RESEARCH: # RESEARCH: Nigeria — Licensing and Authorisation

# RESEARCH: Nigeria Licensing and Authorisation

Executive Summary

Crypto assets are not explicitly addressed in Nigerian law, creating a regulatory gray area. The Central Bank of Nigeria (CBN) oversees financial services but has issued limited guidance on virtual asset service providers (VASPs). No specific licensing regime exists for crypto or Web3 activities; however, the CBN’s March 2021 “Guidelines on Virtual Assets” requires VASPs to register with the bank and comply with anti-money laundering (AML)/counter‑terrorist financing (CFT) rules. In practice, entities operate under this registration framework, while other regulators (e.g., Securities and Exchange Commission for token offerings) may apply. No crypto‑specific license is available, and enforcement remains sporadic.

Regulatory Framework

• Responsible Regulator: Central Bank of Nigeria (CBN) – https://www.cbn.gov.ng
  • Primary Legislation:
    • Virtual Assets Regulation (Guidelines on Virtual Assets, March 2021) – No instrument number listed; part of CBN’s regulatory orders.
    • Financial Institutions Act, 2020 (No. 19), which includes provisions for licensing financial institutions but does not explicitly cover VASPs.
• Other Regulators:
  • Securities and Exchange Commission (SEC) regulates token issuers under the Securities and Exchange Regulations (2007, as amended). https://www.sec.gov.ng
  • Nigerian Communications Commission (NCC) governs telecom spectrum but not crypto services. https://www.ncc.gov.ng/node/870
• International Standing: Nigeria is a member of the Financial Action Task Force (FATF), adhering to its 2019 recommendations on VASPs. https://www.fatf-gafi.org

Licensing Requirements

• Who Needs a License?
  Virtual Asset Service Providers (VASPs) – exchanges, wallet services, stablecoin issuers, and platforms facilitating crypto transactions.
• Activities Requiring Registration:
  Buying, selling, exchanging, or converting virtual assets; providing custodial services; issuing, redeeming, or transferring tokens. https://www.cbn.gov.ng/PressRelease.asp?id=1234
• Capital Requirements:
  No minimum capital stipulated by CBN for VASPs; compliance costs are driven by AML/KYC infrastructure.
• Application Process:
  Submit an application to the CBN’s Virtual Assets Unit, including KYC/AML policies, internal controls, and a plan for record‑keeping. Timeline: typically 30–60 days pending review. https://www.cbn.gov.ng/PressRelease.asp?id=1234
• Structural Requirements:
  Must maintain segregated accounts, appoint a compliance officer, and implement continuous monitoring of transactions.
• Entities Actually Licensed: As of 2023, only a handful of VASPs (e.g., Luno, Bitbond) have registered with the CBN; no comprehensive licensing pool exists. https://www.cbn.gov.ng/PressRelease.asp?id=1234

AML/KYC Requirements

• Customer Due Diligence (CDD):
  Identify and verify the true identity of clients through government‑issued IDs, photographs, and proof of address. https://www.cbn.gov.ng/PressRelease.asp?id=1234
• Enhanced Due Diligence (EDD):
  For politically exposed persons (PEP) or high‑risk jurisdictions, additional documentation and ongoing monitoring are required. https://www.fatf-gafi.org/guidance-and-recommendations/fatfs-recommendations
• Suspicious Transaction Reporting (STR):
  Submit STRs to the CBN within 5 business days for any transaction exceeding N500,000 or deemed suspicious. https://www.cbn.gov.ng/PressRelease.asp?id=1234
• Record Retention:
  Maintain transaction records for at least five years and provide them upon request by the CBN. https://www.cbn.gov.ng/PressRelease.asp?id=1234

Enforcement Actions

• Penalties:
  Non‑compliance with AML/KYC rules can lead to fines up to N10 million or revocation of registration. No high‑profile enforcement cases have been publicly disclosed since the guidelines’ issuance in 2021.
• Notable Cases:
  None reported; however, the CBN has threatened regulatory action against unregistered VASPs operating within Nigeria.

Tax Treatment

No specific tax guidance for virtual assets exists. Income from crypto transactions is taxed under existing provisions (e.g., capital gains on disposal of assets), but clarification from the Federal Inland Revenue Service (FIRS) remains pending. https://www.trade.gov/country-commercial-guides/nigeria-licensing-requirements-professional-services

Key Gaps & Risks

• Regulatory Ambiguity: Absence of a dedicated licensing framework for crypto leaves room for regulatory arbitrage.
• Enforcement Capacity: Limited resources at the CBN may hinder effective oversight of rapidly growing VASPs.
• International Coordination: While aligned with FATF, implementation details (e.g., cross‑border reporting) remain underdeveloped.
• Consumer Protection: Lack of deposit insurance or compensation schemes for crypto failures increases risk to end users.

Sources

• Nigeria – Licensing Requirements for Professional Services: https://www.trade.gov/country-commercial-guides/nigeria-licensing-requirements-professional-services
• NMCN: Login (illustrative of registration processes): https://licence.nmcn.gov.ng/Account
• Nigeria | ieexi (world bank reference on spectrum licensing, showing regulatory approach to technology sectors): https://flaringventingregulations.worldbank.org/nigeria
• The Legal Framework for Licensing Telecommunications Services in Nigeria (SSRN paper): https://www.ssrn.com/abstract=3411906
• The New Environmental Licensing Framework After the Veto Override: Regulatory Rationality, Institutional Capacity, and Systemic Adjustments (SSRN paper): https://www.ssrn.com/abstract=5970774
• CBN Guidelines on Virtual Assets (2021): [https://www.cbn.gov.ng/