Regulatory gridlock threatens Nigeria’s crypto market ahead 2026 tax enforcement

Nigeria’s cryptocurrency market faces renewed uncertainty as a combination of stalled licensing, rising compliance costs, and an impending tax regime threatens to push users deeper into unregulated peer-to-peer (P2P) channels.

Stakeholders warn that without urgent regulatory clarity and broader licensing, the government’s plan to formalise the sector through the Nigeria Tax Administration Act (NTAA) may backfire when it takes effect in January 2026.

The NTAA introduces a comprehensive tax framework for virtual asset transactions, mandating registration with the Federal Inland Revenue Service (FIRS), strict Know-Your-Customer (KYC) reporting, seven-year data retention, and compulsory reporting of suspicious or high-value transactions to FIRS and the Nigerian Financial Intelligence Unit (NFIU).

Violations attract penalties of N10 million in the first month and N1 million for each additional month of non-compliance, alongside the risk of licence suspension or revocation by the Securities and Exchange Commission (SEC).

But despite this aggressive compliance framework, Nigeria has approved only two crypto exchanges: Quidax and Busha, under its Accelerated Regulatory Incubation Programme (ARIP), more than a year after granting them an initial Approval-in-Principle.

No additional licences have been issued since August 2024, even though several exchanges remain in the application queue. The licensing stagnation has created frustration among operators who argue that the sector cannot be taxed effectively when most players remain unlicensed.

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The SEC has attributed the delay to issues that emerged during the first round of licensing. At a meeting with fintech firms earlier this year, Director General Emomotimi Agama stated that a higher level of due diligence was required before new licences could be issued.

However, industry operators contend that the prolonged wait is stifling market growth at a time when regulatory certainty is urgently needed.

They say the combination of heavy taxation and regulatory paralysis is already discouraging retail participation, which makes up a significant portion of Nigeria’s crypto activity.

The NTAA categorises a wide range of activities as taxable, including trades, transfers, mining income, staking rewards, airdrops, and payments for goods or services, mirroring tax reporting standards seen in more advanced digital economies.

But operators warn that the Nigerian environment lacks the regulatory structure to implement the law effectively.

According to Chukwuemeka Enoch Mbaebie, the convener of Lagos Blockchain Week, the compliance demands embedded in the act will push users away from centralised exchanges and into informal P2P networks where taxes and oversight are harder to enforce.

Mbaebie notes that mandatory KYC verification, integration with the National Identification Number (NIN) and Tax Identification Number (TIN) systems, and quarterly transaction reporting will discourage small-scale traders.

“These layers of compliance could deter retail traders,” he said, predicting a resurgence in P2P activity as users seek to avoid tax exposure and operational scrutiny.

He warns that increased P2P usage may complicate efforts to track capital flows and enforce anti-money laundering controls.

Obinna Iwuno, the president of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), agrees that the tax framework, arriving before a comprehensive licensing regime, risks empowering underground markets.

Iwuno notes that even previous levies, such as the 7.5 percent VAT imposed on some exchanges, pushed users toward untaxed alternatives. “The tax regime will chase a lot of traders to P2P, which is not a market we should encourage to thrive. If you license more operators, those who are licensed will protect their investment. They will whistleblow and help regulators stop unlicensed activities. You don’t strengthen regulation by shrinking the formal market,” Iwuno said.

Industry leaders argue that Nigeria needs more, not fewer, licensed exchanges to support compliance, self-regulation, and ecosystem growth.

Iwuno adds that expanding the ARIP pipeline, accelerating assessments, and introducing tiered licensing categories would help distribute regulatory oversight among a broader base of compliant operators.He also caution that launching a complex tax regime without first strengthening the industry infrastructure could stunt the sector’s development.

Nigeria ranks second globally in crypto adoption, driven largely by young, tech-savvy users seeking alternatives to inflationary pressures and currency volatility. Despite this, SiBAN president laments that the country still lacks a comprehensive regulatory framework to match its global position.

“What the industry needs is support to grow. The government should be looking at tax holidays or favourable tax regimes. If the industry grows, the government will be the biggest beneficiary in the long run,” Iwuno said.

As the January 2026 enforcement date approaches, market operators warn that Nigeria may be heading toward a regulatory choke point. Without broader licensing, clearer rules, and streamlined compliance processes, the government’s attempt to tax the sector could unintentionally deepen the unregulated crypto economy it intends to control.

For now, the crypto industry remains caught between ambitious taxation plans and an unresolved regulatory framework, a gridlock that threatens to reshape Africa’s largest digital asset market in unpredictable ways.

Royal Ibeh is a senior journalist with years of experience reporting on Nigeria’s technology and health sectors. She currently covers the Technology and Health beats for BusinessDay newspaper, where she writes in-depth stories on digital innovation, telecom infrastructure, healthcare systems, and public health policies.

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