The Nigeria business climate for virtual asset service providers (VASPs) cannot be described as ideal. Of course this is not peculiar to the West African country. No jurisdiction in the world today is ideal for VASPs. However, certain developments in Nigeria’s regulatory space over the years might have done more harm than good to this emerging sector.
This is why whether due to the actions or inactions of the Nigerian government regarding VASPs, the regulatory climate in the country has been markedly characterized by bans or restrictions and criminal prosecutions. While both local and foreign digital asset exchanges and digital asset wallet service providers to peer-to-peer platforms and over-the-counter (OTC) merchants hardly have clarity on what regulators are cooking in the kitchen, they are feeling the heat.
Speaking recently in a panel at the Global Tech Africa Conference 2024 in Lagos over a week ago on the implementation of the National Blockchain Policy in Nigeria, Femi Adegolu, Co-Founder and CEO of BChain Africa, shared his thoughts about the state of regulation in Nigeria.
“I have asked questions regarding the Binance saga and the Federal Government. I have spoken extensively about how the government needs to start taxing these companies rather than letting them go. Every month, it is becoming a normal thing that companies are leaving Nigeria. Why are these companies leaving Nigeria? I think it is because our regulatory landscape is too rigid and strict for these companies. And when it is rigid and strict, these companies experience a drop in revenue, they have to do a lot of downsizing by sacking their workers, and then unemployment increases. Before you know it, crime increases.”
Mr. Adegolu also decried the regulatory conflict in the virtual assets industry in Nigeria whereby the CBN and the SEC appear to not be on the same page regarding the approach Nigeria should take. “The SEC is releasing a circular announcing a sandbox, but CBN is saying “no”, we will do things the way we want to do it. CBN [then] places a restriction or ban on trade or anything that has to do with crypto and EFCC is arresting people who are trading crypto on their own…EFCC calls them scammers.”
Interestingly, while Mr. Adegolu acknowledges the presence of scammers in the crypto space in the country, he believes that there is an absence of the rule of law, whereby while some alleged scammers are being arrested, others are “walking freely”. In his words, “Now, I know there are definitely scammers in the space definitely. At least, some months ago Davido released a meme coin and Nigerians lost millions of dollars from that but EFCC did not chase Davido. Davido is walking freely. So if {the law} covers one person, it should cover everybody.”
Looking forward to Nigeria’s positive thinking, Mr Femi Adegolu wants Nigeria to rethink its present over-restrictive approach to regulating crypto in the country considering the economic opportunities the nascent sector is also enabling. He strongly believes that the sector can continue to grow the country’s GDP. According to Mr. Adegolu, “Everybody is looking forward to seeing Nigeria on the continent really pushing forward for this blockchain policy to be enacted. The thing is that Web3 and blockchain have employed a lot of young people.. Both developers and those doing business and people who are building companies, FinTech or not. I can tell you right now that thousands of young people are employed by foreign companies and they are working in Nigeria. They are getting their salaries and spending in Nigeria, thus contributing to the economy. Bringing forex into Nigeria. What are we doing? If we are doing that and the government is restricting these countries from coming in.”
“I don’t know what’s going on. Binance has left. OKX has left. I think that Nigeria can make millions of dollars from taxing these companies every year if we sit down with these people and ask, What do you want? How do we really make this environment really conducive for you to do business? And I can tell you, in the next one year, if the government—the CBN, SEC, NITDA—sit down with the private sector to put hands together to solve these problems, I am very sure that you will see young people getting jobs and these companies coming to register with the Corporate Affairs Commission (CAC) to become local companies that we recognize.
Apart from Mr. Adegolu, other members of the panel were the Director General of Securities and Exchange Commission, Nigeria Dr Timi Agama; the Director of Digital Economy Development at NITDA Nigeria, Engr Salisu Kaka (PhD), and the CEO of Afen Blockchain, Deborah Ojengbede.
From the EFCC’s criminal prosecution of Binance and Tigran Gambaryan over allegations of money laundering and terrorism financing and the FIRS’s prosecution of Binance over allegation of tax evasion; freezing the bank accounts of many crypto operators and P2P merchants over allegations of foreign-exchange violations to the unexplained blacklisting of both local and foreign crypto exchange platforms operating in the Nigerian market, and the unceremonious delisting of naira from peer-to-peer (P2P) crypto platforms as directed by the SEC, the business climate for crypto in Nigeria definitely feels hotter than the extreme effects of global warming.
Amidst all that, without any regulatory guidelines by the FIRS, Kucoin, itself blacklisted in Nigeria’s cyberspace, suddenly starts implementing value added tax (VAT) on its platform. OKX, a leading crypto exchange, eventually pulled out last month. No doubt, Nigeria cannot presently be said to be a globally competitive jurisdiction for crypto businesses who desire the level of clarity and transparency that proper regulation brings.
In a country with over 35 million crypto users and a predominantly youthful, techy population, Nigeria is the leading market for crypto in Africa and one of the leading markets globally. But policy and regulation has been a mess—no thanks to what many operators believe is due to the lack of coordination, direction, and vision on the part of the relevant regulators and the Nigerian government. The National Blockchain Policy seems to have been reduced to a mere paper, with weak implementation so far.
As the National Blockchain Steering Committee, under the chairmanship of Chimezie Chuta, sets out to galvanize support from both the private and public sectors towards helping Nigeria implement the National Blockchain Policy, the hope of the emerging virtual asset industry hangs in the balance.
Will Nigeria be able to get on the global map as a globally competitive blockchain and crypto market, not only in terms of grassroot adoption but also in terms of institutional adoption driven by coordinated, responsible, and transparent regulation?
Read also: Clampdowns, Crackdowns, and Shutdowns in Crypto Town: Responsible regulation is what Nigeria needs.
