2019 was a good year for the motorcycle ride-hailing industry. Gokada and Max.ng, two of the major players in the sector, had just completed fundraising rounds and were ready to expand the sector going into 2020. Bold statements and bright projections of purchasing new bikes and training more riders were made, but all these plans fell flat when the Lagos state government banned motorcycles in select areas in the state effectively strangling the nascent industry. This was the first in a series of harsh regulatory policies aimed at the start-up and technology sector of the country.
Government regulation is essential in any economy; it guides the way businesses operate and ensures free and fair competition between companies, like a neutral referee officiating a football match. Nigeria has the highest number of startup companies on the continent and is supported by a large talent pool and increasing mobile phone penetration and reduction in data prices have found innovative solutions to unique problems leading to the creation of a vibrant technology sector. However, strict government policies are making it difficult for these companies to survive and thrive.
On February 5, 2021, the Central Bank of Nigeria (CBN) issued a statement ordering all financial institutions to stop facilitating cryptocurrency transactions and to cease transactions with entities trading in cryptocurrency. This slowed the growth of cryptocurrency in the country which had previously been on an upward trajectory. This was followed by the controversial indefinite Twitter ban after the microblogging site deleted a tweet by President Muhammadu Buhari, which threatened protesters, for violating its abusive behaviour policy. Other policies include the freezing of the accounts of investment platforms like Bamboo and Risevest and the pressure to shut down Aboki Fx the mobile-based platform which used to publish black market exchange rates.
The Nigerian government is unrelenting but seeks to double down and further expand its control of the technology industry with a proposed amendment of the National Information Technology Development Agency (NITDA) Act which has raised a lot of concerns. A leaked version of the bill states that tech companies regardless of their size would need to be licensed by NITDA to operate in Nigeria, pre-tax levies for companies making an annual turnover of 100 million Naira, and strict punishment for companies who contravene the act.
The government has touted these initiatives as being in the best interest of the country. The CBN stated that it banned cryptocurrency because of its unregulated nature and its increasing use by criminal elements. ‘The very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.‘ The Minister of Information Lai Mohammed in the statement announcing the suspension of Twitter cited the persistent use of the platform in ‘activities undermining the corporate existence of the country,’ as the reason for the ban.
However many Nigerians view the actions of the government as a retaliation for the instrumental role Twitter and the tech sector played in the EndSARS protest of 2020. Jack Dorsey the CEO of Twitter actively supported the protesters and Twitter was the primary site from which the protests were organized and donations were raised. And after the accounts of the Feminist Coalition, a women-led organization coordinating the protest was blocked, cryptocurrency was still used to raise funds.
The consequences of the harsh regulatory policies are already being felt as Twitter opted to open its African office in Ghana instead of Nigeria citing the freedom of speech, online freedom, and open internet in Ghana as the reason for its decision. Also Patricia the leading cryptocurrency company in the country has moved its headquarters to Estonia after the crypto ban. According to Fejiro Hanu Agbeodje the CEO of Patricia, ”regulation is one of the biggest challenges facing the company, every other challenge we can handle, we can find our way around but regulation is something that first of all reduces the trust of the public. If regulation can be handled we would thrive.”
In 2019, Nigeria ranked 131 out of 190 on the World Bank ease of doing business index, which measures the ease of doing business through a relative assessment of a country’s regulatory conditions, and is one of the determining factors for investment in a country. If the government maintains its strict and erratic regulatory posture this could lead to a drop in the ranking and reduction in foreign direct investment as investors value reliability and consistency in government policy.