Legitimisation or revenue grab? Top Web3 lawyer Senator Ihenyen on Nigeria’s new Virtual Assets Tax Guidelines

Nigeria’s crypto traders spent years operating in a grey zone, watching regulators circle the industry without quite landing a framework. That changed on August 3rd, 2026, when the Nigeria Revenue Service (NRS) released its Guidelines on the Taxation of Virtual Assets, a document built on the Nigeria Tax Act 2025 that scraps the old flat 10% capital gains regime in favour of something far more granular and far more aggressive.

Under the new rules, exchanges must withhold tax at source. Stamp duty now applies to token-to-fiat conversions. Staking rewards, mining income, airdrops and DeFi yields all get taxed at 10%. And in one of the more unusual provisions to emerge from any tax authority globally, the NRS wants some of that tax remitted not in Naira, but in the crypto tokens themselves.

To make sense of what this means for the people actually trading, building and running exchanges in Nigeria, Technext sat down with Senator Ihenyen, Lead Partner at Infusion Lawyers and Founding Trustee of the Virtual Asset Service Providers Association (VASPA). His answers below are presented in full, question by question, because the detail is where the real story lives.

One-on-one with Senator Ihenyen on NRS’ Virtual Assets Tax Guidelines

Technext: The new NRS framework transitions crypto profits from the previously established flat 10% capital gains tax to a progressive personal income tax, which could scale up to 25%. In the simplest terms, what does this mean for the everyday Nigerian retail trader who is just trying to hedge against inflation? Are they now going to be taxed on their total portfolio balance or strictly on realised profits?

Senator Ihenyen: For the everyday retail trader, tax applies strictly to realised gains from the disposal of their virtual assets, not on their portfolio balance. Merely holding virtual assets, including unrealised appreciation, is a non-taxable event under the guidelines.

Crucially, gains are calculated in USD (proceeds minus cost base), which requires traders to convert only the net USD profit to Naira at the applicable NAFEM/CBN rate on the transaction date. Here, the NRS is trying to prevent a situation where traders pay tax on fictitious Naira gains driven purely by currency devaluation.

TN: The guidelines stipulate that Virtual Asset Service Providers (VASPs) and P2P marketplaces must now withhold 1% of proceeds from the disposal of crypto assets. Can you walk us through the mechanics of this? If a trader sells a token on a local exchange, at what exact point is this 1% deducted, and how does it reconcile with their final end-of-year tax liability?

Ihenyen: VASPs and P2P escrows are now required to deduct a 1% withholding tax at source upon execution of a transaction. This is taken directly from the gross originating token, which the NRS has limited to Categories 1, 3, and 5: cryptocurrencies and exchange tokens, security and investment tokens, and NFTs. It’s the Naira equivalent of the token in question that is credited as an advance tax credit.

To reconcile this with the final end-of-year tax liability, traders are then required to subtract the total withheld tax from their final annual income tax liability on their self-assessment return, resulting in either a net balance due or a refund.

TN: Interestingly, the NRS has exempted the sale of stablecoins from this 1% withholding tax. Given that stablecoins like USDT and USDC dominate the Nigerian crypto market as digital dollars, how significant is this exemption? Do you foresee traders altering their trading behaviours to exploit this specific caveat?

Ihenyen: The exemption of stablecoins from the 1% gross withholding tax is very significant. Stablecoins like USDT, USDC and cNGN are pegged to fiat currencies, so gains against their underlying pegged fiat are typically negligible. Exempting them from withholding helps avoid locking up capital unnecessarily. Besides, stablecoins, like their fiat counterparts, mainly serve as a medium of exchange or unit of account, just as money does.

Will traders alter their trading behaviour? Most likely. By routing intermediate trades through stablecoins, traders can settle any actual tax liabilities exclusively through their annual self-assessment returns.

TN: There is a newly introduced 1.5% stamp duty on token-to-fiat and fiat-to-token transfers. For P2P merchants and local exchanges whose business models rely on high-frequency, low-margin transactions, how severe will the impact of this friction be? Could this inadvertently push users back towards informal, unregulated trading channels?

Ihenyen: For high-frequency P2P merchants and local exchanges operating on sub-1% margins, a 1.5% stamp duty on every conversion significantly compresses profitability. This poses serious market friction and carries a real risk of driving price-sensitive traders away from regulated, order-book VASPs toward off-platform bilateral P2P trading, such as direct wallet-to-wallet transfers over messaging apps, where no central intermediary exists to collect stamp duty at source.

Essentially, this will take Nigeria back to the dark days of the Emefiele era. The NRS should kill it before it kills the industry.

TN: The framework imposes a hefty 10% withholding rate on staking, mining, airdrops and DeFi yields. From a legal and practical standpoint, how does the NRS plan to track and enforce taxes on decentralised, on-chain activities where there is often no central intermediary to withhold the funds?

Ihenyen: The NRS’s tax appetite is platform-neutral, whether centralised or decentralised. For on-chain traders using decentralised protocols, the NRS understands it has significant limitations, so it primarily relies on the trader or resident taxpayer to self-declare and account for the income in their annual self-assessment returns.

That’s unlike a trader whose rewards or yields are distributed through a registered VASP, where the platform is legally bound to deduct a 10% withholding tax at source in the received token. That’s also why registered VASPs and centralised platforms have been mandated to collect the Tax Identification Number (TIN) of customers at onboarding. Regardless, the NRS mandates that all traders keep trading records for up to six years, and the penalties for failing to do so are steep. Nigeria needs to tread carefully here so that registered VASPs don’t face the risk of losing market share to an industry that has, historically, relied on creativity, ingenuity and resilience just to survive without much support.

TN: Perhaps one of the most groundbreaking directives is that income tax deducted at source must be remitted to the NRS in the “originating token” of the transaction. Are Nigeria’s tax authorities technologically and legally equipped to custody volatile digital assets like Bitcoin and Ethereum, or does this place an unreasonable conversion and security burden on VASPs?

Ihenyen: To manage custody, volatility and technical overhead, the guidelines establish a Token Treasury framework. Under this, the NRS will maintain a list of supported tokens transacted by registered VASPs. If a transaction involves an unsupported token, the NRS will absorb the cost of converting it into a supported token, without reducing the taxpayer’s withholding credit.

That arrangement spares VASPs from immediate market conversion risk, but it transfers significant operational, custody and cybersecurity requirements onto the revenue authority’s Token Treasury system. It also introduces meaningful cost burdens and vulnerability risks for VASPs themselves, who will now have to spend more on custody services and security.

TN: Under the new mandate, exchanges are required to report granular transaction details, including customers’ names and Tax Identification Numbers. How do we balance the core ethos of Web3 privacy with the government’s aggressive drive for data collection and tax compliance?

Ihenyen: If the present posture of the NRS, and by extension the current administration eyeing a $1 trillion economy, is anything to go by, this is purely about tax revenue and tax governance, not some Web3 ethos. Explicitly, the guidelines prioritise tax compliance and enforcement over pseudonymous Web3 privacy on centralised gateways. Traders using custodial or centralised intermediaries must accept full identity disclosure as a condition of market participation, and those on self-custody wallets remain legally required to keep complete records for annual self-assessment filing.

That said, balancing tax compliance with data privacy is vital. The NRS, as a government agency, is obliged to comply with Nigeria’s data protection and privacy law. In fact, the Nigeria Data Protection Commission has just issued a compliance circular to ministries, departments and agencies on data protection and responsible data governance.

TN: The penalties for defaulting on these reporting obligations are steep, starting at an administrative penalty of ₦10 million in the first month, alongside the threat of SEC licence revocation. Do you believe the current crop of Nigerian VASPs has the technical infrastructure and capital runway to survive these stringent compliance costs?

Ihenyen: Add to that ₦1 million for each subsequent month, alongside a 40% penalty on unwithheld taxes and statutory interest charges, and you’re done for.

I think these stringent penalties create a high barrier to entry for VASPs and could potentially scare off even the average trader. Combined with existing SEC requirements and the technical overhead of automated token withholding, real-time NAFEM valuation tracking and Token Treasury integration, early-stage local startups with limited capital runways may struggle to remain compliant. Most likely, this drives market consolidation toward well-capitalised domestic exchanges or international entities operating locally, at least for those VASPs still standing.

TN: While the NRS can easily enforce these rules on centralised, registered exchanges, what happens to traders using self-custody wallets like Trust Wallet or MetaMask and decentralised exchanges? Is this framework inherently skewed to punish users of centralised platforms while leaving a massive blind spot for on-chain purists?

Ihenyen: To be clear, while there may be a significant blind spot for “on-chain purists”, legally, self-custody and DEX users enjoy no tax exemption, and failure to declare on-chain income also constitutes tax default, which attracts penalties. Operationally, though, the guidelines turn centralised, registered exchanges into tax collectors, enforcing the 1% withholding tax and 1.5% stamp duty automatically at the point of trade or conversion. Automated enforcement remains heavily concentrated on these centralised gateways, which suggests the guidelines may disincentivise a number of users from registered exchanges altogether.

But such users should also appreciate that self-custody activities face audit risk primarily when assets are off-ramped into the traditional banking system or registered VASPs. And these on-chain users still have to manually calculate, report and remit their own tax.

TN: As someone who has championed the Nigerian blockchain space for years, how do you ultimately view these August 2026 guidelines? Are they a necessary milestone for the legitimisation of digital assets in Nigeria, or do they feel more like a premature revenue grab that could stifle innovation in our emerging tech sector?

Ihenyen: The guidelines represent a significant structural evolution for Nigeria’s virtual asset landscape, and I think they come with two sides to the coin. On one side, this is a legitimisation milestone. The framework provides clear regulatory taxonomy across six distinct virtual asset categories, eliminates double taxation on wrapped and DeFi receipt tokens, introduces dollar-referenced gain calculations to neutralise the effect of local currency inflation, and officially recognises VASPs as regulated financial intermediaries. These are welcome developments.

But on the other side, the guidelines amount to a revenue grab. The 1.5% stamp duty on token-fiat conversion, combined with 10% withholding on passive on-chain receipts and ₦10 million monthly non-compliance penalties for VASPs, introduces significant transaction friction that could strain early-stage innovation and, once again, push trading volume into unmonitored shadow markets, potentially taking Nigeria back to 2021.

Clearly, Nigeria has chosen to maximise short-term revenue collection that guarantees instant cash flow, rather than invest in the kind of long-term innovation support that promises a bigger tax purse down the line. My recommendation is that Nigeria suspends enforcement of the guidelines to allow for open industry consultation, which the NRS did not extend to stakeholders as far as I’m aware. I would also recommend a 24-month companies’ income tax break and an express declaration that any virtual asset-related tax obligation predating the commencement of the Nigeria Tax Act is unenforceable.