A follow-up to my earlier analysis of Nigeria’s new Virtual Asset Tax Guidelines
Nigeria’s new Guidelines on the Taxation of Virtual Assets are an important step toward providing clarity and legitimacy to the country’s growing digital-asset industry.
In my previous article, I looked at the major provisions covering crypto disposals, withholding tax, stamp duty, VAT, P2P transactions and the responsibilities of Virtual Asset Service Providers (VASPs).
But after examining the guidelines more closely, I believe there is another issue that deserves attention:
What happens when a Nigerian uses a crypto exchange to trade a financial product that may not actually be a virtual asset?
This brings us to three important areas:
- Crypto futures and perpetual contracts
- Foreign exchange (FX) trading using crypto
- Stocks and stock-related products offered through crypto platforms
And my position is straightforward:
I am not suggesting that the government should create a tax loophole or exempt these activities from taxation. I am asking for clarity.
If futures, FX or ordinary stocks are intended to fall under the Virtual Asset Tax Guidelines, taxpayers should be told exactly how.
If they are not virtual assets under the guidelines, NRS should clearly say so and, where applicable, direct taxpayers to the other tax rules that govern them.
A clear rule is better than a grey area.
The problem: The financial world has moved beyond “buy Bitcoin and sell Bitcoin”
Crypto exchanges are no longer simply places where people buy and sell Bitcoin.
A single exchange account can now give a Nigerian access to:
- Bitcoin and other cryptocurrencies
- Stablecoins
- Futures
- Perpetual contracts
- FX
- Stocks
- Tokenised securities
- Staking
- DeFi products
- P2P trading
But these products are not all the same thing.
Buying Bitcoin on the spot market is fundamentally different from trading a Bitcoin perpetual contract.
Trading EUR/USD is different from buying USDT.
Buying an actual Apple share is different from buying a tokenised representation of Apple shares.
And a stock CFD is different from owning the underlying stock.
This distinction becomes very important when applying a tax framework specifically designed for virtual assets.
1. Futures trading: a major omission
One of the most noticeable gaps in the guidelines is the absence of a specific treatment for crypto futures and perpetual futures.
The guidelines provide detailed provisions for spot cryptocurrencies, stablecoins, security tokens, NFTs, staking, mining, DeFi, P2P transactions and other virtual-asset activities.
But they don’t specifically explain how futures or perpetual contracts should be treated.
This is significant because futures trading is very popular among crypto traders.
Consider a simple example.
A Nigerian trader deposits:
$1,000 USDT
on a crypto exchange.
They use 10x leverage to open a:
$10,000 BTC perpetual futures position.
They eventually close the position with a:
$500 profit.
The trader never actually bought $10,000 worth of Bitcoin.
They traded a derivative whose value was linked to Bitcoin.
So what exactly is the taxable event?
2. Is the $500 futures profit taxable?
The guidelines clearly intend to tax income, profits and gains arising from virtual assets.
But futures create a different problem.
The spot-crypto provisions generally deal with an asset being acquired and subsequently disposed of.
With a perpetual futures contract, the trader may never own the underlying BTC.
The transaction is essentially:
Open position → price movement → close position → realised profit/loss.
There may be no:
Buy BTC → hold BTC → sell BTC
transaction.
Therefore, the guidelines should clarify whether futures profits are treated as:
- income from a derivative;
- income from trading;
- a virtual-asset disposal;
- or something else.
3. The 1% withholding tax creates an even bigger question
The guidelines provide a 1% withholding tax on gross disposal proceeds for certain virtual-asset disposals.
But how would that work with futures?
Return to our example:
$1,000 margin
controls a:
$10,000 futures position
and the trader makes:
$500 profit.
What is the “gross disposal proceeds”?
Is it:
$500, the actual profit?
Or:
$10,000, the notional value of the position?
Or some other settlement amount?
The guidelines don’t specifically answer this for futures.
This matters because applying a gross-proceeds tax mechanism designed for spot disposals to highly leveraged derivatives could produce very unusual results.
For example, if $10,000 were treated as the relevant gross amount:
1% = $100
That would be a $100 withholding against a $500 actual profit.
That’s equivalent to 20% of the trader’s profit being withheld, before the final income-tax calculation.
That may or may not be what policymakers intend—but the point is that the guideline should tell us.
4. What happens when the futures trader loses money?
This makes the issue even clearer.
Imagine a trader has three futures trades:
Trade 1: +$1,000
Trade 2: -$1,500
Trade 3: +$500
Total:
$0
The trader has made no net profit.
Yet the individual winning trades could have generated substantial transaction values.
How should withholding tax operate?
Should WHT be deducted from every winning position?
Should losses be netted first?
Should tax only be calculated on annual net realised profit?
What happens when a trader pays funding fees and trading fees?
The guidelines do not specifically answer these futures questions.
5. Leverage makes the issue even more important
Suppose another trader controls:
$100,000 of futures positions
through leverage but ends the year with only:
$2,000 net profit.
A tax system based on economic income should distinguish between the $100,000 notional trading volume and the $2,000 actual gain.
Otherwise, a highly active but low-profit trader could face a very different tax burden from someone who generates the same economic income through fewer transactions.
This is why I believe derivatives deserve a specific provision rather than simply trying to force them into rules designed primarily around spot virtual assets.
6. What about funding fees?
Perpetual futures also have additional components that don’t exist in ordinary spot transactions.
For example:
- Funding fees
- Trading fees
- Liquidation fees
- Rebates
- Realised P&L
- Unrealised P&L
Suppose a trader makes:
$5,000 trading profit
but pays:
$1,000 in trading and funding costs.
Their economic profit is:
$4,000.
Would those costs be deductible in calculating taxable futures income?
The guidelines don’t specifically explain the treatment of futures funding and related expenses.
Again, clarity is needed.
7. Then there is FX trading with crypto
Another interesting situation is foreign-exchange trading.
A Nigerian trader can deposit USDT into an exchange or trading platform and trade:
- EUR/USD
- GBP/USD
- USD/JPY
- and other currency pairs.
But what exactly is the person trading?
They may not be acquiring a cryptocurrency.
They may not be acquiring a tokenised security.
They may simply be trading an FX contract or CFD.
The guidelines identify six categories of virtual assets:
- Cryptocurrencies/exchange tokens
- Stablecoins/payment tokens
- Security/investment tokens
- Utility/governance tokens
- NFTs
- Sovereign digital currencies
A conventional FX contract does not obviously appear as one of these categories.
8. Using crypto to fund FX doesn’t necessarily turn FX into crypto
Consider this transaction:
₦ → USDT → FX account → EUR/USD trade → USDT
There are potentially different tax questions here.
The USDT transaction can have its own treatment under the virtual-asset framework.
But the underlying EUR/USD trading activity is a separate financial activity.
The fact that someone uses USDT to fund an FX account doesn’t necessarily transform the FX instrument into a virtual asset.
For example, if the trader deposits:
$10,000 USDT
and makes:
$2,000 trading profit
from EUR/USD, the $2,000 profit shouldn’t automatically be assumed to be a “crypto gain” simply because USDT was used as the funding currency.
The nature of the underlying product matters.
9. What about stocks traded through crypto exchanges?
This may be even more complicated.
Some crypto platforms now give users access to stock-related products.
But there is a crucial distinction between:
Actual shares
You acquire an interest in a company.
Tokenised shares
A blockchain-based token represents an economic interest in an underlying security.
Stock CFDs
You don’t own the underlying stock. You have a contract whose value follows the stock price.
To an ordinary user, all three might look like:
“Buy Apple.”
But legally and economically, they can be completely different products.
10. The guidelines do cover security tokens
The guidelines’ Category 3 covers security and investment tokens.
Examples include:
- Tokenised equity
- Revenue-sharing tokens
- Asset-backed tokens
- Tokenised bonds
These represent an economic interest in an underlying asset, enterprise or cash flow.
Therefore, a blockchain-based token representing an economic interest in a company’s shares can reasonably fall within the Category 3 framework.
But that does not necessarily mean every stock traded through a crypto exchange is a security token.
11. What if I buy a real stock through a crypto exchange?
Imagine an exchange allows a Nigerian user to purchase:
$1,000 of Apple shares.
But the customer doesn’t receive a blockchain token.
Instead, the shares are held through a conventional broker or custodian and the customer has an ordinary beneficial interest in the shares.
Is that automatically a virtual asset simply because the transaction happened through a crypto exchange?
I don’t think we should assume that.
The product itself should matter, not simply the platform through which it was purchased.
The guidelines specifically refer to tokenised equity under Category 3.
That is different from saying:
“Every stock available on a VASP is a security token.”
12. But I am not saying ordinary stocks should be tax-free
This distinction is extremely important.
I am not arguing:
“If it isn’t a virtual asset, it cannot be taxed.”
That’s too broad.
My argument is:
If an asset or financial product is not a virtual asset under the six categories, the Virtual Asset Tax Guidelines should not automatically be assumed to apply to it.
It may still be taxable under another existing tax or securities framework.
The taxpayer should simply be told which framework applies.
13. This is where the grey area becomes a problem
Imagine four Nigerians using the same exchange:
Trader A
Buys BTC on the spot market.
Clearly a virtual asset.
Trader B
Trades BTC perpetual futures.
Not specifically addressed.
Trader C
Trades EUR/USD using USDT.
The underlying FX instrument is not obviously one of the six VA categories.
Trader D
Buys an actual US stock through a brokerage product on the exchange.
Whether that is a virtual asset depends on the structure of the product.
All four transactions can take place inside the same app.
But they aren’t necessarily the same financial instrument.
We Are Not Asking for a Tax Loophole
This is the point I want to make particularly clear.
When I raise these questions about futures, FX and stocks, I am not asking the government to create a loophole or allow Nigerians to avoid tax.
I am asking for certainty.
If NRS believes that crypto futures should be taxable under the Virtual Asset Guidelines, then tell taxpayers:
- what the taxable event is;
- how gains and losses are calculated;
- how leverage is treated;
- how funding fees are treated;
- what constitutes gross disposal proceeds;
- and how the 1% WHT applies.
If conventional FX trading is outside the VA framework but taxable under another existing law, say so.
If ordinary shares purchased through a crypto platform are not virtual assets because they are conventional securities rather than tokenised securities, say so.
And if these activities are outside the scope of the Virtual Asset Tax Guidelines altogether, say that clearly.
A clear exemption is better than a grey area.
A Nigerian taxpayer should not have to guess:
“I traded EUR/USD using USDT. Am I being taxed under the crypto rules?”
Or:
“I bought an actual US stock through a crypto exchange. Is that now a Category 3 security token?”
Or:
“I traded BTC perpetual futures without ever owning Bitcoin. Is my futures turnover subject to the 1% withholding tax?”
These are legitimate questions.
What I think NRS should clarify
I believe a supplementary clarification should specifically address:
1. Futures and perpetual contracts
Clearly define how realised gains, losses, leverage, funding fees, trading fees and WHT should be treated.
2. FX and CFDs
Clarify whether conventional FX contracts and CFDs offered through VASPs are virtual assets or are governed by other tax rules.
3. Ordinary stocks
Clarify whether an ordinary share purchased through a VASP remains an ordinary security rather than becoming a virtual asset simply because it was purchased on a crypto platform.
4. Tokenised stocks
Clearly explain when a stock becomes a Category 3 security/investment token.
5. Offshore products
Clarify how Nigerian residents trading these products through foreign exchanges should report their income where the product falls outside the VA framework.
Conclusion: Tax clarity is just as important as tax collection
I believe the NRS and JTB deserve credit for attempting to bring greater structure to Nigeria’s virtual-asset industry.
The guidelines are a significant step forward.
But as the industry develops, regulation needs to keep pace with the products Nigerians are actually using.
Bitcoin spot is not the same as Bitcoin futures.
USDT is not the same as EUR/USD.
A tokenised Apple share is not necessarily the same as an ordinary Apple share.
And a stock CFD is not the same as owning the underlying stock.
Therefore, the question shouldn’t simply be:
“How do we tax everything happening on a crypto exchange?”
It should first be:
“What exactly is the financial product being traded?”
If it is a virtual asset, the taxpayer should know that and understand the applicable tax.
If it is not a virtual asset, the taxpayer should know that too—and should be directed to whatever other tax rules apply.
We are not asking for special treatment for crypto traders.
We are asking for a tax system where the rules are clear enough for ordinary Nigerians, exchanges, accountants and regulators to understand exactly what is taxable, what is not, and how the tax is calculated.
Because ultimately:
The objective should not be to find a tax on every activity. The objective should be to build a tax system where taxpayers know what they owe, why they owe it, and how it is calculated.
That is the clarity Nigeria’s growing digital-asset industry needs.
