The Great Gaming Gamble: Nigeria's Regulatory Revolution Rocks Industry

Several weeks after the Supreme Court's landmark nullification of the National Lottery Act and the restriction of National Lottery Regulatory Commission (NLRC) to Federal Capital Territory (FCT), the entire Nigerian gaming landscape is poised for a dramatic shift. The nature of the shift is considered victorious for the likes of Federation of Gaming Regulators of Nigeria (FSGRN)- the association responsible for spearheading this fight. But for gaming experts like Harrison Ehiaguina, this dramatic shift has not only opened the door to confusion, but launched the exit door for the potential capital flight of investors and the significant slowdown of market expansion: 

"The supreme court ruling is overturning established gaming laws which have been in place for years. Numerous investors came into Nigeria knowing that with the NLRC license, they could operate in any state in Nigeria - as long as they were operating online. Such judicial action causes a sense of uncertainty, particularly for investors who rely on a stable regulatory framework," Ehiaguina told SportsBoom.com. 

We have operators who have just obtained their licenses that are now null and void and this could disrupt everything leading them reevaluate their decisions and seek other options like South Africa or Ghana that have stable gaming laws. It may cause disruption to the operators as well.

The Director General of the Oyo State Gaming Board, Olajide Boladuro, begs to differ. He sees this as a bottomless pit of opportunities for Oyo state in particular and the Nigerian Gaming Industry in general. Boladuro explains that this federation has reached a consensus whereby operators who seek to obtain new gaming licenses through the umbrella, would enjoy the benefit of having that license valid in all the member states under the federation. He further projects a revenue increase of 20-30% for Oyo state as a result of this judgment, as opposed to the negligence which the state was subjected to under the regime of the NLRC in the past:

"In the past, we had operators that operated online and were aligned with the proscribed NLRC, because the commission portrayed itself as the federal body which had the right to legitimize and license the operators. Those operators operated within the Oyo state airspace in spite of not  being licensed there. Oyo state citizens staked on their websites and the painful part is that we were getting zero revenue from them. I won’t mention names, but a particular online sports betting company which happens to be the biggest in Africa and Nigeria falls under this category. All efforts to communicate with them fell on deaf ears, but with this historic judgment, we stand to gain and not to lose as a state in the long run."

Harmonization with other states of the FSGRN

The FSGRN may come across as more utopian than practical from an observer's point of view. For instance, questions about how the revenue to purchase licenses would be distributed amongst the member states could come up as well as leadership questions. However, Boladuro explains that regular stakeholder meetings, shared standards of licensing, taxation and compliance are all indicators that the federation’s “laws are going to be in alignment under one umbrella and it will speak with one voice.’’

Speaking with one voice might not be far from the truth, as the Director General of the Lagos State Lotteries and Gaming Authority (LSLGA), Bashir Are, reiterates Boladuro’s stance on harmonization:

"With the federation of state gaming regulators, we make use of self- regulation. We seek to ensure that the standard is the same across the board, we advise ourselves, go to training and attend conferences. This industry is a global one and for that reason we follow the best standards and incorporate innovations, emerging technologies, etc. We have all these in place and we are sharing it with our counterparts across states."

Without question, Lagos state is at the forefront of this federation. It has taken 23 states under its wings and plays the role of the big brother in the regulation of the Nigerian gaming industry. However, some concerns might be raised about the likelihood of the student surpassing the master, as Lagos state guides other member states. Are doesn’t share that concern. Instead, he deems this gesture of the LSLGA as one which builds and protects the industry:

"For me it's important for Nigerians at every respective state - to not only look at this as an industry where people become punters, but as one where products can be developed locally and can compete on a global scale. We want to put our platform providers across the globe to where our youth can develop games where they can earn foreign currency for the country and for themselves."

The need for a departure from sidelining operators

From the start of 2024, sports betting operators have complained that they have been subjected to numerous changes like tax regimes and shifts in the industry for which they have had little or no say, but are simply expected to comply and adjust. If the gaming industry is expected to thrive in Nigeria, operators and gaming experts calling for inclusion in the decision-making process can no longer fall on deaf ears. 

Ehiaguina recommends that in order for the state regulators to adequately fill the vacuum which has been brought on by the restriction of the NLRC, the various states in which gaming takes place need to adopt of a localized approach:  

"I think what states can do to step up is to tailor their regulations. They may craft rules that align with local / cultural norms, incorporate social attitudes towards gaming. By taking a localized approach, it could lead to better targeted and effective governance. Other steps include the enhancement of monitoring capabilities and imposition of rules towards licensing requirements to ensure compliance with operational standards. States could also consider performing compact and regional agreements to harmonize regulations across borders particularly for online gaming. Gaming could also be used as a tool for economic development- directing their revenues towards infrastructure."

The FSGRN is actively working towards Ehiaguina’s recommendations by harmonizing gaming regulations across all 24 member states of the federation. For now, the timeline for the implementation of the federation’s operations remains uncertain, but Boladuro assures all gaming stakeholders that it won’t take too long: 

"I can't give you a specific timeline, but we are actively working round the clock to actualize this revolution and it won't be too long before it’s implemented. As a federation we will ensure that we engage in dialogue with our operators and come to a compromise so that it’s a win-win situation for the regulators and the operators."

The gray areas about the Supreme court ruling and the FSGRN

No matter how confident and assuring the FSGRN appears to be, gaming operators and their legal representatives are wondering if the supreme court judgment is one which the gaming industry could regret. 

A legal representative of one of the top sports betting companies in Nigeria, who pleaded anonymity raised a number of concerns and questions. The legal representative wonders why the supreme court judgment has not been made public almost one month since it was announced- operators cannot make decisions based on media publications, so why the delay in making the copy of the judgment public? 

While Boladuro and Are seek to boost the confidence of sports betting operators by stating that all 24 states which fall under the umbrella of the FSGRN will operate under one license, the legal representative asks a crucial question “where is the legal backing for making a centralized license payment, if one of the states decides to leave the federation?”

The representative is equally concerned about the high cost of obtaining a gaming license and thinks it could serve as a deterrent to new players who don’t have the same financial capacities as the top sports betting companies in Nigeria. Another huge concern of the representative is the 18% tax on the monthly Gross Gaming Revenue (GGR), which the FSGRN is proposing to collect from operators, as was disclosed  during its last meeting with them in December 2024-  This is more than 3 times the total tax which was remitted monthly to a Nigerian state, the NLRC and the National Lottery Trust Fund (NLRT). 

The legal representative also wonders how the federation could come up with the aforementioned proposal when it is aware of the new 5% excise duty tax and the 5% withholding tax which are scheduled to come into effect at the start of 2025, courtesy of the federal government. The representative makes it clear that the technical providers for gaming platforms are paid in dollars- so how can investors and operators possibly see a Return on Investment (ROI)? 

These are some of the questions and concerns which the FSGRN & the supreme court need to answer and address urgently to demonstrate that the operators are actually being listened to and not just being dictated to. 

Conclusion

In a high-stakes game where regulatory power meets market reality, Nigeria's gaming industry stands at a crossroads that could either crown it as Africa's next gaming powerhouse or deal it a losing hand. As state regulators celebrate their newfound autonomy and dream of revenue windfalls, operators and investors hold their breath, watching their stable regulatory foundation crumble beneath proposed triple taxation and uncertain interstate agreements. 

The Supreme Court's game-changing ruling has shuffled the deck, but the real question remains: Will the FSGRN's bold vision of a harmonized gaming paradise prove to be the royal flush that revolutionizes Nigeria's gaming landscape, or will it push operators to fold their hands and seek greener pastures in Ghana and South Africa? 

As the clock ticks and the judgment papers remain sealed, billions in investment, thousands of jobs, and Nigeria's digital gaming future hang precariously in the balance – and in this high-stakes poker game of regulation versus market forces, there's no room for bluffing.