CONSUMER PROTECTION AND CRYPTO CURRENCYFRAUD IN NIGERIA: THE LEGAL CHALLENGES OF ONLINE SCAMS IN THE DIGITAL ECONOMY

ABSTRACT

The increasing speed and encroachment of web3 in our present world, reveals rapid growth of digital investments specifically crypto currency transactions in Nigeria. This has led to the increase in crypto scams in the space targeting consumers. Nigeria is ranked the highest state in Africa with most transactions. According to a 2025 report, there was recorded a 45% increase in online scams in Nigeria.[1] Despite the rise in digital transactions, Nigeria consumer protection laws remain inadequate to address the complexities of crypto related fraud. Due to the advent of new technology, cybercriminals have become more organized and quicker in their attacks and alliance creation. To maintain a secure digital environment for all consumer, this study focused on the challenges, solutions, and need for Nigeria  to adopt a specific law regarding online crypto transactions and online safety by tackling cybercrime, online fraud. This article examines the legal challenges surrounding consumer protection in the Nigeria digital economy, highlighting gaps in enforcement, regulation, and jurisdiction. It argues for clearer regulatory frameworks and coordinated enforcement mechanisms to ensure consumer confidence and financial safety in digital financial ecosystems.

Keywords: consumer protection, online scams, crypto currency fraud, digital economy

Introduction

 Earlier this month, a young crypto currency investor lost 60USDT to a fake telegram vendor who had cloned the profile of a legitimate web3 trader and vendor. The victim transferred  funds worth 100k in naira believing the transaction was genuine. The fraudster disappeared immediately afterwards and blocked the victim. After filing complaints by the victim to his bank and the fraudster bank he received no compensation , issue is that there isn’t a specific law guiding crypto currency transactions. Such incidents highlights the urgent need for adoption a consumer protection  mechanism specially directed to crypto currency transaction. Nigeria has  existing legal instruments such as the

1. Federal Competition and Consumer Protection Act 2018
2. Cybercrimes (prohibition, Prevention, etc. ) Act 2015 by the Central Bank Of Nigeria(CBN) and the Securities and Exchange Commission(SEC).

Yet this instruments are inadequate to address the complexities faced cause they were not designed with digital currencies in mind. Their provisions either ignore crypto currencies altogether or approach them from conflicting perspectives, leaving loop holes that fraudsters continue to exploits. Online investment frauds can exert far-reaching financial, emotional, psychological, and even health-related impacts on individual investors, their families, and the wider community. (Button et al., 2014b; Kerr et al., 2012; Whitty & Buchanan, 2012; Harvey et al., 2014).[2] Analyzing the nature of crypto currency scam, Mackenzie (2022) opined that crypto currency online marketplace is characterized by its expansive and diverse nature, serving as an unconventional financial system. Within this context, it offers intricate and high-risk technological investment opportunities.

The financial impact of the online investment frauds is significant. In Nigeria, it has been reported that Nigerians lost over 911billion Naira to Ponzi Schemes and other related fraudulent investments in the last 23 years.[3]

It is in this context, the issue of consumer protection against crypto currency fraud becomes urgent and complex. This article therefore examines the legal challenges of protecting consumers from crypto related scams in Nigeria digital economy. It explores the adequacy of existing statues, identifies gaps in enforcement, and proposes legal reforms aimed at ensuring transparency, accountability, and consumer trust in digital financial markets.

Conceptual Clarification

Consumer Protection: According to wikipedia, Consumer protection is the practice of safe guarding buyers of goods and services, and the public, against unfair practices in the market place.[4] Consumer protection measures are often established by law. In Nigeria, Federal competition and consumer protection act (FCCPPA) 2018, Cybercrimes (prohibition, prevention, e.t.c) Act 2015, Securities and Exchange Commission (SEC) are laws regarding consumer protection.

Online Scams: According to OCC.gov online and digital scams occur when fraudsters use the internet to trick people into revealing information or sending money. There are different types of online scams which are in various forms; phishing emails, fake websites, or fraudulent online shopping schemes.[5]

Crypto Currency fraud: Similar to online scams but in this case has to do with crypto assets.

Digital Economy: Wikipedia on this, defined digital economy also referred to as the new economy, refers to an economy in which digital computing technologies are used in economi activities.[6]

Research Methodology.

This article adopts a doctrinal and analytical research approach. It relies primarily on statutory interpretation and case analysis to examine the extent to which Nigerian law protects consumers from crypto  currency-related fraud. Relevant legislative instruments, including the Federal Competition and Consumer Protection Act 2018, the Cybercrimes (Prohibition, Prevention, etc.) Act 2015, the Securities and Exchange Commission (SEC) Rules on Digital Assets 2022, and Central Bank of Nigeria (CBN) Circulars on Virtual Currencies, form the core legal materials reviewed. Secondary sources such as academic commentaries, policy papers, government reports, and credible media publications were also consulted to assess the practical enforcement of these laws. In  summary, the methodology aims to demonstrate that Nigeria currently lacks a specific and total or comprehensive legal framework governing crypto currency transactions and consumer protection in digital economy.

NIGERIA LEGAL APPROACH :

Nigeria does not yet have a single, comprehensive statute that regulates crypto currencies or digital asset transactions. Instead, several existing laws — originally designed for traditional commerce or financial regulation — are applied indirectly to crypto-related issues. These include the Federal Competition and Consumer Protection Act (FCCPA) 2018, the Cybercrimes (Prohibition, Prevention, etc.) Act 2015, the Securities and Exchange Commission (SEC) Rules on Digital Assets 2022, and various Central Bank of Nigeria (CBN) circulars. Together, these instruments form a patchwork legal framework that inadequately protects consumers in the digital economy.

The Federal Competition and Consumer Protection Act (FCCPA) 2018:

The FCCPA is Nigeria’s primary legislation on consumer rights. It repealed the former Consumer Protection Council Act and established the Federal Competition and Consumer Protection Commission (FCCPC).

Key provisions include:

Section 120–124: prohibit misleading, deceptive, and unfair business practices.

Section 125–130: outline consumers’ rights and redress mechanisms.

Section 17: empowers the FCCPC to investigate and penalize offenders.

The Act provides consumer safeguards, yet  silent on crypto currency and virtual assets. Its definitions of “goods” and “services” were written for traditional markets and cannot easily accommodate decentralized or digital asset transactions. This legal silence creates uncertainty about whether crypto exchanges, wallet providers, or peer-to peer traders fall under the FCCPC’s jurisdiction. Victims of crypto fraud  rarely find relief under this Act.

The Cybercrimes (Prohibition, Prevention, etc.) Act 2015

The Cybercrimes Act remains the primary law addressing online fraud and electronic offenses.

Relevant sections include:

Section 14 (Fraud by false pretense through electronic means), Section 22 (Electronic card-related fraud), and Section 24 (Cyber stalking and online deception).

Although these provisions can be used to prosecute crypto-related scams. The Act was enacted  before crypto currency gained prominence and therefore lacks any definition or recognition of digital assets. It punishes offenders but provides no consumer restitution mechanism. Enforcement is also challenging due to anonymity, cross-border nature of crypto, and technological limitations in tracing block chain transactions.

The Role of the Central Bank of Nigeria (CBN)

The CBN regulates Nigeria’s financial institutions and payment systems.

Its position on crypto currency has shifted over time:

• In 2017 and 2021, the CBN issued circulars prohibiting banks from dealing in or facilitating crypto transactions
• .In December 2023, the CBN issued Revised Guidelines for Virtual Asset Service Providers (VASPs), partially lifting the earlier restrictions by allowing banks to open accounts for licensed crypto service providers under SEC oversight.

They do not  provide consumer rights, redress procedures, or liability rules for losses suffered in crypto transactions. This policy inconsistency creates regulatory confusion and limits protection for ordinary crypto users.                                

The Securities and Exchange Commission (SEC) Rules on Digital Assets (2022)

The SEC, in May 2022, introduced  the Rules on Issuance, Offering Platforms and Custody of Digital Assets. These rules:

“Define “digital assets” as securities representing value. Require registration of crypto exchanges, token issuers, and custodians. Aim to promote investor protection and market integrity”.[7]

However, the SEC’s framework mainly targets investment and securities regulation, not consumer protection. It does not address online fraud, impersonation, or peer-to-peer scams — the most common risks Nigerian users face. Moreover, SEC oversight overlaps with CBN restrictions, leading to jurisdictional conflicts and weak enforcement.

NIGERIA JUDICIAL APPROACH

There are few reported Nigerian judgments directly concerning crypto currency, but several court decisions have touched on digital fraud, banking restrictions, and asset forfeiture, which indirectly relate to crypto issues.

Rise Vest Technologies Ltd v. Central Bank of Nigeria (FHC/L/CS/1629/2021)

In this case, the investment platform Rise Vest challenged the CBN’s freezing of its accounts on the allegation that it was engaged in crypto currency trading contrary to the CBN’s February 2021 circular. The Federal High Court (Lagos Division) held that while the CBN had regulatory powers, those powers must be exercised within the law and that CBN cannot rely on mere circular to freeze the banks accounts of a company transacting in crypto currency. The decision signaled judicial recognition that administrative circulars cannot override statutory rights or operate as criminal prohibitions. This case illustrates the courts’ willingness to scrutinize regulatory overreach but also exposes the absence of clear statutory guidance on crypto currency activities.

CBN v. Access Bank Plc & Ors (2022) LPELR-57017(CA)

In similar matters involving account restrictions for crypto-related transactions, courts have required the CBN to justify its actions with evidence of illegality, not mere suspicion of crypto currency involvement. These rulings underscore the judiciary’s cautious stance: while respecting financial regulation, the courts have resisted arbitrary interference with lawful business activities.

THE LEGAL CHALLENGES OF ONLINE SCAMS IN THE DIGITAL ECONOMY

We’ll run through some challenges of protecting consumers from crypto currency fraud and also policy reforms.

Regulatory uncertainty and legal ambiguity

The CBN (Central Bank of Nigeria) banned banks from facilitating crypto transaction in 2021, calling it a threat to the financial system, meanwhile the SEC(Security and Exchange commission) later released guidelines treating digital assets as securities under certain conditions. This explain that there is no single and clear Nigerian law that defines what crypto currency is and such regulatory uncertainty waves consumers unprotected as it is unclear which institutional framework should takeresponsibility when crypto investors are defrauded

Inadequacy of existing consumer Protection laws

The Federal Competition and Consumer Protection Act (FCCPA) 2018 protects consumers from unfair trade practices, but it was written specifically for physical markets and traditional business and not victims decentralized digital transactions.

For example after the CBEX scam, victims of the fraud attempted to report to the FCCPC but the agency lacked clear jurisdiction because operators were anonymous and occurred through digital wallets.

Jurisdiction and enforcement challenge

One major problem facing consumer protection in crypto currency fraud cases is jurisdiction. Most of these scams happen online, and the people behind them are nusually outside Nigeria. Because crypto currency transactions take place on the internet and across borders, it becomes difficult to determine which country’s law should apply or which court has the power to handle the matter. For example, in cases like the CBEX crypto fraud, investigations showed that the platform’s servers and wallets were based abroad. This made it hard for Nigerian authorities to trace the operators or recover the victims’ funds. The courts also struggle because our laws were made for traditional financial crimes, not for anonymous online transactions.

POLICY REFORMS TO STRENGTHEN CONSUMER PROTECTION IN THE DIGITAL SPACE

I’ll be disscussing the ways forward for amendment in this section:

Establish a Clear Legal Framework for Crypto currency Regulation

There is an urgent need for a specific law that defines what crypto currency is and how it should be regulated. The Central Bank, SEC, and other agencies should work together to produce a single, unified framework. This law should recognize digital assets as part of the financial system and provide clear rules on registration, trading, taxation, and consumer protection. A clear legal definition will close the current gaps that fraudsters use to exploit investors.

Strengthen International Cooperation

Since many crypto scams involve actors outside Nigeria, there should be bilateral agreements with other countries and international law enforcement bodies to aid investigation and recovery of stolen assets. Nigeria should also participate in   regional cybercrime treaties to ensure faster response in cross-border cases. With international cooperation and modern tools for investigation the Nigerian legal system can easily safeguard consumer rights and interest and protect them from online scams                                                                        

Strengthen the Role of the Federal Competition and Consumer Protection Commission (FCCPC)

The FCCPC should be empowered to handle digital and crypto-related complaints.

This can be done by amending the FCCPA 2018 to include provisions on online transactions and virtual investments. The Commission should also establish a Digital Consumer Protection Unit to handle cases involving blockchain, fintech, and e-commerce fraud.

CONCLUSION

In the end, protecting consumers from crypto currency fraud in Nigeria goes beyond just creating more laws. The real issue is that our current legal system has not evolved with the speed of technology. Online scams keep changing every day, while the law and its institutions are still trying to understand  how digital currencies operate.

The cases of scams like CBEX and others show how easily Nigerians can lose their money when there are no clear rules or strong enforcement. Consumer protection laws like the FCCPA 2018 were made for the traditional market, not for virtual transactions.

In order to move forward, Nigeria must update its policies, train its regulators, and educate its citizens. The law should not only punish fraud after it happens, but also prevent it through clear regulation and public awareness. If these reforms are made, the digital economy can grow safely, and consumers will be better protected from the rising wave of online scams.

REFERENCES\BIBLIOGRAPHY

Legislation

1. Federal Competition and Consumer Protection Act 2018 (Nigeria).
2. Cybercrimes (Prohibition, Prevention, etc.) Act 2015 (Nigeria).
3. Economic and Financial Crimes Commission (Establishment) Act 2004 (Nigeria).
4. Central Bank of Nigeria Circular to Banks and Other Financial Institutions Re:Crypto currency Transactions (5th February 2021).

Case Law

1. Rise Vest Technologies Ltd v Central Bank of Nigeria (FHC/L/CS/1629/2021, Federal High Court, Lagos).
2. CBN v Access Bank Plc and Others (2022) LPELR-57017 (CA).                         

Policy Papers and Government Publications

1. Federal Ministry of Communications, Innovation and Digital Economy, National Block chain Policy (May 2023).
2. Economic and Financial Crimes Commission (EFCC), Annual Report on Financial Crimes and Cybercrime Trends in Nigeria (Abuja, 2023).
3. Central Bank of Nigeria, Press Statement on Digital Financial Transactions (CBN Press Office, 2021).

Journal Articles

1. Vitus Emmanuel Nnaemeka, ‘Cyber Crime and Online Safety: Addressing the Challenges and Solutions Related to Cyber Crime, Online Fraud and Ensuring a Safe Digital Environment for All Users – A Case of African States’ (2023) 10(9) African Journal of Law and Digital Society.
2. Balogun T A, Akangbe O D, Fagbamila F O and Aigbo v biosa F O, ‘Internet Users’ Perception of the Prevalence of Online Investment Fraud and Victimization in Nigeria’ (2024) 4(2) Gusau Journal of Sociology.
3. [Unknown author], ‘Crypto currency Scams and Investor Protection: Evaluating Legal Safeguards in Emerging Markets’ (August 2025) Research Gate Working Paper.

Books, Reports, and News Sources

1. Federal Competition and Consumer Protection Commission, Consumer Rights and Redress Mechanisms under the FCCPA (FCCPC Press, 2022).
2. Independent Newspaper Nigeria, ‘₦4.8 Trillion Lost to Scams Since 2016’ (Independent.ng, 2025) https://independent.ng/nigerians-lose-n4-8trn-to-scams-since- 2016/.
3. Nairametrics, ‘FBI Report Reveals Crypto Investment Scams Accounted for $5.8 Billion. of 2024 Fraud Losses’ (24 April 2025) https://nairametrics.com/2025/04/24/fbi-report- reveals-crypto-investment-scams-accounted-for-5-8-billion-of-2024-fraud-losses/.
4. Newskobo, ‘Financial Fraud in Nigeria Up 45%: Digital Channels Account for 70% of Losses’ (11 July 2025) https://newskobo.com/2025/07/11/cbn-financial-fraud-in-nigeria- up-45-digital-channels-account-for-70-of-losses/.

Websites and Online Definitions

1. Wikipedia, ‘Digital Economy’ (Wikipedia, last modified 2025)

https://en.wikipedia.org/wiki/Digital_economy.

2. Wikipedia, ‘Consumer Protection’ (Wikipedia, last modified 2025)

https://en.wikipedia.org/wiki/Consumer_protection.

3. Office of the Comptroller of the Currency (OCC.gov), ‘Interpretive Letter 1184:

Clarification of Bank Authority Regarding Crypto-Asset Custody Services’ (May 2025)

https://www.occ.gov/topics/charters-and-licensing/interpretations-and- actions/2025/int1184.pdf.                                                                                         

[1] Financial frauds in Nigeria up 45% : Digital channels account for 70% of losses here

[2] Vitus Emmanuel Nnaemeka, ‘Cyber crime and online safety: Addressing the challenges and solutions related to cyber crime,online fraud and ensuring a safe digital environment for all users – A case of African states’ (2023) 10(9) African journal of law and digital society.

[3] Geoff lysate and Anthony Otaru, ‘Nigerians lose over #911b to ponzi schemes ,related frauds in 23 years’ The guardian (Nigeria) (1 December 2022)

[4] Wikipedia, ‘consumer protection’(Wikipedia, last modified 2025)

[5] Office of the comptroller of the currency (OCC.gov), ‘interpretive letter 1184; Clarification of bank authority regarding crypto – asset custody services and definition of online scams’ (May 2025)

[6] Wikipedia, ‘Digital Economy’ ( Wikipedia, last modified 2025)

[7] The Securities and Exchange Commission (SEC) Rules on Digital Assets (2022)