The technology industry in Nigeria remains one of the most exciting in Africa, and in the world. The growth and potential shown by the technology ecosystem in Nigeria have been immense despite hostile regulation and unsavoury business conditions. We looked at Nigeria's approach to technology regulation in the past 6 years reminding the government why it is a sin to kill a mockingbird.
Published in 1960, Harper Lee’s “To Kill a Mockingbird” is one of few true classics of modern literature. The title of the book derives from an eponymous passage on page 88 where Maudie explains to Jean why it is a sin to shoot a mockingbird. She says:
“Mockingbirds don’t do one thing but make music for us to enjoy. They don’t eat up people’s gardens, don’t nest in corncribs, they don’t do one thing but sing their hearts out for us. That’s why it’s a sin to kill a mockingbird.”
The theme of the book also echoes the same message. Thematically, the book warns of the perils of destroying the things which benefit oneself and of how easily one can do just that. It is a warning that is worth retelling in the context of Nigeria’s relationship with her technology sector.
Africa's Netflix packs up
On 28 August 2020, Iroko TV, Nigeria’s premier Pay TV startup, announced it was leaving Nigeria. The effective language was “defocusing Africa growth efforts.” The reasons behind the Pay TV platform’s decision to stop expending resources in scaling in Nigeria, and Africa by extension, were all too familiar. One of the principal offenders was the then newly released 6th edition of the Nigeria Broadcasting Code (NBC Code Amendment).
The company’s CEO, Jason Njoku, in an impassioned blog post, argued that the NBC Code Amendment was effectively destroying Pay TV in Nigeria under the pretext of competition regulation. He explicated that the amendment played a massive role in the company’s decision to refocus on other markets.
This was a company which could boast of being a true disruptor, a company on course to realizing the playbook for the Pay TV industry in Nigeria, a company tipped to be the Netflix of Africa, resigning ultimately to the avoidable fatality that is regulation in Nigeria. This is not a lone case, but it stands out for its direct casualty.
Nigeria’s approach to technology regulation, particularly in the last six years, has been troubled, to say the least. In this time, regulation has been everything from uncalculated, and insufficient, to destructive. Between the taxman approach of “milking” businesses still trying to flesh out experimental business cases, to opting for dangerous misinterpretations of disruptive business models, to forestalling innovation to favour the norm, to wielding the axe on a whim; regulators and the disposition to the regulation of technology in Nigeria is fast becoming a threat to the country’s own growth.
What does data tell us?
The technology industry in Nigeria remains one of the most exciting in Africa, and in some ways, in the world. In 2019, the country surpassed South Africa as the premier technology investment destination in Africa, raking in over $747 million in venture funding according to Partech Africa and over 50% of the entire funding into tech in Africa according to WeeTracker. In 2020, Partech Africa placed venture funding into Nigeria at $307M despite the pandemic. Partech Africa reports that Nigerian companies raked in funding amounting to $1.8B in 2021, while WeeTracker has Nigerian startups raising $1.42B in funding in its 2021 report.
Make no mistake — the cost of Nigeria’s approach to technology regulation goes beyond lower ratings in high-end tech reports. The cost is paid every day, by the tech-preneurs in Nigeria, by the common masses and by Nigeria herself, in more ways than one.
However, the immense growth and potential shown by the technology ecosystem in Nigeria has been despite hostile regulation and unsavoury business conditions - and is beginning to tell. FDI Intelligence’s African Tech Ecosystems of the Future report, put Nigeria at the sixth position overall in the African Tech Ecosystems of the Future ranking for 2021. The ranking, which explores the African tech ecosystem and its potential for the future, was based on mostly qualitative indices.
Where South Africa ranked first overall in categories such as startup status, business friendliness, and economic potential, and Kenya and Egypt led in human capital and lifestyle and Foreign Direct Investment (FDI) strategy respectively, Nigeria ranked top in only one category - number of startups, the lone quantitative index, unsurprisingly. In truth, compared to other countries in Africa’s “innovation quadrangle,” Nigeria’s successes as a “tech hub" have been mostly down to two factors: the daring, adaptability, and innovative nous of Nigeria’s tech-preneurs and the country's insane market-size.
A closer look at funding reports with similar indexes, such as Briter Bridges’ report on venture funding in Africa, betrays the same fact. Briter’s 2020 report, which factored in the place of incorporation of startups operating in Africa, does not have Nigeria in its top five. According to the report, the leading destinations of incorporation of African startups which received funding in 2020 were the US, South Africa, Mauritius, the U.K and Kenya, in that order.
It is obvious why Nigeria does not make the list despite the chunk of funding received by “Nigerian startups” for the year. Considering unfriendly (and erratic) regulations, poor business realities, weak currency and tax conditions, most Nigerian startups prefer to be regulated elsewhere. One of the latest cases was one of Nigeria’s few multi-billion-naira technology businesses moving shop to Estonia towards the end of 2021, due (at least in part) to regulatory constraints.
Make no mistakes about it – the cost of Nigeria’s approach to technology regulation goes beyond lower ratings in high-end tech reports. The cost is paid every day, by the tech-preneurs in Nigeria, by the common masses and by Nigeria herself, in more ways than one.
The NBC Code Amendment for instance, which had the effect of outlawing exclusive ownership of original content by creators in the broadcast space in Nigeria (amongst other things), not only factored in iROKOTV’s eventual decision to “defocus” Nigeria, but had and continues to have other far-reaching implications for Nigeria and Nigerians, in terms of depreciation of Nigeria’s investment appeal in the Pay TV space, the resultant loss of jobs, negative disruption to other wealth generation channels based off thriving Pay TV etc.
Of Bans, Motorcycles and Taxes
Elsewhere, the incredible and ill-considered ban on motorcycles in Lagos had grave implications for motorcycle-based ride-hailing businesses in Nigeria (with the likes of Gokada and O-Ride having the worse of it), on employment, in terms of revenue lost, and on everyday business commuting for the common man, amongst others.
And if in a way, the ban inadvertently led to an increase in activities in the logistic-tech business ecosystem in Nigeria - that too, is currently threatened by the remarkably obscure Courier and Logistics Services (Operations) Regulations, which establishes NIPOST (yes, they are still alive) as the regulator of the logistics industry and portends a similar fate for logistic-tech business as an earlier regulation of 2020 by the same name, increased licensing fees for logistics operators and required logistics companies to remit 2% of their revenue to the NIPOST.
Whether it is in terms of the missed opportunity to capitalise on Nigeria’s station as the biggest market for cryptocurrency in Africa (second largest in the world)...
Elsewhere, leaks from the National Information Technology Development Agency’s (NITDA) proposed amendment to the NITDA Act propose levies of 1% of profit before tax for technology companies with an annual turnover of N100 million, amongst other fines, as well as the prospects of imprisonment for players in the technology ecosystem.
The Art of (Regulatory) War
While recent upheavals in the invest-tech space in Nigeria following the SEC’s implied “ban” on the offering of foreign security to Nigerians appear to have been somewhat resolved by the SEC’s amendments to their Consolidated Rules and Regulations and the proposed Rules on Digital (Robo) Advisory Services, the cost of that guns-blazing, shoot-first-talk-later approach to regulation counts in investor and customer confidence, if nothing else.
These are not lightly regained and matter much for disruptive businesses. Not that it matters too much to the CBN, who after the SEC created a digital sub-broker licensing regime to enable players in the industry to operate within its regulatory remit, obtained an exparte order to freeze the accounts of various invest-tech platforms including Rise Vest, Bamboo, Chaka and Trove for 180 days. The CBN’s concern is that these startups operated without a license as asset management companies “and utilized FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of a CBN circular which instructed otherwise.”
According to the CBN, the exparte order was further necessitated by the fact that the foreign exchange deals done with the startups were part of what was making the Naira weaker than the United States dollars. Between the under-noted illegality of an exparte order lasting for 180 days and the sheer incredulousness of both the CBN’s gung-ho approach to whatever the actual problem is, there is just enough room for resumed worry about the overall implication of moves like this on Nigeria’s already severely whittled investment appeal, amongst other urgent concerns.
CBN and a non-guide to witch-hunting Crypto
Of course, the costs of vacillations such as that which happened between the SEC and CBN in respect of crypto-assets between late 2020 and early 2021 may be harder to calculate. But if there are doubts as to whether the SEC’s tax-man-like classification of all crypto assets as securities (until proven otherwise) had any direct implications on the technology ecosystem (before it was compulsorily suspended), there is no questioning whether CBN’s subsequent outlawry of “facilitation of payments for crypto exchanges'' by banks has cost the country.
Whether it is in terms of the missed opportunity to capitalise on Nigeria’s station as the biggest market for cryptocurrency in Africa (second largest in the world) or; in terms of money lost by players in the cryptocurrency space, or in terms of the forfeited potential revenue from regulation and perhaps taxation of cryptocurrency, or in terms of the resultant compound mistrust, which is limiting the acceptance and growth of crypto-assets in Nigeria, the answer to the question is obvious.
the ban costs Nigeria over 2 billion Naira daily
What is even more confounding with this specific howler was that it went contrary to the SEC’s stance on regulating crypto-assets, the tenor of the National Blockchain Adoption Strategy released by NITDA and even the CBN’s own much-advertised policy on driving financial inclusion through digitisation, evidencing a lack of cohesion in regulatory decision-making amongst different regulators interacting with the technology ecosystem in Nigeria and offering further indictment on Nigeria's directionless approach to technology regulation.
A Twitter Ban
Another in a litany of government/regulator decisions costing the technology industry in Nigeria was the recent ban of Twitter. This decision deserves a place as the most shocking in an ever-growing catalogue, as it was neither based on the desire to drive revenue nor an intention to protect existing structures nor does it come from a place of misunderstanding.
This one was, apparently, a reaction to an annoyance within the Presidency. For this, the consequences have slightly more clear numbers. Paradigm HQ reports that the ban costs Nigeria over 2 billion Naira daily, going by estimates from Netblock’s Cost of Shutdown Tool. The approximation is that Nigeria lost no less than tens of a hundred billion at the end of this debacle.
The ban costs commercial productivity which led to increased unemployment, and further harmed Nigeria’s FDI appeal, weighed on the digital economy (which is one of few sectors still “thriving”), in addition to heavily impacting MSMEs, e-commerce platforms and other internet entrepreneurs who rely on Twitter’s micro-blogging magic to push sales and to operate a business.
A Policy Response to a Policy Problem
Nigeria’s plentiful faux pas in technology regulation tells of a larger failure – one of a lack of a clear technology policy and/or absence of a thoughtful developmental policy. More so, it betrays a disinterest on the part of the government to enable her most promising industry (and no, it is not the oil). It should be of priority for a country such as Nigeria, whose economy is greatly impacted by the booming business of technology, to craft a clear policy or approach, applicable across the board and instructive to all regulators, which will inform her attitude to regulating technology and technology-based businesses, tell in her investment into technology and technology infrastructure, and guide her interaction with technological globalisation.
The unwritten policy of the US, for example, is one to follow and can be glimpsed, for example, in some of the thoughts of former Commissioner Hester M. Peirce in a number of notable speeches. In “Beaches and Bitcoin: Remarks before the Medici Conference” for instance, she noted that the role of regulators is to protect investors and market integrity without losing sight of the benefits of new technology, while learning, adjusting and adopting innovative approaches to regulation along the way, to enable sustainable growth.
The US’s technology policy is evident in the country’s persistent investment in technology, whether through infrastructure, innovative regulation or education. The same clarity of purpose is apparent in the approach of forward-thinking economies like that of China, the UK, Canada and Germany, to varying degrees. In Africa, countries like South Africa, Ghana, Egypt and even Botswana seem to understand the stakes better and are hurriedly adopting pro-technology policies and crafting clear roadmaps to capitalise on the shared economy of innovation.
technology and technology-based business models are revolutionizing business and driving upward economic growth.
The Nigerian Startup Bill: A silver lining?
There is some hope that the Nigerian Startup Bill (NSB) is a move in the right direction and might kick-start a new regime for technology in Nigeria. The NBS, should it pass into law, will hope to harmonise the workings of the plethora of regulators interacting with Nigeria’s startup ecosystem and ensure that they are all positively aligned on a forward vision for the Nigerian tech startup ecosystem while updating outdated laws touching on the technology industry. There is a lot of hope resting on the NBS but yet again, if precedence is instructive, as with most things Nigerian, there is every sense in keeping excitement minimal.
Whatever happens with the NBS, there is every need to recalibrate what is becoming a self-defeating approach to the business of technology in Nigeria. Tech regulators in Nigeria need to start getting it right fast - if not for the sake of the country today, but for the sake of the country’s future.
In the world today, technology and technology-based business models are revolutionizing business and driving upward economic growth. But where the current boom is remarkable for its wealth generation potential in more advanced countries, for Nigeria, especially for her younger generation, it is a lifeline – we must do everything to seize this lifeline.
If Nigeria must get it right, it will have to reconsider its approach to technology regulation and develop and implement a clear policy towards technology and technological development. While Nigerians are often forced to do things for themselves, as heartbreaking as it is, this is one thing the government will have to do for the people. On our part as Nigerians then, like Mrs Maudie, we will have to find a way to remind the government why it is a sin to kill a mockingbird.
Vincent Okonkwo | Lead Research Analyst, Tech and Innovation Policy | firstname.lastname@example.org
The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.
The ideas expressed qualify as copyright and is protected under the Berne Convention.
Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.
©2022 borg. Legal & Policy Research