From Cash to Crypto: The Legal Framework for Digital Currency Recognition in Nigeria’s Financial System

Abstract

Abstract

Nigeria has emerged as a leading cryptocurrency market in Africa, but its regulatory framework remains disjointed, with different government agencies enforcing conflicting policies. While the Central Bank of Nigeria (CBN) has imposed restrictions on cryptocurrency transactions, the Securities and Exchange Commission (SEC) has been attempting to provide a regulatory framework for digital assets and Initial Coin Offerings (ICOs). Meanwhile, agencies such as the National Information Technology Development Agency (NITDA) and the Economic and Financial Crimes Commission (EFCC) oversee cybersecurity risks and investigations into financial crimes. This study adopts a qualitative research methodology, utilizing doctrinal analysis of legal frameworks, policy documents, and relevant academic literature. It also employs a comparative approach, examining global regulatory models such as the European Union’s Market in Crypto Assets (MiCA) regulation, El Salvador’s adoption of Bitcoin, and the United States’ multi-agency approach. These comparative insights help assess how Nigeria can develop a harmonized and effective regulatory framework for cryptocurrencies. The findings reveal key challenges, including regulatory inconsistencies, limited internet access, cybersecurity vulnerabilities, and unreliable electricity supply, which hinder Nigeria’s ability to fully leverage the potential of digital finance. The study recommends adopting a coordinated regulatory strategy, enhancing financial inclusion by leveraging blockchain technology, implementing clear tax policies, and strengthening investor protection measures. These reforms will be essential in positioning Nigeria as a leading player in the global cryptocurrency ecosystem while ensuring economic stability and consumer protection.