On May 28, Nigerian President Muhammadu Buhari green-lighted the Finance Act 2023, aiming to increase revenue streams, maintain fiscal transparency, and recognize crypto as a legitimate asset. The new regulation will introduce several tax reforms to update Nigeria’s existing fiscal framework.
The Finance Act 2023 has stirred heated debate among Nigerian investors, businesses, and scholars. Obinna Iwunna, the president of the stakeholders in the blockchain technology association of Nigeria (SIBAN), challenged the regulator’s stance on the new legislation.
Importance of Finance Act 2023
In a statement, Iwunna expressed concerns about whether the Finance Act 2023 will be implemented in the West African country since it was still premature to enact new regulations on crypto. Under the new legislation, the Nigerian authority plans to introduce a 10% tax on revenue from selling digital assets such as cryptocurrencies.
After analyzing the proposed tax reforms, Iwunna strongly opposed implementing the 10% crypto tax due to existing uncertainties battling the crypto sector. He described the crypto tax as “putting the cart before the horse.”
In February, the central bank of Nigeria (CBN) implemented restrictive measures to local financial institutions from providing services to crypto exchanges. Commenting on the CBN’s latest directive, Iwunna expressed concern on how the government could tax an asset that is not legally recognized or even defined.
The SIBAN’s president urged the regulators to invest in infrastructure development before enacting the tax rules. He also requested the regulators clarify the new legislation to support compliance.
Impact of Imposing 10% Tax on Crypto
Iwunna proposed that the regulators should adopt the regulatory approach implemented by Nigeria’s National Information Technology Development Agency (NITDA) when formulating the blockchain national policy. It was reported that the NITDA team held multiple stakeholders consultations involving participants from both the private and public sectors.
In addition, Iwunna outlined the roles of regulatory agencies such as the Nigerian Securities and Exchange Commission (SEC), CBN, and NITDA. Guided by the current regulation in Nigeria, Iwunna admitted each regulatory agency in Nigeria recognizes cryptocurrency and its benefits.
Afterwards, he provided a overview of what crypto assets entail, merits and need for clear regulation. In his report, Iwunna explained that cryptocurrency consists of three main features: security, technology, and currency.
Besides the features of crypto assets, Iwunna requested the regulators to provide a clear definition of digital assets such as cryptos. He also underscored the need to develop appropriate policies and regulations for crypto assets.
In his concluding remarks, the president of SIBAN requested the Nigerian regulators to work on implementing tax measures.
Why are Nigerians Against Crypto Tax ?
Recently the Nigerian authority has taken strategic actions to expand its revenue-generating projects. Iwunna applauded the efforts made by the government to increase its tax base.
However, Iwunna requested the regulators to maintain regulatory balance to ensure the taxation supports the growth of the crypto sector and innovation.Beyond this, Iwunna highlighted the implicit steps regulators should take to ensure regulatory clarity for crypto assets. He advised the regulators to examine how taxation affects cryptocurrency.
The pro-crypto entrepreneur proposed that the regulator should seek public consultation before implementing the new legislation. He admitted that lack of public consultation has limited the implementation of new rules in Nigeria.
Reflecting on the launch of the e-naira, Iwunna observed that the regulators failed to hold a public consultation crucial for the massive adoption of digital fiat. Interestingly, Iwunna statement sparked mixed feelings among the community.
In a separate report, the Nigerian crypto enthusiast demanded to know whether Iwunna has submitted his proposal to the responsible regulatory bodies. Responding to the multiple questions asked by the community, Iwunna confessed that the SIBAN team had presented their proposals to the CBN and the SEC. He admitted that the regulators had not provided their response concerning his submission.
Besides Iwunna’s proposal, other crypto entrepreneurs requested the government to invest heavily in crypto-related education. Presently Nigeria has a large population of crypto-savvy communities which require the government to equip the citizens with crypto knowledge.