Nigeria: Stakeholders Advocate for Comprehensive Crypto Regulation in Nigeria

Stakeholders from various sectors have underscored the crucial role of crypto assets in the global financial system and have called for a comprehensive regulatory framework in Nigeria. This framework aims to foster greater interest and investment in the immense potential of crypto assets while mitigating associated risks.

Experts from academia, legislature, capital markets, banking, and other ancillary sectors convened at the first annual conference of the Association of Capital Market Academics of Nigeria (ACMAN). They unanimously agreed that crypto assets are an integral part of the global financial ecosystem, including in Nigeria.

Speaking at the conference themed “Crypto Assets and the Nigerian Capital Market,” ACMAN President, Prof. Uche Uwaleke, noted that crypto assets are seen as significant disruptors in the financial sector. While some view them as a major risk to conventional asset classes, Uwaleke emphasized the need to address these risks within a regulatory framework.

“When you have a systematic risk, which is a risk you cannot diversify, the best approach is to provide for it and accommodate it,” Uwaleke stated, highlighting the conference’s goal of finding ways to integrate crypto assets into the regulatory space.

Director General of the Securities and Exchange Commission (SEC), Dr. Emomotimi Agama, presented a paper titled “Crypto Assets and the Nigerian Economy: Implications for Financial Markets Regulation.” He disclosed that over 15,000 cryptocurrencies exist globally, with Bitcoin being the most popular. The total market capitalization of all cryptocurrencies stands at an impressive $2.59 trillion.

Agama pointed out that Nigeria currently lacks a comprehensive regulatory framework for crypto assets. The SEC’s approach has been to issue advisories on risk management, emphasizing the Risk Reward Theory—the higher the risk, the higher the potential reward.

Even in the United States, the crypto market lacks firm regulation, described by Agama as convoluted. However, he noted the growing acceptance of crypto assets, stating, “Everyone is beginning to understand that you can’t shy away from it. We must develop along this thought process.”

Highlighting the widespread adoption of crypto assets in Nigeria, Agama cited a 2023 survey indicating that approximately 33.4% of Nigerians own or use cryptocurrencies—one of the highest adoption rates globally. Nigerians use cryptocurrencies for various purposes, including investments, online purchases, and as a hedge against the naira’s devaluation.

“Nigeria is one of the largest recipients of remittances in Africa. Cryptocurrencies offer a more efficient and cost-effective way for Nigerians abroad to send money home. With traditional remittance fees often being prohibitively high, cryptocurrencies provide a cheaper and faster alternative,” Agama explained. He attributed this trend to Nigeria’s young and tech-savvy population, with a median age of around 18 years and widespread use of smartphones and internet connectivity.

Agama acknowledged the significant opportunities and challenges crypto assets present for Nigeria’s economy, stressing the need for a balanced regulatory approach to harness their benefits while mitigating risks. “Collaborative efforts from regulators, industry stakeholders, and the public are crucial for developing effective regulations. I encourage continued dialogue and cooperation to ensure a secure and innovative financial ecosystem,” he said.

The absence of a comprehensive regulatory framework has created uncertainty, deterring both investors and innovators. Agama highlighted cybersecurity threats, including hacking and fraud, and the lack of financial literacy among the population, making them vulnerable to scams and risky investments.

Despite these challenges, Agama noted numerous advantages in the crypto space and revealed that a bill currently before the National Assembly contains extensive provisions on crypto assets to protect investors and mitigate risks.

In his goodwill message, the Chairman of the Senate Committee on Capital Market, Senator Osita Izunaso, emphasized the importance of developing a comprehensive regulatory framework for crypto assets in Nigeria. He stated that the committee’s approach is guided by principles of investor protection, market integrity, financial stability, and fostering innovation and growth.

“These are the core areas where we want to focus on building proper regulation for crypto assets in Nigeria,” Senator Izunaso affirmed.