Nigeria’s cryptocurrency regulatory framework is facing a critical test as suspicious public funds move through banks, fintechs and private companies into digital asset wallets, exposing gaps in transaction monitoring and anti-money laundering controls.
The vulnerability lies not only in the difficulty of recovering funds after they enter cryptocurrency wallets, but also in the financial channels through which they move. Banks and payment platforms provide the infrastructure for converting naira into digital assets, yet suspicious transactions can pass through multiple accounts before investigators establish their destination.
In early September 2026, Ola Olukoyede, chairman of the Economic and Financial Crimes Commission (EFCC), disclosed how the commission’s Financial Recovery and Asset Tracing (FRAC) unit flagged suspicious movements from a local government account. Investigators traced the money to a private company and subsequently into cryptocurrency wallets.
The account was frozen for 72 hours while investigators established the destination of the funds. Olukoyede did not identify the local government, company or state involved.
The EFCC chairman said public officials under investigation increasingly use cryptocurrency wallets to conceal suspected proceeds of corruption, sometimes involving students and other young people as intermediaries.
“We have gotten to a stage in Nigeria now that public officials steal money and they put it in cryptocurrency wallets. Most of the directors we are investigating now, you can’t trace tangible assets to them. They steal this money, give it to students, give it to young people. They open cryptocurrency wallets all over the world. They plunder the money there within 24 hours,” he disclosed.
The disclosure raises questions about whether financial institutions can detect suspicious transactions quickly enough to prevent public money from moving through multiple accounts and into digital assets.
Between January and August 2026, Federation Account Allocation Committee disbursements to Nigeria’s 774 local government areas exceeded N3.7 trillion. The funds are intended to support essential services, including roads, primary healthcare, education, water supply and sanitation.
Although the 2024 Supreme Court ruling on local government financial autonomy strengthened the basis for direct access to allocations, the EFCC’s disclosure highlights the need for effective controls over how the money is spent.
N162bn crypto transactions raise questions over bank controls
The September case follows an earlier warning from the EFCC about weaknesses in financial institutions’ customer due diligence procedures.
In January 2026, Wilson Uwujaren, the commission’s director of public affairs, disclosed that a new-generation commercial bank had processed cryptocurrency transactions worth N162 billion without meaningful due diligence.
The EFCC also reported that N18.7 billion in proceeds from two major fraud schemes had moved through the financial system amid weak know-your-customer (KYC) and customer due diligence controls. The schemes involved an airline-ticket discount racket and a multi-company investment scam.
According to the commission, one new-generation bank, six fintechs and several microfinance banks were implicated. In one instance, a customer operated 960 accounts allegedly used exclusively for fraudulent activity.
The EFCC said it recovered only a fraction of the losses associated with the smaller scams and called for the suspension and possible prosecution of implicated institutions.
The two disclosures highlight a common vulnerability: suspicious funds can enter the formal financial system, pass through multiple accounts and reach cryptocurrency markets before investigators establish the full transaction trail.
The N162 billion figure, however, refers to cryptocurrency transactions the EFCC said were processed without meaningful due diligence. It does not establish that the entire amount comprised stolen public funds.
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P2P trading creates a monitoring blind spot
Bobola Odebiyi, founder and chief executive officer of Avanor Labs, a fintech company building digital dollar infrastructure for African governments, financial institutions, businesses and individuals, identified peer-to-peer (P2P) cryptocurrency trading as a major weakness in the fiat-to-crypto pipeline.
Under the P2P model, individuals buy and sell digital assets directly. Banks may see only a naira transfer between two accounts without knowing that the payment relates to cryptocurrency. Multiple cash deposits and intermediary accounts can further complicate investigations.
“One of the biggest weaknesses is the P2P market, where people buy and sell stablecoins directly,” Odebiyi told BusinessDay.
He called for a system linking bank transfers, P2P trades and the blockchain wallets receiving cryptocurrency, alongside continuous monitoring of government contractors’ accounts.
Monitoring should extend beyond the initial government payment to subsequent transfers to suppliers, intermediaries and other beneficiaries, he said, adding that banks should flag unusual transactions, rapid movement of funds, multiple cash deposits followed by crypto-related payments, and transfers inconsistent with a contractor’s business profile.
Contractors receiving public funds should also document their expenditure, with independent audits and verification of ultimate beneficiaries.
“The objective is to establish a traceable chain of accountability for every naira of public money,” he said.
Odebiyi said the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), EFCC and Nigerian Financial Intelligence Unit (NFIU) should establish enforceable requirements for P2P transaction records, customer identification and wallet traceability.
Relevant intermediaries should retain records linking buyers, sellers, naira payments, stablecoin transactions and receiving wallets, he added.
He also proposed a secure financial intelligence system connecting banks, fintechs, P2P operators, licensed virtual asset service providers (VASPs) and enforcement agencies to speed up lawful information-sharing and asset-preservation measures.
SiBAN proposes ban on direct government crypto payments
Mela Claude-Ake, president of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), a lawyer and blockchain advocate, said moving money into cryptocurrency should not automatically be treated as criminal.
“What is criminalized is the intent. The intent behind the movement of money. We cannot punish the movement of money except where it is proven that the intention was for some criminal purposes,” he told BusinessDay.
However, he said government expenditure raises distinct accountability concerns because public funds belong to the commonwealth and should be traceable.
“The question therefore is why would a government feel the need to move money through a system that was built or designed for anonymity? That raises concerns,” he asserted.
Claude-Ake proposed that Nigeria consider prohibiting government institutions from making direct payments into cryptocurrency wallets. Under such a policy, government agencies and parastatals would pay contractors and vendors into conventional bank accounts, preserving a documented trail of public expenditure.
He said the restriction could form part of the country’s anti-money laundering framework, covering all tiers and arms of government.
Claude-Ake also cautioned against treating anonymity as the only problem. Cryptocurrency operators subject to KYC requirements can retain customer information, potentially allowing investigators to identify recipients.
The greater concern includes the speed and irreversibility of cryptocurrency transactions, which can make it difficult to freeze assets before they move through additional wallets, he posited.
“If the problem that the EFCC is complaining about is not necessarily the anonymity, but perhaps other things like irreversibility, and the speed with which crypto payments move, therefore making it very difficult to place a lien, for example, on an account or on a wallet, then it should or it could be considered that as a matter of public policy, as touching public expenditure or government expenditure, there should be no reason why governments should pay any monies into crypto wallets,” he added.
The proposal is a policy recommendation, not an existing nationwide ban on government payments into cryptocurrency wallets.
Regulation expands as enforcement questions persist
Nigeria has taken steps to bring cryptocurrency businesses within its regulatory framework. The CBN lifted earlier blanket restrictions on banking relationships with cryptocurrency businesses and issued guidelines allowing banks to maintain designated accounts for SEC-licensed VASPs.
The SEC has introduced regulatory pathways, including its Accelerated Regulatory Incubation Programme, while the EFCC has said roughly 40 virtual asset platforms have been licensed or brought under the regulatory framework.
The CBN has also conducted anti-money laundering and counter-terrorist financing supervision pilots for VASPs. Regulators and investigators have increased cooperation on tracing and freezing suspicious digital assets.
Olukoyede said the EFCC can trace wallets linked to Nigeria-registered VASPs. The Federal Government has also approved a national confiscation wallet to hold seized virtual assets, addressing previous concerns about the custody and accountability of recovered assets, including those associated with the high-profile CBEX case.
However, licensing platforms and improving asset recovery do not automatically close gaps in the banking and payment channels that feed cryptocurrency markets.
Odebiyi said banks, fintechs and crypto platforms that negligently facilitate illicit transactions or disregard credible warning signs should face proportionate penalties. He cautioned, however, against criminalising legitimate cryptocurrency activity.
“The answer is not to criminalize P2P trading; it is to make transactions traceable and enforce accountability across the entire financial chain,” he said.
The EFCC’s disclosures have also prompted editorial criticism. The Punch called for those involved in local government crypto-related diversion to be brought to justice, while The Nation described the practice as an “abomination”.
Publicly available reporting has provided limited detail on responses from the specific financial institutions implicated in the EFCC’s January disclosures. The local government, private company and wallets involved in the September case have also not been publicly identified in the material available for this report.
These gaps limit independent assessment of the transactions and the responsibilities of individual institutions.
The missing link is real-time monitoring
The proposals from SiBAN and Avanor Labs address different parts of the same problem. Restricting direct government payments into crypto wallets could preserve a conventional banking trail, while linking bank transfers to P2P trades and blockchain wallets could help investigators follow funds beyond the initial recipient.
Neither measure alone would eliminate corruption or guarantee asset recovery. Their effectiveness would depend on enforceable rules, reliable transaction records, risk-based monitoring and timely action when credible evidence of wrongdoing emerges.
The September case illustrates the value of early intervention, but the available disclosure does not establish whether the funds were ultimately recovered.
Nigeria’s challenge is to bridge the gap between regulating cryptocurrency businesses and monitoring the financial transactions that feed them. Until banks, fintechs and relevant intermediaries can identify suspicious movements and establish where public money ultimately goes, investigators may continue to trace funds only after they have passed through multiple accounts and become more difficult to recover.
Royal Ibeh is a senior journalist with years of experience reporting on Nigeria’s technology and health sectors. She currently covers the Technology and Health beats for BusinessDay newspaper, where she writes in-depth stories on digital innovation, telecom infrastructure, healthcare systems, and public health policies.
