In a landmark development that has far-reaching implications for Nigeria’s capital markets, President Bola Tinubu has signed the 2024 Investments and Securities Act (ISA) into law, officially recognizing cryptocurrencies and other digital assets as securities for the first time. This move is set to bring greater transparency to the emerging market of virtual currencies and provide a legal framework that encourages investment in digital assets.
The new law, which repeals the 2007 Investments and Securities Act, now explicitly classifies virtual/digital assets and investment contracts as securities. This groundbreaking decision means that businesses dealing with digital assets such as cryptocurrencies will now fall under the regulatory purview of the Securities and Exchange Commission (SEC). It also means that virtual asset service providers (VASPs), digital asset operators (DAOPs), and digital asset exchanges will be required to register with the SEC and comply with its regulatory guidelines.
This development is a clear shift in Nigeria’s stance on digital assets, which had previously been marked by hesitation and regulation aimed at curbing the growth of the cryptocurrency market. Back in 2015, following a significant crash in global oil prices, cryptocurrencies like Bitcoin gained massive popularity in Nigeria as citizens sought an alternative to the rapidly depreciating naira. As the demand for digital assets surged, Nigeria became the second-largest holder of cryptocurrencies globally, after the United States.
However, the rise in cryptocurrency trading also led to increased pressure on the naira’s exchange rate, prompting the Central Bank of Nigeria (CBN) to ban banks from dealing with cryptocurrency transactions in 2021. This decision led to an underground market of peer-to-peer (P2P) exchanges, where Nigerian traders continued to buy and sell cryptocurrencies.
Under President Tinubu’s administration, there has been a noticeable shift. In mid-2023, the government began signaling a more supportive stance towards cryptocurrencies, appointing Olayemi Cardoso as the new CBN Governor and hinting at a possible shift in the country’s regulatory approach. The signing of the ISA 2024 into law is the clearest sign yet of this change.
The new ISA law is expected to bring much-needed regulation and oversight to the digital asset sector, fostering trust and stability. According to Emomotimi Agama, the Director-General of the SEC, the new law is a transformative step that will help position Nigeria as a competitive player in the global digital asset market. Agama said, “This Act reflects our commitment to building a dynamic, inclusive, and resilient capital market. By addressing regulatory gaps, the new law empowers the SEC to foster innovation, protect investors more efficiently, and reposition Nigeria as a competitive destination for local and foreign investments.”
The law now requires all businesses involved in digital assets to register with the SEC, providing a clear and structured regulatory environment for the sector. It also gives the SEC the power to monitor these businesses and ensure they adhere to international standards. This move will be crucial in curbing fraudulent activities within the sector, which has often been associated with scams and illegal investment schemes.
Oluropo Dada, the 13th President and Chairman of the Council of the Chartered Institute of Stockbrokers (CIS), welcomed the passage of the law, calling it a testament to Nigeria’s commitment to modernizing its capital markets. He said, “The enactment of the Investments and Securities Act 2024 underscores the government’s commitment to fostering transparency, efficiency, and stability in our financial markets.” Dada expressed confidence that the law would not only boost investor confidence but also expand the range of investment opportunities available to Nigerians and the global investment community.
Sam Onukwue, Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), also hailed the law, emphasizing that it would help reinstate investor confidence in the country’s capital markets. He noted that the law would enhance regulatory oversight of capital markets, offering greater protection to investors and creating new opportunities for both traditional investors and those looking to invest in the growing digital asset space.
With the new regulatory framework, Nigeria is expected to become a leading hub for cryptocurrency and blockchain technology in Africa, allowing investors to transact with confidence. This will likely result in a surge of interest in the country’s emerging digital asset markets, particularly among young Nigerians who have shown growing enthusiasm for cryptocurrencies.
The ISA 2024 is also a response to the global rise in digital assets and an effort to ensure that Nigeria’s capital markets remain competitive on the world stage. The Act includes provisions to improve the functioning of Nigeria’s securities exchanges, which are now classified into two categories: Composite Exchanges and Non-composite Exchanges. Composite Exchanges can list and trade all types of securities, while Non-composite Exchanges focus on specific types of products.
In addition, the Act introduces new provisions for Financial Market Infrastructures such as Central Counterparties, Clearing Houses, and Trade Depositories. This is designed to streamline operations and align Nigeria’s market practices with international best practices. The law also strengthens the regulatory authority of the SEC, enabling it to better monitor market activities and mitigate systemic risks.
Furthermore, the Act tackles illegal investment schemes, including Ponzi schemes, by prescribing harsh penalties for their promoters. This is a critical measure to protect Nigerians from fraudulent activities and ensure that only legitimate businesses operate within the capital markets.
One of the most significant aspects of the ISA 2024 is its provision for the recognition of virtual assets as securities, which is expected to transform the digital asset landscape in Nigeria. By regulating virtual asset exchanges and operators, the government hopes to ensure greater transparency, reduce fraud, and create an environment conducive to sustainable growth in the sector.
Eguarekhide Longe, Managing Director of NASD, expressed optimism about the impact of the law, noting that it would strengthen Nigeria’s financial infrastructure and attract both local and international investors. He emphasized that the law would also appeal to the youth, who are increasingly interested in digital assets and blockchain technologies.
