A brief review of the 2007 NITDA Act, the leaked bill & what it could mean for the Nigerian tech ecosystem.
It is an undeniable fact that Africa has one of the fastest growing tech markets in the world. Against all economic odds, the tech industry especially in Nigeria is booming day by day.
This growth can be attributed to the solution oriented approach that the tech sector applies. Where there was a gap in the public education system, edutech startups came to the rescue, where there was distress in the transportation sector, mobility and logistics startups became their knight in shining armour. Health startups are offering innovative healthcare solutions while fintech startups are looking to simplify traditional financial services. These industries among others have shown that the possibilities are indeed endless.
In Nigeria, statistics reveal that in 2001 when the National Information Technology Development Agency (NITDA) was established [the body responsible for the coordination, monitoring, evaluation and regulation of IT practices in Nigeria through subsequent regulatory guidelines and policies], the ICT sector in Nigeria grew from less than 1 percent of GDP to almost 10 percent of GDP in 2018. This growth spurt has prompted NITDA to consider a review of the 2007 Act in order to align with the accelerating changes in the tech ecosystem in Nigeria. The Director General of the NITDA, Kashifu Abdullahi expressed that this will enable Nigeria to keep up with the global pace of the tech ecosystem worldwide.
As a startup founder, an angel investor, a venture capitalist or a tech enthusiast/entrepreneur, the importance of staying informed about policies concerning the tech sector cannot be over emphasized. One second, you're sleeping on your well-made bed, in your comfortable house, and the next second you could be sleeping on that same bed but in the middle of the ocean, faced with two options, to sink or to swim?
The recent leak of an amendment to some of the provisions of the National Information Technology Development Agency (NITDA) Act, 2007 led to this article; with our intention to highlight some significant similarities and differences, if any. Thanks (or no thanks?) to the leaked bill, we might have a glimpse at what the new NITDA Act could be.
From a bird’s eye view, the current Act and the proposed bill for its amendment don’t appear vastly different. In the NITDA 2007 Act and the leaked bill, the Federal Inland Revenue Service (FIRS) still has the duty to assess and collect a levy of 1% of the profit before tax of companies and enterprises with an annual turnover of N100,000,000 and pay into the National Information Technology Development Fund. Any company that fails to pay this levy is still liable to pay a fine or imprisonment or both depending on the peculiar circumstances. These provisions among a few others remain unchanged.
However, when you zoom in on other provisions, you’d notice some significant changes.
First, the functions of the agency increase from a bulky list of 14 responsibilities to an even bulkier list of 24. This may suggest that the Agency is gearing up to be more active if the leaked bill is passed to law. Among such functions is that the agency can “enter premises, inspect, seize, seal, detain and impose administrative sanctions on erring persons and entities who disobey any provision of the Act. (Section 6 of the leaked bill).
Also, contrary to the old law, Section 20 and 21 of the leaked bill, empowers the Agency to make regulations relating to licenses and authorisations for operators in the IT sector. These licences have been categorized into product license, service provider license and platform provider license. This seems to imply that no person or company in the IT sector can operate without a licence or authorisation. The agency is also expected to fix licensing and authorisation charges, collect fees and penalties as may be necessary for the exercise of its functions.
Thirdly, in the leaked bill, we notice an update on companies eligible to pay the 1% levy. The current Act outlines only 5 categories, the leaked bill adds 7 more categories.
Any of the above mentioned categories of companies that fail to pay will be sanctioned. Under both laws, first time offenders are liable to a minimum of one year imprisonment or a fine of N200,000 ($485.55), or both. Then, subsequent offenders are liable to a minimum of 2 years imprisonment, a fine of N500,000 ($1,213.89) or both.
The leaked bill also deters non compliance with its general provisions. Any defaulting individual or company would be fined a minimum of 3 Million Naira ($7,283.82) or face 1year imprisonment and a minimum of 30 Million naira ($72,832.21) or two year imprisonment (for the principal officers) respectively.
Other notable provisions under the leaked bill include encouraged use of tech platforms in rule making processes, administrative redress process even in dispute resolution. It also provides for the establishment of a Digital Infrastructure and Service Provision Company, Galaxy Backbone, Although the bill doesn’t clearly state what its role will be, Galaxy Backbone, according to its website, was set up to deliver technology services to public sector agencies and institutions.
On a final note, it’s important to reiterate that these provisions are not legally binding until it is passed into law by the National Assembly. Word on the street is that there is a forthcoming Nigerian Startup Bill that will help to heal the wounds and accommodate the growth potential of tech startups in Nigeria. In fact, the website is live and it has a section where key stakeholders and the general public can contribute to the content of the bill so as to properly capture the real interests of operators in the tech ecosystem. However, based on the hierarchy of laws in Nigeria, an Act supersedes a bill. This means that if a bill provides for something that is contrary to the Act, the provisions of the Act will prevail. This is why it’s important for the NITDA Act and the Startup Bill to be in alignment.
Tech is the future and it is critical that the laws create an enabling environment for the tech ecosystem to spread its wings and soar.