Nigeria’s relationship with cryptocurrency is a story of immense grassroots enthusiasm colliding with regulatory apprehension. For years, Africa’s largest economy has also been one of its most vibrant crypto hubs, with citizens embracing digital assets as a hedge against a volatile naira, a tool for cross-border payments, and a gateway to the global digital economy. This bottom-up adoption, however, has unfolded against a backdrop of a dramatically evolving regulatory landscape, shifting from a hardline prohibition to the careful construction of a formal supervisory framework.
The Spark: Grassroots Adoption and Early Warnings
Long before the major regulatory interventions, Nigerians were already prolific adopters of cryptocurrency. By 2020, the country ranked third globally in crypto transaction volume, with an estimated 32% of the population having used digital currencies. This surge was driven by necessity; chronic inflation and foreign exchange shortages made USD-backed stablecoins an attractive alternative for preserving wealth and facilitating international trade. The utility of crypto was cast into the national spotlight during the 2020 #EndSARS protests, when it became a crucial tool for funding the movement after traditional bank accounts were suspended.
Regulators, however, watched this organic growth with increasing concern. As early as 2017, the Central Bank of Nigeria (CBN) had issued a circular warning banks about the risks associated with cryptocurrencies but stopped short of an outright ban. This cautious stance would soon give way to decisive action.
The Prohibition: The CBN’s 2021 Directive
On February 5, 2021, the CBN dropped a bombshell on the burgeoning crypto ecosystem. It issued a directive explicitly prohibiting all regulated financial institutions from dealing in cryptocurrencies or facilitating payments for crypto exchanges. Banks were ordered to identify and immediately close any accounts associated with crypto trading.
In a subsequent press release, the CBN justified its position by citing a host of risks, including money laundering, terrorism financing, tax evasion, and the extreme price volatility of crypto assets. The bank argued that the anonymity of cryptocurrencies made them “well-suited for conducting many illegal activities” and that their use contravened the CBN’s mandate as the sole issuer of legal tender in Nigeria. The move sent shockwaves through the market, with exchanges halting services and users scrambling as their bank accounts were frozen.
The Unintended Consequence: A P2P Boom
Rather than extinguishing the market, the CBN’s directive had the opposite effect: it drove the crypto economy underground and ignited an unprecedented boom in peer-to-peer (P2P) trading. Severed from the formal banking system, Nigerians flocked to P2P platforms, which allowed them to trade directly with one another using bank transfers for the fiat leg of the transaction.
The result was staggering. By 2023, Nigeria had become the largest P2P crypto market in the world. Between July 2022 and June 2023, the country’s crypto transaction volume grew by 9% year-over-year to $56.7 billion. The ban had proven ineffective; as one analyst put it, “resistance is futile”. The policy had simply pushed activity into less transparent channels, making it harder for regulators to monitor and manage the very risks they sought to prevent.
The Pivot: From Prohibition to Regulation
Recognizing the limitations of its previous stance and acknowledging global trends toward regulation, the CBN executed a major policy pivot. On December 22, 2023, it issued new guidelines that formally reversed the 2021 prohibition. The new rules permit banks and other financial institutions to open accounts for Virtual Asset Service Providers (VASPs), provided these entities are licensed by the Securities and Exchange Commission (SEC).
This marked a fundamental shift from a strategy of exclusion to one of supervised inclusion. The goal was no longer to resist crypto adoption but to bring it within a formal regulatory perimeter where risks could be managed through proper oversight.
Building the Framework: The SEC Steps In
With the CBN’s reversal, the mantle of regulatory construction passed to the SEC. Building on its 2022 “Rules on Issuance, Offering and Custody of Digital Assets,” the SEC launched a key initiative in June 2024: the Accelerated Regulation Incubation Program (ARIP). The ARIP was designed as a regulatory sandbox, allowing VASPs to operate in a controlled environment while the SEC gathered insights to refine its rules.
The program bore its first major fruit in September 2024, when the SEC granted an “Approval-in-Principle” to two local exchanges. This was a landmark moment, representing the first official licensing of crypto platforms in the country. The move was hailed by industry leaders as a critical step toward legitimizing the sector, boosting investor confidence, and allowing VASPs to access formal banking services.
The journey was further solidified in March 2025 with the signing of the Investments and Securities Act 2025, which formally classifies digital assets as securities, cementing the SEC’s oversight role.
The Road Ahead
Nigeria’s regulatory journey for cryptocurrency has been turbulent, marked by a pragmatic evolution from a prohibitive stance to a structured, risk-based framework. While challenges remain, including a recent crackdown on P2P platforms over alleged currency manipulation, the direction is clear. The country’s regulators have moved to embrace a new reality, seeking to balance the immense innovative potential of digital assets with the imperative of financial stability. This new, regulated era promises to bring Nigeria’s massive crypto economy out of the shadows and into the formal financial system.
