As a preliminary remark, one may be tempted to point out the quasi insignificant contribution of Nigeria’s gaming industry to the gross domestic product (GDP) of the largest economy in Africa. Yet this imposing margin could not have been created if not for Nigeria’s overreliance on its petroleum exports which has over the years formed the bedrock of its economy. Hence, against other constituent sectors of Nigeria’s economy, the gaming industry stands heads up and also promises to be a big contributor to Nigeria’s economy in the near future. However, a whole lot of factors mitigate its development and threaten its prospects, chief amongst them being its regulatory frameworks which has over the years remained verycomplex. This article attempts an exposition of the prospects and challenges of the Nigerian gaming industry against its complex regulatory frameworks with a view to determining the way forward.
Overview of the Regulatory Frameworks for the Nigerian Gaming Industry
The Nigerian regulatory framework for its gaming industry is relatively complex given concurrent, overlapping and incoherent exercise of jurisdiction by both Federal and State level governments alike. These complexities havearisen due to the varying nature of constituent elemental activities of the industry which consequently do not allow for uniform and exclusive management and regulation of the sector. The gambling industry in Nigeria also circumstantially (when legal) known as the gaming industry refers to the economic sector of Nigeria which includes activities sanctioned by law such as lotteries, fixed odd betting, casino gaming, non-casino gamingand all such matters pertaining thereto.
While the Constitution of the Federal Republic of Nigeria in force with regards to the amended 1999 one makes no provision on the subject matter of gambling or any matter incidental thereto in its delineation of powers of Federal and State level governments as done in its Second Schedule,by necessity, practice or convention, certain elements within the industry as forming part of its constituents such as lotteries, fixed odd betting and such othercharacteristically closely related elementshave come to assume (argumentatively)positions within the provisions of Part II of the Second Schedule to the 1999 Constitution of the Federal Republic of Nigeria(as amended and hereinafter referred to as the Constitution)thus, within the concurrent jurisdiction of the Federal and State government legislations.This phenomenon has arisen partly due to the undeniable need for concurrent regulation of the sector given the existence and distinct nature of the national lottery and State based lotteriesamongst other incidental elements forming parts of the industry and the existence of both Federal and State based legislations on the subject matter as forming parts of extant regulatory frameworks.
In the determination of appropriate and legal regulatory authorities for the industry, a thorough analysis of extant body of laws both at Federal and State level and of case laws is incumbent. Against this background, the principal bodies of legislations on the subject matter of gaming within the context of applicable laws in Nigeria is the National Lottery Act, (NLA) 2005 complimented in functions by the National Lottery (Amendment) Regulations 2007which regulates the operation of the national lottery, the Pools Betting and Casino Gaming (Prohibition) Act which unsuccessfully attempts to prohibit the establishment, licensing and the combined operation of any pools betting and casino gaming undertaking in Nigeria, the Gaming Machines (Prohibition) Act which also unsuccessfully attempts to ban the importation, ownership and operation of any gaming machine in Nigeria and the Casino Taxation Act which enigmatically regulates the tax regime of licenced casinos within the territories of Nigeria. At subnational (State) level, various legislations abound amongst which are the Casino and Gaming Regulatory Authority Law and the Lagos State Lottery Law, (as amended) 2008 all applicable to Lagos Stateand the Anambra State Gaming Law, 2005 applicable to Anambra State.
Hence, for ease of applicability of its provisions, the National Lottery Act comprehensively defines the term lottery to include:
any game, scheme, arrangement, system, plan, promotional competition or device for the distribution of prizes by lot or chance, or as a result of the exercise of skill and chance or based on the outcome of sporting events, or any other game, scheme, arrangement, system, plan, competition or device, which the President may by notice in the Gazette declare to be lottery and which shall he operated according to a license
While the Casino (Licensing) Law applicable to Lagos State as a State exercising exclusive jurisdiction on the subject matter within its territory defines casino to mean“any building or part of a building in respect of which a licence has been issued and to which members of the public authorised by the licensee have access for the purpose, among other things, of playing at prescribed games of chance” and by extension “casino gaming” gamings associated with such buildings. Similar definitions are also provided in various State legislations across the country such as those provided in the Casino and Gaming Regulatory AuthorityLawapplicable to Lagos State, and in the Anambra State Gaming Law, 2005 applicable to Anambra State.This exclusive exercise of jurisdiction by States with regards to casino gaming stems from therulingof the Court of Appeal in Edet v. Chagoon((2008) 2 NWLR (Pt. 1070) 85 at P.103, paras. C-E) on the Legislative competence of the House of Assembly of a State over pools betting and casino gaming. In the instant case, it was determined that pools betting and casino gaming were within the exclusive legislative competence of State governments. In the pivotal case, the Court of Appeal held per Ngwuta JCA that:
Pool betting and casino gaming do not appear in either Part I (Exclusive Legislative List) or Part II (Concurrent Legislative List) of the Second Schedule to the 1999 Constitution. Not being an item in the Exclusive Legislative List or in the Concurrent Legislative List and not matters incidental or supplementary to the execution of any of the powers in the Exclusive Legislative List or even the Concurrent Legislative List, pools betting and casino gaming are residual matters. Being residual matters, they are within the legislative competence of the House of Assembly of a State…
A cursory interpretation at the ruling of the Court seems to confer exclusive jurisdiction over the whole of the gaming industry on State Governments. However, a comprehensive consideration of the ipsissimaverbaof the Court shows that “pools betting and casino gaming” and not lottery or gambling in its general sense were within the exclusive legislative competence of the House of Assembly of States hence not in prejudice of the regulatory authority of the Federal Government over other elements of the gaming industry.
Hence, against this background, the National Lottery Regulatory Commission (hereinafter referred to as the Commission) established by dint of Section 1 ofthe National Lottery Act, 2005(being an Act of the national Assembly) has longhad regulatory and oversight authority over the national lottery as forming part of the gambling industry in Nigeria. Its functions include interalia:the regulation, setting of standards, guidelines, and rules, the promotion of transparency, propriety and integrity and theprotection of the interest of players, stakeholders and the public in the operation and business of the national lottery in Nigeria. In the discharge of its broad functions, the Commission is also empowered to recommend to the President of the Federal Republic of Nigeria such persons qualified and having complied with the provisions of the Act for the issuance of licence for the operation of the business of a national lottery or any lottery by whatsoever name called. This is pursuant to Section 17 of the National Lottery Regulatory Act which precludes the operation of any business of a national lottery except upon the issuance of a corresponding license by the President. Furthermore, such licence granted are subject to the general terms and conditions set out in the National lottery Act and any incidental ones to be set by the President to specific licensees. Hence, in the event of a breach of the set terms, the license thus granted may be revoked by the President on the satisfaction of the conditions set out in Section 21 of the NLA.
Parallelly, State based lotteries are overseen byregulatory bodies established by applicable laws in the corresponding States. Noteworthy in this respect is the Lagos State Lotteries Boardestablished by dint ofSection 1 of theLagos State Lottery Law, (as amended) 2008 whichregulates the gaming industry in Lagos State. Its functions as laid out in the comprehensive and articulate provisions of Section 9 of its establishing law include inter alia: advising the Governor on the issuing of the licences, ensuring propriety and compliance with laid down regulations in the industry within Lagos State,protecting the interests of every participant in the industry, ensuring maximal productivity in the industry, granting specific licences to certain types of operators and doing all such things as are necessary and incidental to achieving its purpose.
Under the Lagos State Lottery Law, (as amended) 2008, all applications for licences are to be addressed to the Lagos State Lotteries Board (dicta of Section 53) who is also mandated to issue such licences upon satisfaction by the prospective licensee of the conditions set out in the Law and other subsequent regulations to be set by the Lagos State Lotteries Board.
While such regulatory bodies are also extant in some other Sates in Nigeria, States with no such institutions have their Internal Revenue Services (IRS) to regulate the sector hence amongst others, the Edo State Internal RevenueServices (EIRS) regulates the gaming industry within the territories of Edo State.
Having regards to pools betting and casino gamingas within the exclusive jurisdiction of States, the Casino (Licensing)Law of Lagos State regulates the licencing of casinos within the jurisdiction of Lagos State while the Lagos State Lotteries Board regulates pools betting in Lagos State having been transferred from the Lagos State Ministry of Finance in 2016 which had been previously saddled with its regulation by the cumulative provisions of the Pool Betting Control Law (1961) and the Pool Betting Regulations (1967)of Lagos State.
Prospects and Allaying Factors of the Nigerian Gaming Industry
A Large Population is a Big Market
The Nigerian Population estimated at 195.5 million persons in 2018 with a corresponding fertility rate of interest 5.46 births per woman, a life expectancy value of 53.95 years and a consequent annual growth rate of 2.6% is a great market for the gaming industry and by extension every economic activity in general. This population-factor has over the years driven important foreign direct investments to the country.
Increase in Foreign Direct Investments
A number of foreign investors has lately shown interest in the Nigerian gaming industry particularly sports betting. Some well-known and established foreign firms have also partnered with local firms for the provision of content and overall improvement of the Industry. One of such partnership is that of NaijaBillionaire andLightmaker lotto which offer payment solutions and Indus Net Technologies which develop and provide technical support and digital content.
A Growing Customer Base
The expansion of gaming activities from the traditional lower income earners to the middle-class heralds a breakthrough for the gaming industry. Therealisation of this expansion was partly due to the increase in mobile penetration which according to the Nigerian Communications Commission (NCC) increased from ~35% to ~49% in the last three years. Additionally, the perpetual rise in unemployment amongst the youth and the aggressive advertisement and promotion of gaming platforms by operators has skyrocketed the customer base of the industry. Hence, the lower class is involved, the upper class is involved and the middle-class has also gotten involved in the industry.
Improved Regulatory Framework
The role of the National Lottery Regulatory Commission in recent times has been pivotal in the growth of the industry. With increase transparency, accountability and propriety in the sector, investors are willing to stake more and punters are more confident even in their bet. At the State level, the various bodies responsible for the regulation of the industry in their specific sates have also been instrumental. The Lagos State Lotteries Board in this respect has particularly stood out.
Increase in technology
Technological advancements of the twenty-first century have not been without effect on the gaming industry in Nigeria. Particularly, recent improvements in payment platforms, internet connectivity, mobile communications and content delivery have increased the penetration of the industry within the local market. According to a report on Football betting in Nigeria, most bets were placed in bet shops while an increasing number of customers were placing bets online.
The Nigerian Culture
Nigerians are naturally sport loving and as such betting on sports literally becomes a ritual given the fact that it is easier to stake on what one is passionate about. Additionally, certain parts of Nigeria have long shown an unfading disposition to betting. This prevailing practice bespeaks a potential thriving market.
Professional Third Party Involvements
Recent entrance of professional third-party service providers such as network service providers, commercial banks, consulting firms etc. through partnership with operators in the industry has improved efficiency and quality service delivery to an appreciable extent.
Challenges and Mitigating Factors of the Nigerian Gaming Industry
Overlap of Regulatory Frameworks
The current overlap of regulatory authority between the State and the Federal government is a huge mitigating factor to the gaming industry in Nigeria despite the immerse potential which the industry regurgitates. The overlapping directives, processes and procedures of these regulatory authorities at State and Federal jurisdictional levels creates an undue systemic inefficiency and imposes additional restraints to the potential investor, the actual investor and literally every other player in the sector.
Tax Regime and Double Taxation
The multiplicity of regulatory authorities of varying jurisdictions has done more harm than good in the Nigerian gaming industry. The determination of what constitutes taxable profit (i.e. the tax base) and the applicable tax rate of the net gaming revenue remains unclear and largely inconsistent. Hence determination of the value added tax (VAT) and withholding tax (WHT) on winnings, payments made to foreign partners, etc.is problematic. This is in addition to the fact that these taxes are circumstantially collected by both Federal and State authorities.
Physical and Cyber Insecurity
Nigeria has long been plagued by the bane of insecurity and this has been a major mitigating factor to its young and budding gaming industry. Investors know better than to invest in a country where assets form part of the risked capital. Beyond this, the Nigerian cyberspace has also been exposed to attacks of significant importance lately. The cumulative effect of this interaliais a lack of confidence in the e-platforms of these operators by the punters which consequently reduces participation in the industry.
Economic, Financial and Monetary Policies
Nigeria’s economic and monetary policies has over time being relatively inconsistent. This has been translated in multiple economic recessions within short periods of times, fluctuation of the value of the Nigerian Naira and slow growth of the economy. The effects of these factors which are very well evident even beyond the gaming industry is a decrease in foreign direct investments.
Prevailing Religious and Moralistic Ideologies
Christianity and Islam which are the major religions in Nigeria condemn the game of chance hence discouraging their respective adherents from the practice of gaming. Corroboratively, the average moralistic Nigerian considers gaming an immoral act premised on its addictive nature. This has over the years militated against the industry from achieving its full potential even with the existence of a very large market.
Inefficient Management of some Operators
Efficient management is always central in the determination of the prospects of whatsoever undertakings. In the instant, the inefficient management of some licenced operators within the industry mitigates its development. This is particularly pronounced in Nigeria given the evolutionary trajectory of the industry. Hence, operators still hold on to the traditional way of doing things in a fast paced and changing world.
Conclusion and Recommendations
Given the huge potentialities of the industry, the least carefully thought out effort is most likely to yield impressive results. The following are recommended for the improvement of the gaming industry:
- An overhaul of the regulatory environment with the institution of a more efficiency driven framework to comprehensively address the problem of licencing, taxation and the overlap of regulatory authorities.
- Enhancement of the security apparatus of the country is strongly recommended in as much as an improvement in the sector and beyond it is envisaged in Nigeria. Additionally, the operators as well as the government have to sufficiently prove to the participants that the cyberspace and the online gaming platforms are relatively safe to handle their transactions.
- A revaluation of the Naira will also be beneficial to the gaming industry given that the sourcing of capital goods by operators is for the most part from abroad. Thus if the Naira appreciates in value, these capital goods would become relatively cheap.
- Operators should ensure that the management of their operations are entrusted in capable and efficient hands and that the management structure is relatively good.
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