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E-commerce in Nigeria: Legal framework and Challenges.
“E-commerce is a powerful means to connect the unconnected to global trade” Arancha Gonzalez
What is E-Commerce?
Electronic commerce (e-commerce) is the process of buying and selling tangible products and services online[1] E-commerce relies on technology and digital platforms, including websites, mobile apps, and social media to make trade possible.[2] It is part of the greater industry known as electronic business (e-business), which involves all processes required to run a company online.[3]
Types of E-commerce
E-commerce operates in different types of market segments. There are six major models for conducting e-commerce today namely:
Legal Framework of E-Commerce in Nigeria
Nigeria has made efforts to establish a legal framework for e-commerce, with several key regulations and initiatives in place:
Companies and Allied Matters Act 2020: This Act provides for the incorporation, registration, organization, and management of corporate organizations, including online businesses.[12]
National Information Technology Development Agency Act (NITDA): Following the coming into force of the National Information Technology Development Agency Act, 2007 (NITDA Act) e-commerce regulations now fall under the scope of authority of the National Information Technology Development Agency (NITDA).
The NITDA Act established the NITDA as the regulatory body responsible for the development of the framework of rules for the governance and monitoring of the exchange of data and conduct of transactions online.[13]
Nigerian Communications Act, 2003: The Act established the Commission to regulate telecommunications services, including aspects related to e-commerce, such as online transactions and data protection. This act regulates electronic commerce, protects consumers, licenses e-commerce service providers, and establishes dispute resolution mechanisms.
The Federal Competition and Consumer Protection Act (FCCPA): In 2018, the FCCPA established the Federal Competition and Consumer Protection Council to develop and promote fair, efficient, and competitive markets in the Nigerian economy and to also facilitate access by all citizens to safe products and secure the protection of rights for all consumers in Nigeria.[14]The Federal Competition and Consumer Protection Council is a Federal Agency under the Federal Ministry of Trade and Investment that is responsible for competition and consumer protection in Nigeria. It was set up to protect the rights of consumers.
Section 17(a) of the Act provides that “The Commission shall be responsible for the administration and enforcement of the provisions of this Act and any other enactment with respect to competition and protection of consumers[15];
Section 17(b) of the Act provides that the Commission shall initiate broad-based policies and review economic activities in Nigeria to identify anti-competitive, anti-consumer protection and restrictive practices which may adversely affect the economic interest of consumers and make rules and regulations under this Act and any other enactment with regards to competitions and protection of consumers[16].
Consumer Protection Council (CPC) Act, 1992: The CPC Act establishes the Consumer Protection Council, which is tasked with protecting consumers from unfair trade practices, including those prevalent in e-commerce.
Section 2(a) of the Act provides that “The Council shall have the power to provide speedy redress to consumers complaints through negotiations, mediation and conciliations.[17]”
Section 2(b) of the Act provides that “The Council shall seek ways and means of removing or eliminating from the market hazardous products and causing offenders to replace such products with safer and more appropriate alternatives[18];
Section 2(c) of the Act provides that the function of the council shall be to publish from time to time, list of products whose consumption and sale have been banned, withdrawn, severally restricted or not approved by the Federal Government or foreign governments[19];
Section 2(d) of the Act provides that “The Council shall cause an offending company, firm, trade, association or individual to protect, compensate, provide relief and safeguards to injured consumers or communities from adverse effects of technologies that are inherently harmful, injurious, violent or highly hazardous[20].
Cybercrime (Prohibition, Prevention, etc.) Act, 2015: This legislation addresses cybercrimes and online fraud, providing measures to protect consumers from fraudulent activities on e-commerce platforms. The Act prohibits fraudulent online transactions, including those conducted through e-commerce platforms. Section 13 of the Act criminalizes obtaining unauthorized access to computer systems, networks, or electronic devices with the intent to commit fraud.[21]
Finance Act, 2023[22]: This Act is a pivotal legal framework for regulating e-commerce. With the rise of digital platforms and online transactions, the Act has been instrumental in addressing the challenges posed by the digital economy. It ensures that both local and foreign e-commerce businesses are subject to Nigerian tax laws, requiring them to comply with VAT and corporate income tax obligations. Through provisions such as the taxation of non-resident companies offering digital services, the Finance Act brings clarity to the tax treatment of cross-border digital transactions, ensuring that Nigeria benefits from the growing e-commerce sector[23]. This legal framework not only fosters accountability but also levels the playing field between local businesses and global digital service providers, ultimately supporting the government’s efforts to modernize revenue collection in the face of a rapidly evolving online marketplace.
Central Bank of Nigeria’s Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria 2019:
The Central Bank of Nigeria (CBN) issued the “Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria 2019” to provide guidelines and standards for electronic payments and collections across various sectors, including e-commerce. This regulation encompasses provisions that impact online businesses and e-commerce activities in Nigeria. Some key provisions related to online business and e-commerce include: [24]
The Electronic Transaction Bill, 2023 (SB. 94): This Bill was sponsored by Senator Saliu Mustapha (Kwara Central). It seeks to provide a legal framework for conducting transactions using electronic or related media in Nigeria. This bill also focuses on protecting the rights of consumers and other parties involved in electronic transactions, as well as facilitating electronic commerce in Nigeria[25].
A key focus of the bill is the recognition of electronic documents, signatures, and records as legally valid, supporting the shift towards digital transactions in various sectors. It also outlines measures to ensure data security and privacy, enhancing trust in online transactions and protecting consumers’ interests.
Although the bill represents a significant step toward modernizing Nigeria’s legal infrastructure for e-commerce, it has not been enacted into law, as it is still undergoing the legislative process[26].
Legal Challenges Associated with E-commerce in Nigeria
Despite the growth of e-commerce in Nigeria, navigating the legal landscape presents various challenges for businesses operating in this sector. Some of these key legal challenges include:
Addressing these legal challenges requires proactive measures, including legal advice from experts, ongoing compliance monitoring, and continuous adaptation to evolving regulatory frameworks. By navigating these challenges effectively, e-commerce businesses can mitigate legal risks and thrive in Nigeria’s digital economy.
Safeguards for E-commerce Users
Conclusion
In conclusion, while e-commerce in Nigeria faces various challenges, including regulatory complexities and infrastructural limitations, the prospects for growth and development are significant. By addressing these challenges through collaboration between stakeholders and policymakers, Nigeria can harness the full potential of e-commerce to drive economic growth, create employment opportunities, and improve access to goods and services for its citizens
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[1] Andrew Bloomenthal (29th March, 2024) “E-commerce Defined: Types, History, and Examples” INVESTOPEDIA https://www.investopedia.com/terms/e/ecommerce.asp Accessed on 12/04/2024
[2] Christiana Jolaoso (7th September, 2023) “What is E-commerce? Definition, Types& Getting started” FORBES https://www.forbes.com/advisor/business/what-is-ecommerce/ Accessed on 12/04/2024
[3] Darren Dematas (28th March, 2024) “What is E-commerce” ecommerceCEO https://www.ecommerceceo.com/learn/what-is-ecommerce/ Accessed on 12/04/2024
[4] BLOOMIDEA “Types of e-commerce” https://bloomidea.com/en/blog/types-e-commerce Accessed on 12/04/2024
[5] SEMRUSH TEAM “6 Types of E-commerce: Business Models, Marketing, and More” https://www.semrush.com/blog/types-of-ecommerce/ Accessed on 12/04/2024
[6] BLOOMIDEA “Types of e-commerce” https://bloomidea.com/en/blog/types-e-commerce Accessed on 12/04/2024
[7] https://www.semrush.com/blog/types-of-ecommerce/
[8] BLOOMIDEA “Types of e-commerce” https://bloomidea.com/en/blog/types-e-commerce Accessed on 12/04/2024
[9] Ibid.
[10] Oksana Yakovlieva (5th March, 2022) “Types Of Ecommerce Businesses: What Model Is Right For Your Online Business?” ELOGIC COMMERCE https://elogic.co/blog/types-of-ecommerce-businesses-what-model-is-right-for-your-online-business/#:~:text=B2A%20(business%2Dto%2Dadministration,they%20are%20secure%20for%20users. Accessed on 12/04/2024
[11] Ibid.
[12] Section 18 (Companies and Allied Matters Act) 2020
[13] Section 6 (National Information Technology Development Agency Act)
[14] https://starlionlegal.com/2020/10/23/legal-and-regulatory-framework-for-setting-up-an-e-commerce-business-in-nigeria/
[15] Section 17(a) FCCPA (2018)
[16] Section 17(b) FCCPA (2018)
[17] Section 2(a) CPCA (1992)
[18] Section 2(b) CPCA (1992)
[19] Section 2(c) CPCA (1992)
[20] Section 2(d) CPCA (1992)
[21] Section 13 Cybercrimes (Provision, Prevention, Etc) Act, 2015
[22] Finance Act, 2023
[23] Section 16(3) of the Finance Act, 2023
[24] CBN circular “REGULATION ON END-TO-END ELECTRONIC PAYMENT OF SALARIES, PENSIONS & OTHER REMITTANCES, SUPPLIERS AND REVENUE COLLECTIONS IN NIGERIA” https://www.cbn.gov.ng/out/2019/psmd/circular%20and%20guideline%20on%20e-payment.pdf Accessed 18/04/2024
[25] A BILL FOR AN ACT TO FACILITATE THE USE OF INFORMATION IN ELECTRONIC FORM FOR CONDUCTING TRANSACTIONS IN NIGERIA AND FOR CONNECTED PURPOSES, 2023 (SB. 94) 11142.pdf (nass.gov.ng) Accessed 30/9/2024
[26] FEDERAL REPUBLIC OF NIGERIA NATIONAL ASSEMBLY (BILL TRACKER) https://nass.gov.ng/documents/bill/11142 Accessed 30/9/2024
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