September 16, 2020 In Commercial Practice


Certain narrative has it that a weaker Nigerian naira is pushing US dollars out of reach for many including the rich and poor alike. This has resulted in the search for alternatives. A study by the has it that, “Four months ago, Abolaji Odunjo made a fundamental change to his business selling mobile phones in a bustling street market in Lagos: He started paying his suppliers in bitcoin. Odunjo sources handsets and accessories from China and the UAE. His Chinese suppliers asked to be paid in the cryptocurrency, he said, for speed and convenience. The shift has boosted his profits, as he no longer has to buy dollars using the Nigerian naira or shell out fees to money-transfer firms. It is also one example of how, in Africa, bitcoin — the original and biggest cryptocurrency — is finding the practical use that it has largely failed to elsewhere.” According to Odunjo, “Bitcoin helped to protect my business against the currency devaluation, and enabled me to grow at the same time. You don’t have to pay charges, you don’t have to buy dollars.” According to data shared exclusively with Reuters and interviews with around 20 bitcoin users and five cryptocurrency exchanges, Odunjo is just one out a thousand beneficiaries of payments made through the medium of bitcoin in Africa currently. The data obtained from US blockchain research firm Chainalysis, the monthly projection of cryptocurrency transfers to and from Africa is about $10,000 mostly individuals and small businesses.


In the midst of these boom, there is indeed no law in Nigeria criminalizing any transaction or trade in cryptocurrency (Bitcoin) and other similar virtual currency transactions. Progressively, just yesterday, the 11th of September, 2020, the Nigeria’s Securities and Exchange Commission made what many may consider regulatory intervention by issuing a statement. According to SEC, “Section 13 of the Investment and Securities Act, 2007 conferred powers on the Commission as the apex regulator of the Nigerian capital market to regulate investments and securities business in Nigeria. In line with these powers, the SEC has adopted a three-pronged objective to regulate innovation, hinged on safety, market deepening and providing solution to problems. This will guide its strategy, its regulations and its interaction with innovators seeking legitimacy and relevance.” It went on to cite the reason behind the intervention thus: “Digital assets offerings provide alternative investment opportunities for the investing public; it is therefore essential to ensure that these offerings operate in a manner that is consistent with investor protection, the interest of the public, market integrity and transparency. The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices that ultimately make for a fair and efficient market. Consequently, the SEC will regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions.”

The Securities and Exchange Commission has submitted that digital assets traded within Nigeria or by Nigerian issuers or sponsors or foreign issuers both corporate and individual, targeting Nigerian investors, in any of the services of reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services of virtual assets shall be subject to the regulation of the Commission. According to the regulatory body, since virtual crypto assets are securities, it falls within their regulatory ambit and unless it is proven otherwise. The burden of proving that the crypto assets proposed to be offered are not securities is placed on the issuer or sponsor of the said assets. An operator in the asset who can be issuer or sponsor is expected to discharge the burden of proving that the virtual assets are not securities by making an initial assessment filing, and where in the opinion of SEC, the virtual assets are indeed securities, such issuer or sponsor must register the digital assets. Clearly, by this end, the registration of the operators of the virtual assets is two dovetailing folds, to wit: the discharge of the burden of proving that the virtual assets are not securities and a proper registration. Although the later fold arises where SEC is not satisfied with the representations made by the issuer or sponsor, it however certain that there can never be otherwise, especially in the light of the directive on all existing digital assets offerings prior to the implementation of the Regulatory Guidelines to either submit the initial assessment filing or documents for registration proper within three (3) months.


However, we recall that the Central Bank of Nigeria had in a Circular Referenced FPR/DIR/GEN/CIR/06/010 and dated 12th January, 2017, drawn the attention of the Nigerian investors to the unregulated nature of the cryptocurrency transactions. This has however not deterred investors and traders in the investment especially considering the gap it has come to close. The circular partly read: “The attention of banks and other financial institution is hereby drawn to the above risks and you are required to take the following actions pending substantive regulation or decision by the CBN….” The circular went further to categorically disown virtual assets by concluding that “The CBN reiterates that VCs such as Bitcoin, Ripples, Monero, Litecoin, Dogecion, Onecoin etc and similar product are not legal tenders in Nigeria, thus any bank or institution that transacts in such business does so at its own risk.” Although there is yet to come into effect, substantive regulation by the CBN, it is however clear that there is a definite approach by the CBN not to recognize virtual assets as legal tenders in Nigeria. However the SEC in its statement had defined “Crypto Asset” as a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status in any jurisdiction. A Crypto Asset is – neither issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the Crypto Asset; and Distinguished from Fiat Currency and E-money.”

Section 2 of the Central Bank of Nigeria Act, 2007 categorized the object of the Apex Bank thus: to ensure monetary and price stability; to issue legal tender currency in Nigeria; to maintain external reserves to safeguard the international value of the legal tender currency; to promote a sound financial system in Nigeria; and to act as banker and provide economic and financial advice to the Federal Government. Whereas Section 13 of the Investments and Securities Act, 2007 identified the SEC as the Apex Regulatory Organization for the Nigerian capital market and thus will regulate investments and securities business as well as offers of securities by public companies and entities in Nigeria as defined in the Act. The Act also empowers the SEC to register and regulate securities exchanges, capital trade points, futures, options and derivatives exchanges, commodity exchanges and any other recognized investment exchange. This role extends to registration of corporate and individual capital market operators. There is also the omnibus power conferred on the agency to perform such other functions and exercise such other powers that are not inconsistent with the Act in order to actualize the real intention of the Act.


Clearly it is the SEC that has the regulatory powers to oversee the derivatives, securities etc. However there is the disturbing question of submitting totally to SEC as the Regulator in this regard. Can we possibly accept the definition offered by SEC through a mere statement or better still a circular? The answer is no. There must be a law either substantive or delegated that can properly put in place what constitutes virtual assets. In the Tax Appeal Tribunal in HALLIBURTON (WA) LIMITED vs. FBIR (2013) 11 TLRN 84, delivered on Friday, September 14, 2012, stated emphatically that: “the FIRS Information Circular is neither law nor regulation but merely information to the general public and in particular all taxpayers’ representatives or advisers and the staff of Revenue Services.” This position was re-emphasized by the same tribunal on 10th September, 2020 in APPEAL NO: TAT/LZ/VAT/029/2019 between ESS-AY HOLDINGS LIMITED vs. FEDERAL INLAND REVENUE SERVICE. Meanwhile the position had earlier been affirmed on appeal by the Court of Appeal in FBIR VS. HALLIBURTON (WA) LTD (2014) LPELR -24230 (CA) or (2016) 4 NWLR (Part 1501) 53, wherein Per IKYEGH JCA held: “I do not agree with the cross-appellant that Exhibit S, the Public Notice, issued by the cross-respondent, (pages 524 – 538 of the record) qualifies as a piece of delegated or subsidiary legislation deriving its efficacy from Sections 2 (1) and (4) and 3 (1) and (3) of CITA, the parent law. Because both sections subject the cross-respondent’s powers to the Minister of Finance which powers are to be exercised in the manner prescribed by the minister. The power to amend the First Schedule to CITA is also given to the minister under Section 4 of CITA, showing the minister is the appropriate person to make bylaws under CITA.”


In addition to the view expressed above as regards the inadequacy of a circular information, statement or briefing not qualifying as a regulatory framework, it is noteworthy that the said statement states thus:



11th September, 2020”

There is no official or officer of SEC identified with such statement either as the signatory or the authority behind the statement. In IGWE vs. (INEC) & ANOR (2012) LPELR-9834(CA) Per AJI, J.C.A. stated the law on the effect of a document signed by an unidentified person thus: “The contention here is not the issue of whether the documents were not signed at all but whether a document signed ‘for’ by an unidentified or undisclosed person is valid in law. Several factors may account for such situation. A fact that is trite is that an unsigned document is a worthless piece of paper and such a document cannot be admitted in evidence as it has no any probative value. This is so because a document which is not signed has no origin in terms of its makers. In other words, the identity of the person signing the document must be properly disclosed for the document to be competent in the eyes of the law. See Omega Bank Plc. V. OBS Ltd. (2005) 8 NWLR (PT 928) 547 @ 581; A. G. Kwara State v. Alao (2000) 9 NWLR (PT 671) 89 @ 104: Adighije v. Nwosu (2010) 12 NWLR (PT 1209) 419 @ 481: P.M.B. Ltd v. N.D.I.C. (2011) 12 NWLR (PT 1261) 253 @ 262 and Okafor v. Nweke (2007) 10 NWLR (PT 1043)531. ….. While in the case of P.M.B v. NDIC (2011) 12 NWLR (PT 1261) 253, the Court of Appeal annulled the Notice of Appeal signed on behalf of the Appellant’s Counsel by an unknown and unidentified person.”

It is our strong view that there is no legislation that relates to the operation, activates and regulation of cryptocurrency in Nigeria as at today. The statement so called remains insufficient. Pending when the needful is done by the Nigerian Government and the Regulatory Authorities, we will make do with a suggestion found in a principle of the International law enunciated in the case of the S.S. Lotus (France v. Turkey) (File E. c., Docket XI, Judgment No. 9 delivered on the 7th September 1927), by the PERMANENT COURT OF INTERNATIONAL JUSTICE sitting in its Twelfth (Ordinary) Session. The Court held that: “States have a sovereign right to act in a way they desire unless a specific rule of international law prohibits that behavior.”This in simple parlance, means what is not prohibited is permitted. This principle in Nigeria may be represented in law by the doctrine that says “what the law has not criminalized cannot be criminalized by any institution including the Court.”See 36 (12) of the 1999 Constitution as Amended. See also the case of BODE GEORGE v. FRN (2014) 1 CLRN 1; FRN v. IFEGWU (2003) 15 NWLR (Pt. 842) 113; A.G FED. v. CLEMENT ISONG (1986) 1 QLRN 86; IKPASA v. BENDEL STATE (1981) 9 S.C (Reprint) 5; and AOKO v. FAGBEMI & ANR (1961) 1 ALL NLR Pg 400.


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