Introduction

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 have over the years formed the bedrock of its economy. Hence, against other constituent sectors of Nigeria’s economy, the gaming industry stands tall and also promises to be a big contributor to Nigeria’s economy shortly. However, a whole lot of factors mitigate its development and threaten its prospects, chief among them being its regulatory frameworks, which over the years have remained very complex. This article attempts an exposition of the prospects and challenges of the Nigerian gaming industry against its complex regulatory frameworks to determine 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 the concurrent, overlapping, and incoherent exercise of jurisdiction by both the federal and state governments alike. These complexities have arisen due to the varying nature of the 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-odds betting, casino gaming, non-casino gaming, and all such matters pertaining thereto.

While the Constitution of the Federal Republic of Nigeria is 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 other characteristically closely related elements have 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 lotteries, among other incidental elements forming parts of the industry, and the existence of both federal and state-based legislation on the subject matter as part of existing regulatory frameworks.

A thorough examination of the existing body of laws, both at the federal and state levels, as well as case law, is required in determining appropriate and legal regulatory authorities for the industry. Against this background, the principal body of legislation 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 2007 which regulates the operation of the national lottery; the Pools Betting and Casino Gaming (Prohibition) Act, which unsuccessfully attempts to prohibit the establishment, licencing, and combined operation of any pool 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 Nigerian territory, a At the sub-national (state) level, various legislations abound, among which are the Casino and Gaming Regulatory Authority Law and the Lagos State Lottery Law (as amended) 2008, all applicable to Lagos State, and the Anambra State Gaming Law, 2005, applicable to Anambra State.

Hence, for ease of application 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 a lottery and which shall be 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 license has been issued and to which members of the public authorized 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 Authority Law applicable 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 the ruling of 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 pool 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 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, pool 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 of the court's ruling seems to confer exclusive jurisdiction over the whole of the gaming industry on state governments. However, a comprehensive consideration of the ipsissima verba of the Court shows that "pools betting and casino gaming" and not lottery or gambling in its general sense was 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 of the National Lottery Act, 2005 (an Act of the National Assembly), has long had regulatory and oversight authority over the national lottery as part of the gambling industry in Nigeria. Its functions include, inter alia: the regulation, setting of standards, guidelines, and rules; the promotion of transparency, propriety, and integrity; and the protection of the interests of players, stakeholders, and the public in the operation and business of the national lottery in Nigeria. In carrying out its broad responsibilities, 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 a licence to operate a national lottery or any lottery by whatever name called. This is under 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 licence by the President. Furthermore, the licence granted is subject to the general terms and conditions set out in the National Lottery Act and any incidental ones to be set by the President for specific licensees. Hence, in the event of a breach of the set terms, the licence thus granted may be revoked by the President upon satisfaction of the conditions set out in Section 21 of the NLA.

Parallelly, state-based lotteries are overseen by regulatory bodies established by applicable laws in the corresponding states. Noteworthy in this respect is the Lagos State Lotteries Board, established by dint of Section 1 of the Lagos State Lottery Law, (as amended in 2008), which regulates the gaming industry in Lagos State. Its functions, as outlined in the comprehensive and articulate provisions of Section 9 of its establishing law, include, among other things, advising the Governor on licence issuance; ensuring propriety and compliance with laid down regulations in the industry within Lagos State; protecting the interests of every participant in the industry; ensuring maximum productivity in the industry; granting specific licences to certain types of operators; and doing all such things as the Governor may require.

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), which 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 states in Nigeria, states with no such institutions have their Internal Revenue Services (IRS) regulate the sector; hence, amongst others, the Edo State Internal Revenue Services (EIRS) regulates the gaming industry within the territories of Edo State.

With regards to pool betting and casino gaming as being 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 pool betting in Lagos State, having been transferred from the Lagos State Ministry of Finance in 2016; this regulation had previously been saddled with 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 was estimated at 195.5 million persons in 2018, with a corresponding fertility rate of 5.46 births per woman, a life expectancy value of 53.95 years, and a consequent annual growth rate of 2.6%. This is a great market for the gaming industry, and by extension every economic activity in general. This population factor has driven significant foreign direct investment into the country over the years.

Increase in Foreign Direct Investments

A number of foreign investors have 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 such partnership is that of NaijaBillionaire and Lightmaker Lotto, which offer payment solutions, and Indus Net Technologies, which develops and provides 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. The realisation 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 have 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 increased transparency, accountability, and propriety in the sector, investors are willing to stake more, and punters are more confident in their bets. At the state level, the various bodies responsible for the regulation of the industry in their specific states have also been instrumental. The Lagos State Lotteries Board in this respect has particularly stood out.

Increase in technology

The twenty-first century's technological advancements have had an impact on Nigeria's gaming industry. 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 betting shops, but an increasing number of customers were placing bets online.

The Nigerian Culture

Nigerians are naturally sport-loving, and as such, betting on sports 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 toward betting. This prevailing practise bespeaks a potential thriving market.

Professional Third-Party Involvements

The recent entrance of professional third-party service providers, such as network service providers, commercial banks, consulting firms, etc., through a 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 for the gaming industry in Nigeria, despite the immense potential that the industry regurgitates. The overlapping directives, processes, and procedures of these regulatory authorities at state and federal jurisdictional levels create an undue systemic inefficiency and impose additional restraints on the potential investor, the actual investor, and every other player in the sector.

Tax Regime and Double Taxation

The multiplicity of regulatory authorities with 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 remain unclear and largely inconsistent. Hence the 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 substantially 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 for 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, Nigerian cyberspace has also been exposed to attacks of significant importance lately. The cumulative effect of this, inter alia, is a lack of confidence by the punters in the e-platforms of these operators, which consequently reduces participation in the industry.

Economic, Financial, and Monetary Policies

Nigeria’s economic and monetary policies have, over time, been relatively inconsistent. This has resulted in multiple economic recessions in short periods, fluctuation in the value of the Nigerian Naira, and slow economic growth. The effect 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 two major religions in Nigeria, condemn the game of chance, hence discouraging their adherents from the practise of gaming. Corroboratingly, the average moralistic Nigerian considers gaming an immoral act premised on its addictive nature. This has over the years prevented 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 to determining the prospects of whatever undertakings there are. In the short term, the industry's development is hampered by the ineffective management of some licenced operators. 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:

1. An overhaul of the regulatory environment with the institution of a more efficiency-driven framework to comprehensively address the problems of licensing, taxation, and the overlap of regulatory authorities.

2. Enhancement of the security apparatus of the country is strongly recommended, in as much as an improvement in the sector goes beyond what is envisaged in Nigeria. Additionally, the operators as well as the government have to sufficiently prove to the participants that cyberspace and online gaming platforms are relatively safe to handle their transactions.

3. Because the majority of capital goods purchased by operators are imported from abroad, a revaluation of the naira will also benefit the gaming industry. Thus, if the naira appreciates, these capital goods would become relatively cheap.

4. Operators should ensure that the management of their operations is entrusted to capable and efficient hands and that the management structure is relatively good.