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THE REGULATION OF TECHNOLOGY COMPANIES IN NIGERIA – THE PROPOSED NITDA ACT 2021

posted 2 years ago

The National Information Technology Development Agency (NITDA) was created under the NITDA Act 2007 (the “Act”) to implement the Nigerian Information Technology Policy and coordinate general Information Technology development in Nigeria. NITDA, however, recently shared a proposed law with stakeholders titled the National Information Technology Development Agency Act 2021 (the “Bill”) which if enacted would repeal and replace the Act.

In addition to repealing the Act, the bill seeks to establish a framework for mandatory licenses to be obtained by Technology companies from NITDA; expand the regulatory oversight of NITDA; and generally, foster the development of the Nigerian information technology sector and the digital economy. In this article, we have analysed the provisions of the Bill.

  1. Companies to be Regulated

The Bill grants power to NITDA to regulate and license companies involved in digital services, products and platforms. This includes companies that use any digitally enabled system in the provision of service or products; and companies that carry out a business within the information technology space in Nigeria.

  1. Licensing and Registration Requirement

One of the major changes proposed under the Bill is the introduction of mandatory licenses to be obtained by companies regulated by it.  More specifically, it states that operators within the information technology and digital economy sector are to apply and obtain licences and authorisation from NITDA to operate. Furthermore, it provides that companies that fail to obtain the requisite license may be guilty of an offence and subject to a fine of N30,000,000 or imprisonment of its principal officers.

The Bill seeks to create three categories of licenses namely: (i) Product Licence, (ii) Service Provider Licence; and (iii) Platform Provider Licence. The Bill, however, does not clearly state the factors that would be considered by NITDA in determining which of the licenses a company is to obtain.

In addition to issuing licences,  the Bill empowers NITDA to maintain a register of operators within the information technology and digital economy sector and publish the register for the general public’s information.

  1. Tech Companies to be Levied

Similar to the Act, the Bill establishes the National Information Technology Development Fund (NITDF) to be used for advancing the nation’s digital economy objectives and related purposes. The NITDF will be funded by a levy of 1% of the profit before tax of regulated companies, amongst other funding sources set out in the Bill.

It is pertinent to note, that the existing Act already requires certain companies to pay a similar levy to NITDA which was however limited. The Bill now seeks to extend the list of the companies required to pay levies as follows:

i.mobile and fixed telecommunications companies;

ii.information technology, e-commerce companies; (new)

iii.digital platform operators and providers; (new)

iv.foreign digital platforms targeting the Nigerian market; (new)

v.pensions managers and pension-related companies;

vi.banks, financial institutions and companies providing financial services using information technology tools;

vii.insurance companies; and

viii.such other companies and enterprises as determined by regulations from time to time by the Agency (new).

  1. Other Notable Changes

The Bill seeks to empower the NITDA, with support from the Standard Organisation of Nigeria, to develop standard requirements for operators within the information technology space. The Bill also confers a duty on NITDA to regulate amongst other things, the use of digital signature and digital contracts; and the use of data for business analytics and intelligence.

Conclusion

An Act that seeks to uniformly and fairly regulate the technology sector and startup space in Nigeria would be a welcome development. The Bill appears to be an attempt at achieving this uniformity. This, however, cannot be achieved by NITDA in silos. The effect of a standalone regulation like the Bill is that companies in the tech space in Nigeria would be over-regulated and weighed down with excessive levies and licensing requirements.

To successfully regulate the Tech space, NITDA must work with other regulators such as the Central Bank of Nigeria, the Securities and Exchange Commission, the Nigerian Communications Commission, and the National Insurance Commission to streamline licences, levies and develop regulations that adequately govern the activities of Tech companies without stifling their growth.

In addition to the foregoing, there are certain ambiguous terms in the Bill that should be clarified which includes terms like “operators within the information technology and digital economy”, “foreign digital platforms targeting the Nigerian market” and “digital economy”. Furthermore, the licensing categories to be established by the Bill should be clarified to ensure companies are clear on the licence they are to obtain.

 

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