Name
Global FinTech Guide
Country _ Name
Nigeria
SectionTitle
ICO/token sale
Body
Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms.  While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.

Introduction

Attitude of the country towards ICOs/token sales

Nigeria is showing interest in the advancement of ICOs/ token sales. Prior to 2020, the sector was largely unregulated. However, recently, the SEC, in exercise of its powers has made rules in order to regulate the sector. This underscores the SEC’s commitment to transparency, investor protection and compliance with the evolving digital asset landscape.


Legal affairs

Presence of any explicit regulation on ICOs and the issuance of token/coins

In 2020, the SEC issued a Statement on Digital Assets and Their Classification and Treatment (“the “Statement”). Pursuant to this statement, the SEC released its rules on issuance, offering platforms and custody of digital assets (the “Rules”) in 2022. Per the Rules, SEC regulates Initial Coin Offerings (ICOs), Security Token ICOs and other Blockchain-based offers of digital assets within Nigeria or by Nigerian issuers or sponsors or foreign issuers targeting Nigerian investor where the digital asset can be classified as securities under the Investments and Securities Act 2007.

Furthermore, in December 2024, the SEC issued the Exposure of Amendments to the Rules on Digital Assets Issuance, Offering Platform, Exchange and Custody ("Amended Digital Assets Rules" or "Rules"), which became effective on June 30, 2025. By virtue of the expanded definition of securities in the recently enacted ISA, the SEC now has clear statutory authority to regulate Initial Coin Offerings (ICOs), Security Token ICOs and other Blockchain-based offers of digital assets within Nigeria, by Nigerian issuers or sponsors, or foreign issuers targeting Nigerian Investors (Section 357 of the ISA).

Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins

Under the Amended Digital Assets Rules, there is a limit of funds to be raised. An issuer may only raise funds subject to the following limit:

  • Twenty times the Issuer’s shareholders’ funds i.e., the maximum quantum of funds permitted to be raised within any continuous 12-month period
  • Notwithstanding (a) above, the Commission may approve higher amounts for Government, Supranational and other eligible issuers.
  • The issuer shall demonstrate that the gross proceeds to be raised from the digital asset offering would be sufficient to undertake the project as proposed in the white paper.
  • In the event that the amount raised is below the soft-cap, the Issuer shall refund all monies collected from the token holders within five (5) business days from the offer closing date.
(See Para 33.0 of the Amended Digital Assets Rules)

Obligations and requirements to issue token/coins

The registration requirements are provided under Part A of the Rules and Part C of the Amended Digital Assets Rules. In addition to incorporating as a limited liability company under the CAC, businesses proposing to conduct ICO must obtain and submit the initial assessment form and draft white paper. The draft whitepaper shall contain relevant, complete and current information regarding the initial digital asset offering projects, business plan and feasibility study.
The whitepapers of initial digital asset offering projects, pending assessment by the Commission, shall contain a disclaimer that the whitepaper does not represent an offer to sell, and a statement in bold letters that ‘The Securities and Exchange Commission has not approved these tokens or determined if the tokens are securities and thus, shall be registered, or that the content of the whitepaper are accurate and complete. Any false or misleading representation is a criminal offence and should be reported immediately to the Securities and Exchange Commission.’
Upon satisfaction of the SEC that the coin/ token qualifies as a security, the issuer shall apply for registration. An application for registration, in addition to the Commission’s minimum disclosure requirements for public offers, shall include:

  • A registration statement of the digital assets which shall include: (i) the name and ticker of the tokens; (ii) the amount to be registered; (iii) the price per token; (iv) the number of tokens to be sold;;
  • KYC procedures, disaster recovery plans and risk management protocol;
  • Security protocols including platform architecture and technology;
  • Solicitor’s opinion confirming that all applicable permits and licenses for the issuance and transfer of the securities, after the offer, has been obtained;
  • Copy of the escrow agreement with an independent Custodian/Trustee registered with the Commission;
  • Corporate governance disclosures;
  • Evidence of payment of the applicable fees;
  • Any other information to be determined by the Commission from time to time.
Where the issuer complies with registration requirements, the Commission may grant registration to the digital assets. The Commission may reject an application for registration of digital assets if in its opinion, the proposed activity infringes public policy, is injurious to investors or violates any of the laws, rules and regulations implemented by the Commission.
(Para. 44 of the Amended Digital Asset Rules)
Note that in the following circumstances registration of digital asset is exempted:

  • Securities structured to be exclusively offered through a SEC-registered crowdfunding portal or intermediary;
  • A judicial sale or sale by an executor, administrator or receiver in insolvency or bankruptcy;
  • Where the sale is by a pledged holder or mortgagee, selling to liquidate a bona fide debt and not for the purposes of avoiding the provision of these rules;
  • An isolated transaction in which any digital token is sold for the owner’s account and such sale or offer for sale is not made in the course of repeated and successive transactions of like manner by such owner.
(Para. 45 of the Amended Digital Asset Rules)

Classification of token/coins in the jurisdiction

Per the SEC’s Statement, virtual Assets are categorized into four (4) namely: (i) Crypto Asset (e.g non-fiat virtual currency), (ii) Utility Tokens or Non-Security Tokens (e.g. virtual tokens), (iii) Security Tokens, and (iv) Derivatives and Collective Investment Funds of Crypto Assets, Security Tokens, and Utility Tokens. Under the Rules, tokens/coins are classified as digital assets that represents assets such as a debt or equity claim on the issuer.

Presence of a duty to publish a prospectus bevor offering token/coins to investors

The Rules by the SEC does not expressly require a prospectus to be issued before offering token/coins to investors. However, before token/ coins can be offered, a draft whitepaper must be sent to the SEC and that whitepaper does not represent an offer to sell. Part A, paragraph 4.0 of the Rules and Paragraph 42.0 of the Amended Digital Assets Rules.

Presence of AML/KYC requirements that are needed to be fulfilled regarding (i) the initial issuance of token/coins and (ii) any following transfer of token/coins to third parties

  Pursuant to the SEC (Capital Market Operators Anti-Money Laundering, Combating Terrorism Financing and Proliferation Financing) Regulations, 2022 (the “Regulation”), VASPs are considered Capital Market Operators. As such, they are subject to stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements outlined in these regulations. The regulations specify the detailed requirements that VASPs must comply with regarding AML and KYC measures.
For the initial issuance of coins/tokens and transfer to third parties, VASPs in Nigeria must meet several requirements related to AML/CFT/CPF. These include adopting policies to comply with relevant laws and prevent criminal activities, implementing internal controls and procedures to deter money laundering and terrorism financing, designating a competent and independent AML/CFT/CPF Chief Compliance Officer who reports to the board of directors, ensuring the Compliance Officer meets fit and proper requirements, complying with the Money Laundering and Terrorism Prevention Acts, and ensuring foreign branches and subsidiaries implement consistent AML/CFT/CPF measures. (Regulation 3, the Regulation).

As it relates to KYC requirements, VASPs involved in the issuance of ICOs and the transfer of ICOs to third parties are subject to KYC requirements under Part IV of the Regulation.

Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties

N/A


Economic conditions

Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction

The market is very volatile due to the fluctuating prices of bitcoin and other cryptocurrencies. Therefore, companies may be weary of utilizing this mode of equity financing.

Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area

N/A




Authors

NameOrganisationEmail
Ebimobowei JikenghanG Elias[email protected]06346
Eberechukwu Ezike [email protected]0 

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