1. Introduction
One key thing gaming investors must note is that Nigeria is a Federation with 36 Federating Units (“States”) and one (1) Federal Capital Territory, Abuja (“FCT”) with clearly delineated powers of both levels of government under the Constitution of 1999 (as amended). The Federal Government of Nigeria (“FGN”) is constitutionally empowered to make and execute policies on matters listed in the Exclusive Legislative List of the Constitution (and some matters in the Concurrent Legislative List upon which the States have not previously legislated). The Residual Legislative List matters are matters which are neither in the Exclusive nor the Concurrent Legislative List and are therefore reserved by the Constitution exclusively for the States.
There is still an unresolved debate over which level of the governments should have regulatory supervision over the gaming industry in Nigeria. At the moment, both the Federal and the State Governments exercise licensing and supervisory powers over all gaming businesses operating within Nigeria. This is because the governing laws of the gaming industry in the country are constituted in both Federal Acts and State laws. Although, amongst the 36 States of Nigeria, only Lagos State, being the commercial hub of the Nation respectively, appears to be most active in the regulation of gaming business and, therefore, will be the focus of this review.
2. History of the Gambling laws of Nigeria
The earliest form of regulation of gaming has been largely to prohibit it. Before the 2000s, gambling was illegal. The regulatory efforts to prohibit unlawful gambling were expressed in the Gaming Machines (Prohibition) Act, 1977, a federal law with 4 sections, enacted principally to ban the importation, ownership and operation of any gambling machines or gaming house and other related matters.
Thereafter, the Federal Government, in apparent bid to recognize some forms of gambling, the Criminal Code Act 1990 (“Criminal Code”) was enacted to prohibit any form of unlawful gaming, defined in section 236(2) of the Criminal Code to include “roulette, every game of dice except backgammon, every game of card which is not a game of skill, the game known as chacha and other games of cowries, and any game the chances of which are not alike favourable to all the players, including the banker or other person or persons by whom the game is managed or against whom the other players stake, play or bet.”
Currently, the gambling is legal in Nigeria, if licensed by the Lottery Commission. Also, it is our opinion that the mere fact that the regulators are yet to develop licensing framework for all kinds of gambling (for instance, online casinos, etc.) does not make those yet-to-be-regulated games illegal. This is because, from our experience, we can confirm that the Lottery Commission welcomes application (and indeed licenses) online interactive games (including online casinos) on a case-by-case basis.
2.1. The Federal Laws
At the Federal level, there is the National Lottery Act 2005 (“Lottery Act”) under which established the National Lottery Regulatory Commission (“Lottery Commission”) and the National Lottery Trust Fund (“Lottery Fund”) in pursuance of which the Lottery Commission’s Governing Board issued the National Lottery Regulation 2007 (as amended in December 2007 and April 2015) (“Lottery Regulation”). It is useful to mention that the foregoing laws commercialized all forms of licensed gambling in Nigeria since 2005.
So, any prospective investors should note that the various States within Nigeria also have their respective laws, except the FCT, Abuja which, being the Nation’s Capital Territory, is under the administration of the FGN and the Lottery Act.
2.2. The State Laws
Lagos State is credited with the first legislative effort to commercialize gaming in 2004. For example, in Lagos State, there is the Lagos State Lotteries and Gaming Board (“Lotteries Board”) established by the Lagos State Lotteries Law of 2004 (which was amended in 2008 and 2021) (“Lagos Lotteries Law”). This law provides that all gaming businesses operating within Lagos State must obtain operational license from the Lagos State Government in addition to the Lottery Commission’s licence of the Federal Government of Nigeria.
3. Why invest in the Nigerian Gaming Industry
The gaming industry in Nigeria, especially sports betting, has witnessed tremendous growth generating over N730 billion annually, an output which is largely attributable to the Nigerian’s huge love and passion for sports, especially soccer[1] and advancement in technology, evident in the increase in GSM subscription and mobile penetration,[2] amongst others.
It is no gainsaying that the advent of technology in Nigeria has increased access to mobile devices and made financial transactions easier, especially with several payment gateways and other fintech platforms helping to create e-wallet services and liberalise how sports betting players can deposit money into their betting accounts in order to participate in sports betting activities. It is interesting to note that given the advancement of technology in Nigeria, the Value Added Service (“VAS”) providers and telecoms service providers now use telecommunications platforms to operate lotteries and other mobile gaming across the country. This naturally made it imperative for the Nigerian Communications Commission (“NCC”) to step up to protect and promote the interest of the telecommunications services in relation mobile lotteries.
Another reason Nigeria is a potential nation for sports betting investment is its population of about 200 million, with 65% of that number being less than 35 years, out of which about 60 million fall between ages 18 and 40, the same age brackets that have been noted as the most active sports betting players. Given the high rate of unemployment in Nigeria and the huge passion for sports, especially soccer, it is therefore easily understandable why the Nigerian youths (being the majority of the nation’s population) see sports betting as either their main means of earning income or a “side hustle.”
In 2018, in response to consumer protection issues arising from unfair practices and abuse in mobile lotteries and promotions by telecommunication operators, the NCC and the Lottery Commission entered into a Memorandum of Understanding (“MoU”) on regulation of lottery activities on telecommunications platforms.One of the agreements reached by the two agencies is that the NCC would withdraw their approval whenever the Lottery Commission withdraws its permit from service providers for lottery, considering the fact that NCC gives approval only when permit has been first obtained from the Lottery Commission.
Another interesting development in Nigeria that has impact on the gaming industry is the enactment of the Finance Act 2020 (amended in 2021) which empowers the Federal tax authority (Federal Inland Revenue Service) to deploy proprietary technology to automate the tax administration process including tax assessment and information gathering and imposed obligation on the tax payer to grant access to the tax authority to records, data or any information recorded in a tax payer’s computers or other electronic device.
In furtherance of the above, tax authorities and state lottery agencies are already pressing for integration of State-monitoring technology to the read-only back-end files of technology companies, including gaming businesses, for proper betting revenue assessment and fair taxation.
4. Between State and Federal Licence
As mentioned earlier, there is an unresolved dispute between the regulatory agencies at both levels (especially between the FGN’s Lottery Commission and the Lagos State’s Lotteries Board) over licensing and supervisory control of gaming business with operational base within Lagos State. The Lagos State’s Lotteries Board is however more aggressive in terms of its insistence on State licence/permit, enforcement and imposition of higher levies and charges on gaming businesses than the Lottery Commission or the other 35 States’ gaming authorities.
From our experience and for the purpose of setting up a gaming business in Nigeria, it is advisable to first obtain the federal licence even if the business is proposed to be set up within a State (outside the FCT). With federal licence alone, a gaming business may be completely set up, but not the case with a State licence alone.
The federal licence will ensure seamless processing of registration of the gaming company with the Corporate Affairs Commission (“CAC”), the Certificate of Capital Importation (“CCI”) from the Central Bank of Nigeria (“CBN”), registration with the Nigerian Investment Promotion Commission (“NIPC”), all of which are federal agencies and would insist that the Applicant show proof of Provisional Approval from the federal regulator, the Lottery Commission, as precondition for any registration or business processing. Also, commercial banks in Nigeria and digital platforms usually request for the federal licence in order to complete account opening process and any engagement for digital marketing of the gaming products respectively.
5. The Types of Federal Gaming Licence
There are four (4) categories of gaming businesses/schemes that are can be licensed the Lottery Commission for different durations not exceeding ten (10) years, namely:
i. National Lottery (including Mobile Lottery/Gaming) relating to lottery schemes conducted on telecommunications operators by Lottery Value Added Services (“VAS”) and other third-party content providers offering lottery-related schemes or other schemes with element of chance in prize distribution/allocation as well as consumer sales promo and loyalty-based promos.
ii. Sports Betting relating to sports events like football, basketball, baseball or similar games, or horse or dog race on which pari-mutuel is allowed.
iii. Promotional lottery for a seasonal gaming permit which covers online and mobile gaming, with the fee determined on a case-by-case basis.
Please note that there is an Interactive Gaming Licence which is the Lottery Commission grants upon review of Applicant’s application, modalities and schemes of the game.
The requirements for licensing the above games vary in accordance with the types of gaming products to be offered by the applicant though some of the licenses have common requirements.
6. Fees, Costs, Taxes, Charges and Prize Fund
There are various government taxes and charges on gaming activities in Nigeria as well as mandatory employers’ contributions which are in addition to permit or licence fees. Some of the taxes include Value Added Tax and Withholding tax on winner’s prize, National Lottery Regulatory Commission’s levy, National Lottery Trust Fund’s levy, personal income tax, the company income tax, tertiary education tax, pension contribution, amongst others.
Please note that by section 24(1-3), a gaming licensee is mandated to establish an operational fund known as the “prize fund” into which a minimum return of fifty (50) per cent of the proceeds of a lottery business shall be paid.
7. The Process of Incorporating a Company in Nigeria
Registration of a company in Nigeria is processed in two stages: first, Name Search/Reservation; and, secondly, the Filing of Registration Application.
In order to register a company in Nigeria, the following information/documents will be required:
- Two (2) preferred names of the proposed company for Name Availability Search and Reservation by the CAC;
- The registered address of the company, which must be in Nigeria (we recommend Abuja, Nigeria for seamless processing of the business set up);
- The email address and phone number of the company;
- The details of the subscribers/shareholders, directors and company secretary which must include their respective home and contact addresses, phone numbers, email addresses, date of birth, data page of international passport and electronic signatures;
- Distribution of shares amongst shareholders (although one person can wholly own a company in Nigeria, inclusion of a local shareholder may increase the chance of getting favourable regulatory consideration for licence);
- The description of the company’s business objects which must relate lottery activities;
- Certificate of any corporate shareholder and shareholders resolution showing decision to set up the Nigerian company;
The incorporation of the company can be completed at the CAC within 72 hours after the grant of the Pre-Incorporation Approval by the Lottery Commission.
8. The Licensing Process of a Gaming Company
The first stage of the process commences with the reservation of the gaming company’s name with CAC. Thereafter, a Pre-Incorporation Approval is obtained from the Lottery Commission. The Pre-Incorporation Approval is required to complete the incorporation of a new gaming company.
The second stage is the post-incorporation application submission of Application to the Lottery Commission, accompanied with all the required documents and information as well as payment of the Application Fee of N2,000,000. Please note that the Applicant will be invited to make Presentation to the Lottery Commissionabout the proposed gaming scheme. The Lottery Commission would thereafter review the Application and revert with its decision between two (2) weeks to four (4) weeks.
The third stage is the grant of the provisional approval for 90 days to enable the Applicant put in place all the necessary conditions for final licence. A Provisional Approval is granted by the Lottery Commission subject to an Applicant’s meeting the application requirements and fulfillment of certain conditions such as payment of permit or licence fee, satisfactory inspection by the Lottery Commission, provision of Read-Only Access to the Lottery Commission for monitoring and reporting purposes, amongst others.
Last stage is the grant of final licence which is subject to fulfillment of all conditions provided by the Lottery Commission on or before 90-day expiration period of the provisional approval. Please note that the 90-day period may be extended upon application and cogent reasons being given.
9. Audit and Reporting Obligation of Gaming Business
All licensed betting operators must submit Monthly Report in the approved format on or before the 10th day of the succeeding month.
Also, the Lottery Commission will conduct a system audit as well as a stakeholders’ interactive meeting on a quarterly basis.
10. Is there any control of capital for foreign investments or divestments in Nigeria?
No. Nigeria government does not control capital for foreign investment in Nigeria. All foreign investors are guaranteed 100% repatriation of their investment funds and profits at the official forex rate subject to deduction of applicable taxes. It is important to obtain a CCI for seamless repatriation of capital.
[1] Nigeria has a huge fan base for popular football leagues around the globe e.g., the English Premier League, the Spanish Laliga, etc.
[2] Data from the Nigerian Communications Commission (“NCC”) shows a total of 195,128,265 of Nigerians are mobile and internet subscribers.
