against Marino FX Limited, which it said had falsely claimed to be registered by the commission as a cryptocurrency exchange. It was not the first time the SEC had published such a notice. Beyond approving the exchanges, Nigeria’s parliament is considering an investment and securities bill that, if passed into law, would establish a regulatory framework for digital currencies. In the run-up to the general election in February 2023, President Bola Tinubu, then as the candidate of the ruling All Progressives Congress, promised a regulatory environment that would encourage the healthy adoption of digital assets.

Many in the industry saw his breakaway from his predecessor’s hardline stance against cryptocurrencies as a welcome development. However, months after taking office, Africa’s economic powerhouse imposed a new set of restrictions on crypto exchanges in an attempt to halt the sliding value of the local naira currency.

In February 2024, central bank governor Olayemi Cardoso singled out Binance for blame.

Binance, the world’s biggest digital asset exchange, was forced to shut down operations involving the naira. Many customers quickly offloaded their wallets, fearing their funds might be trapped.

Authorities arrested, sued and later released one of two Binance executives who had flown into the country for talks with the government. The other fled government custody.

Nigeria’s Inland Revenue Service still has an ongoing $81.5 billion lawsuit against the exchange, which had not been registered to operate in the country. Laolu Biyi Samuel, co-founder of Busha Digital Limited, said the overall regulatory environment was moving positively.

“Despite the strong headwinds we have faced over the years, we have truly seen a turnaround in the government’s approach to innovation in the sector,” he said.

With the United States recently launching a “strategic bitcoin reserve”, experts believe Nigeria’s appetite for digital assets could help the West African nation reap the benefits of a potential windfall. Still, there are concerns that cryptocurrencies remain a conduit for money laundering and terrorism financing, and that the high volatility could wipe out investments in a country with a weak social safety net. “Regulatory clarity and policies should be prioritised now,” Obinna Iwuno, president of Stakeholders in Blockchain Association of Nigeria (SiBAN), said. “It is not too late to start discussing a national Bitcoin strategy and action plans.”