The fiat-to-crypto pipeline: How public funds bypass Nigeria’s financial safeguards
Public funds are allegedly moving through banks, fintechs and private firms into crypto wallets. Here is what the EFCC has said, what is still unknown, and where Nigeria's safeguards are weakest.
Nigeria's crypto rules are being tested by a growing concern: public money allegedly moving through banks, fintechs and private firms into digital wallets, where it can leave the formal system faster than regulators can follow. The Economic and Financial Crimes Commission has publicly described one such case, involving a local government account, a private company and cryptocurrency wallets, and says it froze an account for 72 hours to trace the funds. The specific local government, company and wallets have not been named publicly. The concern is broader than any single case. Nigerians conducted an estimated $92.1 billion in transactions on centralized crypto exchanges between July 2024 and June 2025, a 52 percent rise on the year before, and the government says its rules have not kept pace with that growth. This article explains how the pipeline is said to work, what has been confirmed, what has not, and what the safeguards need to do.
Contents
- The scale of crypto activity
- The public funds case
- How the pipeline is said to work
- Where the safeguards are weakest
- What is not yet known
- What needs to change
The scale of crypto activity
Crypto has become part of everyday finance in Nigeria. The government's draft rules describe a young, tech-savvy population, rising remittance flows and demand for alternatives to traditional banking as the drivers of growth. BusinessDay reported that the $92.1 billion in centralized exchange transactions between July 2024 and June 2025 was a 52 percent increase on the previous year. The IMF has also described Nigeria as one of the world's most active crypto markets. In a 2025 country report, it estimated that Nigeria recorded about $59 billion in crypto transaction volume between July 2023 and June 2024.
Those figures explain why regulators are worried. Large flows through exchanges are hard to monitor when they move through a mix of licensed platforms, unlicensed exchanges and peer-to-peer trading.
The public funds case
EFCC Chairman Ola Olukoyede has described a scheme in which money from a local government account was transferred to a private company and then channelled into cryptocurrency wallets. The commission says its Fraud Risk Assessment and Control Department detected suspicious transactions and froze an account for 72 hours to trace the funds. Olukoyede called the transactions a suspicious movement of public funds, and the case is an allegation under investigation. Nothing reported so far establishes who is responsible.
BusinessDay's feature on the same pipeline notes that the local government, private company and wallets involved in the September case have not been publicly identified in the material available for its report. It also cautions that the reported scale of crypto transactions does not establish that any particular amount came from stolen public funds.
How the pipeline is said to work
The process described by regulators and analysts has several steps. Public money enters the banking system through an account controlled by a government body or contractor. It is then moved to a private company, which may be a vendor, a fintech or a payments business. From there, it can be converted into cryptocurrency through a platform or a peer-to-peer trade, and sent to a wallet that is harder to trace than a bank account.
The IMF has described the broader pattern. It found that unlicensed crypto platforms can be used to move capital out of the country, and that money moved from bank deposits into digital wallets can be hard to follow because authorities may see only one leg of the transaction. Peer-to-peer platforms, it said, let users bypass the traditional financial sector when exchanging crypto.
Where the safeguards are weakest
Three weaknesses come up repeatedly in the reporting and in official material.
The first is peer-to-peer trading. Analysts interviewed by BusinessDay identified P2P crypto trading as a major weakness in the fiat-to-crypto pipeline, because transactions can occur between individuals with limited checks on the parties involved.
The second is custody. The government's draft framework proposes that customer funds be separated from company assets, but a crypto expert quoted by BusinessDay argued that separation is not enough if the funds are held outside Nigeria. The custody location matters for both consumer protection and the ability of authorities to act.
The third is monitoring. The IMF has said standard financial monitoring often fails to capture stablecoin transactions, and that anonymity in some transfers raises the risk of illicit finance. Its recommendations include combining blockchain analytics with mandatory reporting on conversions between the naira and stablecoins.
What is not yet known
Much of the public account rests on a few official statements and a small number of reports. Key questions remain open. The local government and company involved have not been named in the public material reviewed. It is not clear how much money was moved, whether the funds were recovered, or whether any charges have been filed. Readers should treat the scheme as an allegation under investigation until the EFCC or a court provides more detail.
Caution is also needed about the wider numbers. The $92.1 billion figure measures activity on centralized exchanges, not the amount of stolen funds. Most crypto transactions are legitimate, and the existence of a large market does not show that public money is widely diverted through it.
What needs to change
The reporting points to a set of practical steps. Regulators need to bring unlicensed platforms and P2P trading into the monitoring system. Conversions between the naira and crypto should be reported, as the IMF recommends. Custody rules should require that customer funds be held in Nigeria where possible. And government bodies and contractors receiving public money should be subject to independent audits that identify who ultimately benefits from each payment.
For investors and businesses, the case is a reminder that compliance gaps can change the risk profile of fintechs and payment firms quickly. The fintech sector's growth depends on trust, and a visible scandal can damage that trust across the industry, not just for the firms involved.
