After going back and forth between acceptance and rejection, Nigeria was set to accept crypto assets via a new bill recently passed by lawmakers, and is now awaiting signing by President Bora Tinubu.
Nigeria's 2025 Investment and Securities Bill replaced the law passed in 2007 and is now considered outdated in light of global development. The new law defines crypto assets as “a digital representation of value that is transferred, digitally traded and used for payment or investment purposes.”
This definition does not recognize the digital version of Fiat Money as a crypto asset. It also provides legitimate assistance in exchange for platforms used to trade, manage and secure storage of virtual and digital assets.
Turn the page
The attitude of national facilities to the emergence of Nigeria's cryptocurrency was shaped by panic when adoption surged from around 2015. The trigger was the collapse of the price of crude oil, Nigeria's main source of foreign revenue, followed by a sharp decline in the value of Naira and a first quarterly resizing.
Just as Nigerians saw the value they stored in Naira evaporated, Bitcoin and other cryptocurrencies became safe shelters for many to escape. However, demand for cryptocurrency further fueled demand for foreign exchange, putting even more pressure on Naira's exchange rates. Nigeria quickly became the second country after the US, with the largest cryptocurrency holdings.
That was when the Central Bank of Nigeria intervened with directives to the bank to close all bank accounts related to cryptocurrency trading. It was not a complete ban, but it was an adversarial act intended to suffocate trade. Cryptocurrency traders simply went underground, relying on peer-to-peer trading, and continued their business. Binance, a Canadian company, one of the world's largest crypto exchanges, has become a major player in Nigeria by offering such transactions.
When Tinubu took office in mid-2023 and replaced Emifile with Olaemi Kaldoso as governor of the central bank, the monetary authorities were initially softened with cryptocurrency. That changed soon as the government subsequently cracked down on Binance and detained and charged two executives for currency manipulation and money laundering. It was a long-standing conflict that only ended after the diplomatic intervention of then-US President Joe Biden, which secured the release of one Binance official, held after his colleagues fled custody.
Central banks were working on a growing cryptocurrency era, while Nigeria's Securities and Exchange Commission (SEC) was also sought regulatory solutions. Part of the results were redefine the terms and improvements that led to new investment and securities laws.
“The legislation will undoubtedly provide an important opportunity to promote capital market growth and diversification, thereby creating a fostering atmosphere for investors in the capital markets in Nigeria,” said Ojuza Iznaso, chairman of the Senate Markets Senate Committee, who announced that the bill had been sent for signing by Tinubu. He touted the modernization of capital market practices and investment protection within its primary objectives.
A new company is coming
With the advent of fintech companies offering new services that expand regulatory definitions, some of the regulatory changes are needed. Apart from those offering crypto trading, others offer retail investors the opportunity to buy stocks, bonds and currencies. Key destroyers in this category include Piggybest and Kauriwise. This provides bamboo that allows retail investments in offshore securities for $10, so that by investing in high profits and company debt certificates, it provides higher returns than banks.
Changes envisaged in reforms to investment and securities law include the creation of a market for the trading of goods by establishing a framework transaction between warehouse receipts and goods contracts. This is expected to promote a seamless supply chain between major agricultural producers and industries that require them both at home and abroad.
The new law also expands the range of futures markets for currencies and other assets, while providing guidelines for Nigerians who wish to invest in international financial markets. Federal, local, or local authorities wishing to raise funds through the issuance of bonds and promissory notes must comply with some additional regulations. For example, it is not permitted to borrow more than 50% of the expected revenue to ensure that the debt is sustainable.
Targeted scams
Regulators are actively presenting in identifying and exposing recent investment frauds and setting up what is known as “irregular operator alerts” to inform the public about dangerous investment proposals and operators. For this year, some of the people called up so far include unregistered real estate investment companies who have been handed over as capital market fund managers and have access to unlicensed cryptocurrency exchanges for general clients, as well as online brokerage companies that have access to investments in US stocks.
The SEC will acquire more biting teeth in the new law, chasing Ponzi schemes and similar frauds, and prisoners will be liable for prison conditions up to 10 years. The law also expands the Investor Protection Fund's duties to cover investors' losses resulting from securities companies losing their licenses or going out of business.
“A key provision in the bill is a new provision that the Investor Protection Fund (IPF) established by the Stock Exchange will compensate investors who suffer from financial losses arising from registration or cancellation of trading member companies.”
“Under existing law, compensation is limited to cases of bankruptcy, bankruptcy, or other negligence by a member company of the transaction.”
Overall, the driving force behind the law is to mitigate the risks faced by investors. The SEC currently has the sole authority to oversee mergers and acquisitions of companies, regulating companies listed on stock exchanges.
At a hearing on the bill before it passed, the Central Bank of Nigeria raised concerns about the SEC's authority to regulate companies as it is normally associated with banks and other financial institutions within the scope of the financial authorities. These objections were one of the issues that lawmakers were expected to review before sending the bill to President Tinubu for his signature.
Nigeria currently operates three trade exchanges in the capital market. Nigerian exchanges are the leading trading platform for stocks and funds traded on bonds and exchanges of major companies in the country. Operated by the Financial Market Dealer Association (including national banks), FMDQ trading exchanges focus on fixed income securities, forex and derivatives. Small NASD exchanges are traded at private companies.
“Nigeria needs and deserves a world-class capital market to promote ongoing economic diversification,” Agama said. “The passing and enactment of investment and securities bills is a vital step in this direction.”
