By Martin Ekpeke

The Digital Assets Coalition (DAC), a unified body representing digital asset operators and participants across Nigeria, has issued a landmark position paper urging the Federal Government and the Nigeria Revenue Service (NRS) to step down and recalibrate the recently introduced Guidelines on the Taxation of Virtual Assets.

While the coalition firmly supports bringing virtual assets into the formal tax net, advocating for platform registration, anti-money laundering (AML) compliance, and a standard Capital Gains Tax on actual profits, it warns that the current framework contains fatal structural flaws.

“By taxing the gross movement of money rather than actual gains, the guidelines threaten to destroy local innovation, penalize everyday citizens, and drive Nigeria’s multi-billion-dollar crypto economy into underground, unmonitored channels,” DAC said in the position paper.

The Coalition’s primary objection centers on two specific provisions in the guidelines: a 1.5% stamp duty imposed on every fiat-to-token conversion and a 1% withholding tax (WHT) applied to the gross value of all sales.

In digital assets, changing Naira into stablecoins (like USDT) or vice versa is rarely a speculative trade; for most Nigerians, it is merely the movement of capital, much like transferring funds between bank accounts.

Imposing a non-refundable 1.5% stamp duty on gross transfers, where average exchange fees range between 0.1% and 0.3% increases transaction costs for everyday users by as much as 500%. When stacked with an upfront 1% WHT, Nigerians are forced to pay taxes even when they break even or incur severe trading losses.

10 Key Takeaways from the Digital Assets Coalition Position Paper

1. Taxing gross movement destroys the local market: The current guidelines tax the transaction itself rather than the profit earned. Applying a tax every time money enters or leaves a digital asset format forces users off regulated local platforms and into unmonitored peer-to-peer (P2P) and offshore channels.

2. The 1.5% stamp duty exceeds standard financial fees: At 1.5%, the duty on conversions vastly exceeds standard exchange transaction fees of ₦50 with a ₦10,000 threshold. This stacks an unbearable burden on everyday retail users.

3. 1% withholding tax penalizes financial losses: Deducting 1% from the gross sale value up front means citizens pay taxes even during market downturns. While theoretically claimable as a credit, the compliance burden to reclaim it is out of reach for average retail users, permanently penalizing lost capital.

4. The guidelines punish everyday citizens, not speculators: The heaviest impact falls on ordinary Nigerians: small business owners paying foreign suppliers, freelancers receiving cross-border remittances, and students earning micro-rewards. It taxes legitimate livelihood movements below the tax-exempt thresholds set by primary tax laws.

5. Failed global precedents: India, Kenya and Turkey: Nigeria is repeating documented mistakes. India imposed a 1% WHT in 2022 and lost 81% of domestic trading volume to offshore sites within four months. Kenya introduced a 3% transaction tax in 2023, collected negligible revenue, and repealed it in 2025. Turkey withdrew a similar planned tax in 2026 after recognizing it acted as an anti-banking cash penalty.

6. Disruption of government revenue collection: By penalizing compliant, registered exchanges, the guidelines threaten to dismantle the very collectors the government relies on. As volume flees offshore, the tax base evaporates, resulting in a net revenue shortfall for the Federal Government.

7. Illegal tax remittance in virtual assets: The guidelines’ requirement for exchanges to remit tax in tokens violates Section 39 of the Nigeria Tax Act, which mandates tax payments in legal tender (Naira). Virtual assets are not recognized as legal tender in Nigeria; demanding taxes in crypto creates severe legal liability for platforms and the state.

8. Administrative overburden and enforcement costs: Attempting to track, audit, and enforce millions of micro-retail conversions generates administrative costs that far outweigh the tax collected, turning a simple gains-tax framework into an enforcement nightmare.

9. Pressure on foreign exchange reserves: When small businesses and traders are disincentivized from using fast, transparent stablecoins like USDT due to heavy transaction duties, they are forced back into traditional dollar-sourcing mechanisms, compounding pressure on Nigeria’s FX reserves.
10. A workable alternative exists: The Coalition advocates for a Capital Gains Tax model focused strictly on net profits, platform service fees, and formal corporate earnings, a proven approach used by South Africa, the UK, Brazil, and the UAE that secures revenue while preserving market growth.

Why the Government Must Step Down the Guidelines

The Digital Assets Coalition is calling on the Federal Ministry of Finance, the Nigeria Revenue Service, and relevant regulators to temporarily suspend the guidelines and implement three vital structural changes:

1. Immediately abolish the 1.5% stamp duty on conversions and replace the 1% gross withholding tax with a formal Capital Gains Tax (CGT) on net realized profits.
2. Align tax collection with existing national legislation by requiring all liabilities to be settled in official legal tender, protecting platforms and the government from asset-class legal ambiguities.
3. Establish clear de minimis exemption thresholds so students, low-income earners, and small retail remittances are not choked by registration and reporting paperwork that costs more to process than it yields.

Nigeria currently stands as the second-largest grassroots crypto adoption market in the world. By stepping down these flawed guidelines and engaging in public consultation, the government can adopt a model that raises substantial revenue, protects compliant domestic exchanges, fosters youth enterprise, and positions Nigeria as a global benchmark for digital asset regulation.