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Regulating Nigeria’s digital economy beyond fines -Experts

Experts say new parliamentary bills seeking to improve tech regulation must look beyond the imposition of new levies.

THE world is beginning to pay attention to the Nigerian tech ecosystem. Regulators too are showing more than a passing interest in the sector that employs thousands of young talents and attracts foreign exchange to the economy.

Rather than champion regulations to enable the tech space to thrive, the majority of the intended regulations are driven by the need to impose levies on the ecosystem.

This, according to players in the industry, is likely to hinder the growth of the sector. In a webinar organised by Nairametrics entitled, ‘Fintech Rising’, Founding Partner at Ventures Platform, Kola Aina, said, “Laws do not create employment, and we cannot mandate our way out of poverty. The challenge is trying to fit innovation into the law.”

In 2021, a new bill for the tech ecosystem by the National Information Technology Development Agency leaked.

NITDA said it was in the process of repealing its National Information Technology Development Agency Act, No 28 2007, and enacting a new National Information Technology Development Agency Act to provide for the administration, implementation, regulation of information technology systems and practices as well as digital economy in Nigeria and for related matters.

In the proposed bill that circulated online, the purpose of the new Act was to create an effective, impartial, and independent regulatory framework for the development of the Nigerian information technology sector and digital economy.

Earlier in March 2021, the Director-General, NITDA, Kashifu Abdullahi, had presented a proposal for the realignment of NITDA Act 2007 before the relevant committees of both chambers of the National Assembly.

During his presentation, he had clamoured for rapid changes within the IT ecosystem and stressed the need for the review of the NITDA Act 2007. He explained that the need for the review was necessitated by the transformation agenda of the President, Major-General Muhammadu Buhari, (retd.).

He had said, “Technology disruption is the most disturbing and the least understood. Technology is taking over the only thing that differentiates us (humans) from other animals.”

Unlike the NITDA Act 2007 Act No. 28, this new Act has a part for licensing and authorisations, which says, “The agency shall by regulation issue licences and authorisations for operators in the information technology and digital economy sector, and such regulation shall provide for licensing and authorisation criteria including renewal, suspension, and revocation conditions to promote free-market operation and competition, among others.

“The agency shall determine and register operators in the information technology and digital economy sector. Such a register shall be published. Any person or body corporate which operates an information technology or digital economy service, product, or platform contrary to the provisions of this Act, commits an offence.”

It also lists that there shall be three classes of licences and authorisations: Product Licence, Service Provider Licence, and Platform Provider Licence. The payment of one per cent of profit before tax for tech companies with an annual turnover of N100m and above to the National Information Technology Development Fund exists in the two documents.

While the document has other segments, it does not paint the picture of the kind of regulation it hopes to champion.

It says little about how it hopes to help the ecosystem thrive and dwells more on how it will penalise players in the space.

Regulation should not be a means of taxation, but ought to be a vehicle of growth, say experts.

According to Founder, e86 Limited, OluGbenga Odeyemi, regulation should offer guidelines, standards, and operating processes for players.

According to him, regulation should not focus on levies and high-end entry requirements for the ecosystem. He said, “Let me first say that by regulation, I mean a set of rules, standards, and operating procedures that will provide a level-playing field in the industry, and not levies or high-end entry requirements that will stifle participation and innovation.

“So far, the Nigerian government seems to understand and do more of the latter. The way to regulate the industry is to first understand how it works. The startups that we have today are unlike traditional businesses in terms of how they are set up and how rapidly they can grow.  This, I think, is where the government gets it wrong most times.

“The government needs to bring in those who understand the industry in formulating regulations. The goal of regulation in tech should be to enable growth, participation, and innovation. If we are not doing that, then that is not the kind of regulation we need.

“The government needs to set up supporting agencies, not for revenue generation or levy collection but for interacting with players in the industry. This will provide learning for the government and enough data to work with for decision-making.”

According to him, the ecosystem is at its budding stage and needs proper laws to allow it to blossom.

He added, “If the ecosystem was a product, I would say we have found product-market fit. If it was a plant, I would say we are at the budding stage.

“Young people in Nigeria are doing a fantastic job, even with the state of our business/political environment and very little to work with. We now know that we have some of the best software engineers in the world and we lead the pack in Africa.

“We also know that investors have confidence in our creativity, innovation, and our market. Nigerian startups have consumers from all over the world, some have expanded to other African markets. We have what it takes to dominate the tech space globally.”

According to Odeyemi, any bill seeking to regulate the ecosystem must be drafted from a place of knowledge.

He stated, “That’s part of the regulation we need. A bill backed by law will carry more weight than what an individual minister tries to do. A bill will also ensure continuity beyond political tenures.

“Like I said earlier, this bill will only have a positive impact when it is created with a good knowledge of how the industry works, global standards, and the specifics of the Nigerian market. A bill that begins with startups paying a levy to start or joining a government agency or association has failed before kicking off.

“Most startups begin from individual homes, with one or two people who have no money. So, asking them to pay a fee or register will stifle players and innovation. Let us not create a bill just because there isn’t one.  Let us create a bill because we have come to understand the workings of our market, the challenges and we have come up with guidelines that will provide solutions and enable growth.”

In 2021, the Nigeria Startup Bill project, a joint initiative by Nigeria’s tech startup ecosystem and the Presidency to harness the potential of the country’s digital economy through co-created regulations, was also kick-started.

According to its website, the bill will ensure that Nigeria’s laws and regulations are clear, planned, and works for the tech ecosystem.

While speaking at the Art of Technology Lagos 3.0 themed, ‘Funding and a Connected Lagos,’ the Minister of Communication and Digital Economy, Isa Pantami, said the Nigeria Startup Bill would accelerate the growth of small and new technology firms in Nigeria when enacted into law.

According to him, the country has a high number of venture capitalists and the bill, when passed, will accelerate the growth of startups in the nation. He noted that it would create an enabling environment for the growth, attraction, and protection of investments in the tech startup space.

He added that the government was determined to support the growth of startups and businesses.

As the tech ecosystem matures, regulation is threatening to hinder its potential. As the race to which regulation is sufficient continues, agencies must align for the collective good of the ecosystem, according to experts.

With dwindling oil resources, the Federal Government is widening its revenue net, placing demand on agencies to increase their revenues. With this new mandate, agencies are seeking to tax entities they are responsible for.

However, the tech space isn’t ready for levies, rather it needs a regulator that can allow it to thrive.

Several players in the tech space are employing millions of Nigerians and the country must not allow regulations to throw them into an already crowded labour market, where 33 per cent of citizens are out of job.

Similarly, Nigerian tech startups raised $1.7bn in 2021, according to a report posted by the Nigerian Export Promotion Commission. Key players in the sector are worried that over-regulation, especially as it concerns levies, may erode this and many other gains achieved in the sector in recent times.

Credit: PUNCH Newspapers

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