Nigeria’s Tech Scene Hit With Even More Regulation

Beyond only registering tech companies, the bill declares that NITDA will be funded by 1% of the annual revenue of these companies – if the revenue exceeds $243,000. All companies which fail to comply will be fined a minimum $73,000.

Since 2020, the tech scene in Nigeria has been consistently hit by a barrage of regulations.

The first of these was the outright ban on bike hailing, which disrupted the business operations of several transportation startups like Gokada. After that, the CBN blocked international companies from transferring money directly to Nigerian bank accounts without a license.

Things took a turn for the worse after the EndSARS protest of October 2020, where Bitcoin was used as a primary means of crowdfunding after bank accounts of organisers were blocked. Less than five months after the protests, the CBN clamped down on crypto, declaring it illegal and ordering banks to close down all accounts associated with crypto trading.

A few months later, yet another regulatory order came from the Securities and Exchange Commission(SEC) banning stock trading platforms like Chaka and Risevest from operating without a license. In June, the government blocked access to Twitter, claiming the need for social media regulation. 

So far, this NITDA Bill is the most prominent move the government has made to regularise the tech sector. It is especially sensitive as it places the power to decide what companies and products can enter the tech market in the hands of a government agency, while simultaneously insulating itself and all officials from any lawsuits.

According to Kola Aina, the founder of early-stage fund Ventures Platform, regulations are inevitable but they need to be progressive. “All we are saying is that in nascent markets like Nigeria, regulation needs to be progressive and aim to support the growth of our ecosystem as opposed to hampering it,” he said.

The Nigerian tech scene is experiencing rapid growth, but regulations from the government are threatening to restrain it. Asue Ighodalo, who’s the Chairman of the Nigerian Economic Summit Group, lamented the overregulation at a forum in Abuja. According to him, the tight regulations are affecting the market and preventing investors from putting in more money into the market.

“It is a chicken and egg thing. As a developing economy, you want people to bring money to invest, create jobs, pass on technology and skills,” said Ighodalo.

On the topic of investors, there have been rumors that local venture capitalists are contemplating allocating fewer funds to the Nigerian market due to its instability and severe government scrutiny. However, some are optimistic that these regulations will push the startups to innovate further and even come up with stronger strategies. 

For full details of the bill, click here.