NITDA BILL 2021: Nigeria’s proposed technology act seeks to introduce levies, licensing fees, and sentencing for tech companies
The Nigerian Information and Technology Development Agency (NITDA) is proposing amendments to its regulatory Act which will give the agency more control over Nigeria’s budding technology ecosystem.
First enacted in 2007, the Nigerian Information Technology and Development Act lists out the functions of NITDA, a framework for the agency, as well as guidelines for the performance of the listed functions. The proposed amendments, however, will seek to regulate the activities of tech companies in Nigeria, listing out provisions for registration, fees, and even sanctions.
According to NITDA Director-General, Mallam Kashifu Inuwa Abdullahi, the amendments are crucial for the agency to keep up with the accelerating changes in the global IT ecosystem. The DG also affirmed that the amendments are imperative if Nigeria is to secure a place in the emerging global digital economy.
While the announcement was made earlier this year in March, a recent leak of the proposed amendments has many ecosystem players questioning the true motives of the agency and its policymakers.
What’s included in the NITDA amendment bill?
The proposed bill includes standard provisions which list out the duties and obligations of the agency, the crux of which is to create an impartial and independent regulatory framework for the development of the Nigerian information and technology sector.
Debatable parts of the bill, however, are contained in Sections 6, 13, and 22.
Section 6 authorizes NITDA to issue new licenses for the companies seeking to provide information technology and digital services in Nigeria.
Sub-section 5 also provides that the agency may fix license charges and “collect fees and penalties” that are necessary for the agency to carry out its duties.
New levies for tech companies in NITDA bill
In line with fees and charges, Section 13 of the proposed Act also provides for the establishment of the National Information Technology Development Fund which will be funded by grants-in-aid, fees, gifts, and levies.
An important part of the section, listed in sub-section 2a, provides that all companies with an annual turnover of ₦100,000,000 ($243,831), would be required to pay 1% of their profit before tax as levies. This will be in addition to the hefty 30% company income tax all profit-earning companies which include tech startups, have to pay.
While the 2007 Act does contain a similar provision, most tech companies were excluded from the levy as they were not part of the categories listed under the act. The Third Schedule, under the proposed Act, includes categorizations for e-commerce companies, foreign digital platforms targeting the Nigerian market, and fintechs.
Offences are punishable with fining and imprisonment
Another thing the proposed amendments have in common with the present 2007 Act, is the imposition of both fining and imprisonment for offences under the Act.
Under Section 22, offences under the Act include non-payment of levies, punishable with a 0.5% increase in the assessed sum per lapsed day.
Failure to adhere to directives issued by the agency also attracts a fine of ₦3,000,000 ($7,315) for individuals and ₦30,000,000 ($73,149) for corporate bodies. This is a far cry from the 2007 Act which listed out lesser fines for the same offence: ₦200,000 ($487) for individuals, and ₦500,000 ($1,219) for corporate bodies.
The severity of these fines has been highlighted in ongoing conversations because they will apply to tech start-ups if the amendments pass.
Of the $1 billion raised by African start-ups in the first half of 2021, Nigerian startups account for at least $300 million of it, an amount that’s double the total amounts raised in H1 2018 and H1 2019 combined.
Many key players in the Nigerian tech ecosystem, who are rightfully concerned, have proposed that the amendments, particularly sections dealing with fines and fees, are the government’s way of getting a slice of the proverbial pie.