Nigeria's energy sector witnessed remarkable progress in Q3 2024, showcasing the country's commitment to reshaping its energy landscape. Key developments included strategic partnerships with international energy firms, and the expansion of natural gas infrastructure. The government implemented crucial policy reforms, attracting increased foreign investment. The Firma Advisory contributed significantly by hosting high-level discussions, publishing influential research, and launching capacity-building programs. These advancements, coupled with nationwide energy efficiency initiatives, underscore Nigeria's growing influence in regional and global energy markets. As the country moves into Q4, these achievements set the stage for continued growth and innovation in sustainable energy development.
THE AFRICA ENERGY BANK: CATALYSING GROWTH AND INNOVATION IN AFRICA'S ENERGY SECTOR
Africa’s energy sector is characterized by significant potential and substantial challenges. The continent is rich in natural resources, with vast reserves of oil, gas, and renewable energy sources such as solar, bio-fuel, wind, and hydroelectric power. However, the exploitation and distribution of these sources remain uneven, resulting in widespread energy poverty.
A large portion of Africa's population needs access to reliable electricity. According to the International Energy Agency (IEA), over 600 million people in sub-Saharan Africa alone live without electricity. Rural areas are particularly affected, with access rates significantly lower than urban regions. Infrastructure deficits pose a major barrier to energy development. Many countries face outdated or inadequate energy infrastructure, leading to frequent power outages and inefficient delivery in the energy sector. Additionally, the financial landscape for energy projects is challenging, with limited access to funding and investment.
When you think the checklist of challenges is exhausted, it includes high prices and supply chain disruptions leading to increased cost of importation, scarce investment in new refineries, poor maintenance, and maximizing the capacity of existing refineries, pipelines, storage facilities, and logistics. In addition, there is the high and increased demand for energy products, foreign exchange scarcity in many African countries, and finally the reluctance to make and implement policies to aid the emancipation and optimal usage of the energy sector.
The Nigerian scenario shows the Nigerian Electricity Supply Industry (NESI) struggling with overwhelming challenges and the critical issues plaguing Nigeria's energy sector, particularly unsustainable gas pricing, inadequate pipeline infrastructure, high generation costs, transmission losses, and financial struggles of distribution companies. The domestic base price of $2.18 per Metric Million British Thermal Unit fails to incentivize gas well development, and the 4,335 km pipeline network is insufficient to supply the 19 thermal plants connected to the grid.(2) Generation costs of $1.5 million per MW are exacerbated by the Transmission Company of Nigeria's inability to transmit all generated power, discouraging capacity increases. Distribution companies face technical bankruptcy due to currency devaluation and high lending rates, forcing them to ration electricity to prepaid, cost-reflective tariff customers. Addressing these multi-layered problems requires a comprehensive approach to improve gas pricing, expand pipeline infrastructure, reduce transmission losses, and ensure the financial viability of distribution companies.
Notwithstanding these obstacles, there is growing momentum towards improving the energy sector in African countries. Despite the role oil and gas has and will continue to play in Africa, global efforts to transition to alternative sources have created a significant investment gap worldwide. In recent years, fossil fuel funding has declined rapidly, while IOCs divest their oil and gas assets, favoring more strategic investments. The International Energy Agency estimates that delivering modern energy to the entire continent will require up to $25 billion in annual spending until 2030, highlighting a significant opportunity for financiers. Investments in renewable energy are on the rise, driven by environmental concerns and the decreasing cost of technologies like solar and wind power. Countries now recognize the need for policy reforms and regulatory frameworks encouraging private sector investment and innovation. International partnerships and initiatives such as the Africa Energy Bank, are vital in addressing these challenges. By providing financing and fostering collaboration, these initiatives aim to enhance energy access, support sustainable development, and drive economic growth across the continent.
STAKEHOLDER ENGAGEMENT ON THE NATIONAL E-COMMERCE POLICY AND STRATEGY (NEPS)
On September 26, 2024, The Firma Advisory, in collaboration with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), facilitated a Stakeholders' Engagement session to discuss the draft of the National E-Commerce Policy and Strategy (NEPS).
This stakeholders’ engagement was organized by the Federal Ministry of Industry, Trade and Investment (FMITI) and the National Information Technology Development Agency (NITDA).
The session brought together key private stakeholders from Nigeria's e-commerce sector, including representatives from companies like Konga, Flutterwave, amongst others, to identify logistical, regulatory, and financial challenges faced by e-commerce players and evaluate the draft policy's effectiveness in addressing these issues.
The session was both interactive and insightful, highlighting the challenges and opportunities within Nigeria's e-commerce landscape.
This collaborative effort aims to develop a robust e-commerce policy that promotes innovation, supports digital transformation and fosters inclusive growth within the sector
EXAMINING THE LEGAL REGIME OF BLOCKCHAIN AND CRYPTOCURRENCIES IN NIGERIA
ABSTRACT
The world is witnessing very fast developments in all spheres of human endeavor and has, in fact, become a global village. These tremendous developments are occasioned by swift and unending growth in technology and part of these developments is the emergence of blockchain technology (BT). As it is in other parts of the world, BT is fast evolving in Nigeria and is fast disrupting the traditional financial system because it has ushered in a new type of currency called ‘digital or virtual currency’, which differs from the traditional currency and is now a subset of alternative currencies. Despite the rapid acceptance of this digital currency in Nigeria, the existence of a legal framework for its provision, adoption, circulation and usage, as an alternative currency, is circumspect. It is against this background that this presentation seeks to explore the genesis of blockchain and cryptocurrencies and their incursion into Nigeria’s financial market and general business environment.
INTRODUCTION
Prior to the invention of money (which is generally accepted as a means of exchange for goods and services, trade by barter was the means through which trading in goods and services were carried out. Goods and services were traded by people for what they needed. This was the order until the Mesopotamians created the shekel as the first known form of currency. Cowrie-shells, whale-teeth, animal skin, and other items from nature were also some of the early forms of currency. Although the use of metal (coin) for money dates back to Babylon before 2000 BCE, it became standardized about the 7th century and it was then made up of a combination of silver and gold. In the 6th century, animal hide was used as currency in ancient Rome, France, Russia and China. China was the first country to create paper money during the reign of Emperor Zhenzong and paper money spread to other parts of the world in the late 18th and early 19th centuries. Despite the modern-day paper currencies, the world over, it is noteworthy that there are other means used in settling commercial activities, including treasury bills, cheques, bills of exchange, et cetera. The information technology industry is rapidly and steadily adding its transformational value, through new discoveries and development of technologies that could be relied upon for businesses to thrive. Online payments constitute one of such technologies, which were introduced to facilitate payment for goods and services, as against the physical exchange of coins and or paper money. As a result of the internet boom and the growth of e-commerce, online payments have become more convenient and accepted, both in the public and private sectors. Another development in the business circle, attributable to information technology, which is gaining tremendous popularity and widespread use, the world over, is digital currencies, otherwise known as “cryptocurrencies”.
DEFINITION OF BLOCKCHAIN AND CRYPTOCURRENCY
Blockchain
Blockchain may be described as a medium to perform data management that allows persons to create and share the public ledger of transactions within a distributed network. It is a network of blocks connected to one another in a precise order, each block containing specific data, such as financial transactions, contractual terms, medical information, et cetera. It can also be described as a system, set-up to record decentralised transactions, in contrast to banks and issuing houses which are centralised authorities.
Blockchain is a distributed ledger that keep a temper proof history of all activities on a network of connected systems. Transactions in a blockchain are grouped in blocks while being cryptographically chained in an approach that is immutable; thus generates a mathematically irrefutable history. Blockchain is driven by the presence of a peer-to-peer networks; Merkle trees, asymmetric key encryption, hash values to list a few; making it possible to store data in several locations and still continually reconcile such data through a shared database. Blockchain generates identical blocks of information across the network; these information cannot be controlled by a single entity thus, eliminating a single point of failure. It also has a secure validation mechanisms for every transactions on the blockchain; utilising sophisticated encryption technology. Transactions are recorded as
temporal and sequential order of occurrence. Previous data on blockchain are immutable yet accessible to users for validation purposes. Updating transactions on blockchain requires the identity verification of the parties involved in the transaction; the updated transactions is also verified by other users. The connection between identities, transactions, and the ledger create transparency; establishing trust on a blockchain network. Thus, making it possible to trace an entity or a transaction’s path from source to sink with remarkable security and transparency.
The Blockchain Process
TYPES OF BLOCKCHAIN TECHNOLOGY
There are basically 4 types of blockchain technology:
Private: This one operates in a private context and is controlled by a single entity. It is run on a small network within a firm or organization and is not open to everyone. The transactions here are faster because it has a smaller number of nodes which shortens the time it takes to verify transactions. You can tailor this type of blockchain to meet your specific requirement. However, the disadvantage here is that it has fewer nodes or members so it is more vulnerable to a security compromise. It is used to track and manage assets and also for internal voting. Private blockchains restrict participation to select members. Private blockchains offer plenty of opportunities such as enhanced privacy, greater control and faster transaction-processing speeds.
Use cases: Internal applications such as logistics, accounting, payroll and sensitive record-keeping.
Public: Public blockchains are the town squares of the blockchain world. It is a permissionless distributed ledger on which anybody can join and conduct transactions. It is non-restrictive and every peer has a copy. Anyone with an internet connection can access the public blockchain. This type of blockchain technology is used for voting during elections to ensure openness. That said, public blockchains have several inherent challenges. They often struggle with relatively slow transaction speed and limited scalability. Due to their highly transparent nature, they may not be appropriate for sensitive business transactions.
Use cases: Trading digital assets, crowdfunding, collecting donations or working on open-source projects.
Hybrid: Hybrid blockchains combine elements of both public and private options. Organizations who expect the best of both worlds (public & private) use a hybrid blockchain. It enables the organization to decide and choose who has access to a certain blockchain data and what data is made public. They can be tailored to different access levels, and therefore offer a balance between the decentralized ethos of public blockchains and the control of private ones. This versatility makes them an attractive option for businesses seeking the best of both worlds. Managing dual aspects of public and private components can be complex and resource-intensive. Establishing protocols and governance strategies that can handle the hybrid nature of these blockchains is a related challenge.
Use cases: Enterprises involved in selective data-sharing. For example, a financial or healthcare organization might use a hybrid blockchain if they need to make certain information publicly auditable while protecting customer or patient confidentiality.
Consortium: Consortium blockchains are a specific type of permissioned blockchain in which a group of organizations share control and governance of the network. Each consortium member typically has equal rights regarding decisions. Compared to a single-entity, private blockchain, these models foster increased trust and security. Consortium blockchains have distinct challenges. Managing consensus and governance across multiple organizations requires significant coordination and, often, compromise. Differences in goals and strategies among members can lead to conflicts or inefficiencies.
Use cases: Secure data sharing, logistics and supply chain management.
CHARACTERISTICS OF BLOCKCHAIN
Decentralization: Decentralization in transaction systems shifts from centralized authorities to peer-to-peer (P2P) blockchain networks, eliminating the need for trust in intermediaries. This paradigm reduces costs and improves efficiency by leveraging blockchain's consensus mechanisms. While there are trade-offs like higher server and energy costs, the benefits of decentralization, such as enhanced security and efficiency, outweigh these drawbacks. Blockchain's consensus algorithms maintain data consistency across distributed networks, rendering third-party intermediaries unnecessary.
Immutable: Transactions undergo validation within a short timeframe, and if miners detect any unauthorized transaction, it will be rejected from inclusion in the blockchain. Once a transaction is added to the blockchain, it becomes immutable, meaning it cannot be deleted or altered thereafter.
Anonymity: In order to preserve anonymity, users can engage with a Blockchain network using multiple randomly generated addresses within the system (Wang et al., 2017). Being decentralized, the Blockchain does not track or record users' private information through a central authority. This trustless environment offers the possibility of a degree of anonymity.
Auditability: In a Blockchain network, transactions are recorded and validated using a digital distributed ledger and timestamp. This enables easy auditing and tracing of previous records if any node in the network is accessed (Yu et al., 2018). For instance, in Bitcoin, it is feasible to systematically trace all transactions, ensuring the audibility and transparency of the Blockchain's data state. However, tracing the origin of money becomes challenging when it passes through numerous accounts.
Cryptocurrency
Cryptocurrency” is a medium of exchange, alternate to paper currency, created and stored electronically (digitally), using encryption techniques to control the creation of monetary units and to verify the transfer of funds. The Central Bank of Nigeria (CBN) defined “cryptocurrencies” as digital or virtual currencies issued by largely anonymous entities and secured by cryptography, cryptography being a method of encrypting and hiding codes that prevent oversight, accountability, and regulation. The International Monetary Fund (IMF) described “crypto-assets” as mere codes that are stored and accessed, electronically. It refers to a wide-spectrum of digital products that are privately issued, using similar technology and same can be stored and traded, using, primarily, digital wallets and exchanges. EU Market in Crypto-assets Regulation (MiCA) defined “crypto-asset” as ‘a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology.
Cryptocurrency is a digital payment system that doesn't rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
Cryptocurrency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and transmitting cryptocurrency data between wallets and to public ledgers. The aim of encryption is to provide security and safety. The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today. Much of the interest in cryptocurrencies is to trade for profit, with speculators at times driving prices skyward.
How Does Cryptocurrency Work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders. Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins. Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets. If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party. Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
TYPES OF CRYPTOCURRENCY
There are thousands of cryptocurrencies. Some of the best known include:
Bitcoin: Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown.
Ethereum: Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
Litecoin: This currency is most similar to bitcoin but has moved more quickly to develop new innovations, including faster payments and processes to allow more transactions.
Ripple: Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrency. The company behind it has worked with various banks and financial institutions.
Quidax, an African-founded cryptocurrency exchange that has recently made headlines as Nigeria’s first Security and Exchange Commission (SEC) licensed cryptocurrency exchange.
HISTORY AND EVOLUTION OF BLOCKCHAIN TECHNOLOGY AND CRYPTOCURRENCY
One of the emerging technologies that gained popularity and widespread acceptance, within the shortest period of its introduction, is BT, which is, primarily, aimed at driving new business and service models, by supporting the digital transformation of countries and businesses. Historically, cryptocurrency is said to have emerged in the early 1980s and was known, then, as “cyber-currency” and was later improved on, in the 1990s. BT is said to have been first introduced in 2008, when Nakamoto, a researcher, published an article, titled: ‘A Peer-To-Peer Electronic Cash System’, in which he explained how one could carry out instant transactions, directly, from sender to receiver without any involvement of any third-party, such as government or financial institutions. Cryptocurrencies are a digital currency, also known as virtual currencies, which also serve as an alternative means of payment, created using encryption algorithms, and they function as both a currency and virtual accounting system, simultaneously. As earlier indicated, the CBN defines “cryptography” as a method of encrypting and hiding codes that prevent oversight, accountability, and regulation.16 Examples of cryptocurrencies include bitcoin, ripple, compound, litecoin binance coin, chainlink, polkadot and cardano.
Blockchain technology has its roots in the late 1970s when a computer scientist named Ralph Merkle patented Hash trees or Merkle trees. These trees are a computer science structure for storing data by linking blocks using cryptography. In the late 1990s, Stuart Haber and W. Scott Stornetta used Merkle trees to implement a system in which document timestamps could not be tampered with. This was the first instance in the history of blockchain. However, most people know blockchain as the technology behind Bitcoin, and this was indeed its first application, but since then, several innovations in the system have allowed blockchain to spread far and wide and is now democratizing and transforming all kinds of industries, from healthcare to trade and finance.
APPLICATION OF BLOCKCHAIN TECHNOLOGY
Blockchain is an emerging technology that is being adopted in innovative manner by various industries. Application of blockchain in various aspect of economy has yielded good results which tries to turn around negative perception of blockchain into positive recognition in Nigeria. Sequel to this, both government and regulators have come to appreciate good features of blockchain, hence calls for better ways of embarking on blockchain business processes. AWS (2023) describe some use cases in different industries in the following subsections:
Anti Corruption Tool
Corrupt practices such as data manipulation, security of data, concealing of facts, and money laundry are some of the impunities bedeviling Nigeria (Faith, 2023). Reports has shown how African countries make up most of those that are most corrupt in the world with Nigeria in the top 10 ranking (Richman, 2023). In Nigeria, the use of blockchain technology could greatly benefit the economy help eradicate corrupt practices (Tomslin, 2020). Blockchain has two distinct features that make it a powerful anti-corruption tool in the area of transaction record. Firstly, the security of the information and the validity of the data it controls are excellent. Blockchain eliminates the possibility of data manipulation and failure. Also, it enhances information availability, diminishing the capacity of bureaucrats to conceal specific facts (Romanello, 2021). Secondly, blockchain provides a transparent and decentralized framework for recording a series of transactions. Because transactions are stored chronologically, producing an immutable chain, blockchain creates an unalterable trail of transactions, providing for full transaction traceability. As a result, a public blockchain gives prosecutors and law enforcement officials a tool for detecting illegal conduct or wrongdoing by leaving enough digital traces to isolate corrupt behavior (Santiso, 2018). With these, blockchain enables for the reduction or elimination of integrity breaches such as fraud and corruption while also lowering transaction costs (Kshetri & Voas, Blockchain in Developing Countries, 2018a). The blockchain promises tamper-proof records that corrupt clerks or bureaucrats cannot modify. The distribution of a ledger and the consensus mechanisms also make it difficult for one entity to falsify entries.
Democratic Tool
One of the ever-occurring challenges in our democratic process in Africa at large is the issue of vote tampering, electoral result manipulations as alleged in African countries like Nigeria, Cameroun, Kenya e.tc. Democracy is one of the most important pillars of modern society, but as we've seen over the last few years, it's far from perfect. Corruption, manipulation, and a lack of transparency can all weaken democratic processes. There has also been a concerted push over the last several years from anti-democratic and authoritarian movements that aim to challenge the norms of many established democracies. In conjunction, this has left many feeling discouraged about the state of their governments and genuinely worried that the democracies they cherish are at risk. Democracies need a global rejuvenation, and that's where blockchain technology comes in, offering a new way to empower democracies and bring greater transparency and participation to the people. In Nigeria, Blockchain is believed to be a promising technology that can be used in the electoral process. It can be used to create voting records that are cryptographically secured. Votes recorded precisely, permanently, securely, and transparently. Vote casting, tracking, counting, and transmission may all be done using blockchain, which helps to avoid vote fraud. The electoral umpire and voters would have a verifiable audit trail thanks to the way it records votes, ensuring that no votes could be added to the ones already cast (Ikuero, et.al., 2021). According to Alekseev (2020), the main drawbacks of using blockchain technology in elections are: technical problems, hackers, cyberattacks, and violations of vote confidentiality. Utilizing blockchain in electoral systems is purported to decrease national expenditures. By using blockchain-based voting systems, it can be assured that every vote is recorded accurately and securely, while making the voting process as accessible as possible. This can help to prevent voter fraud and ensure that elections are fair and free. Recently, there have been several examples of politicians falsely calling into question the results of elections with the goal of subverting the will of the electorate. The result has been a lot of misinformation which has broken down trust towards democratic systems. Blockchain can help restore this trust by providing a transparent, and easily auditable way to conduct elections. With blockchain-based voting systems, all votes are recorded on a tamper-proof, decentralized ledger. This means that it is virtually impossible to manipulate the results of an election. Additionally, because the ledger is decentralized, there is no single point of failure that could be attacked by hackers or other bad actors.
Healthcare
In the health sector, there are transactions where transparent and immutable record keeping may also be important, such as medical records or other related health data In Nigeria, the healthcare industry is faced with lack of proper records. Blockchain technology is projected to improve medical record administration and insurance claim procedure, accelerate clinical and biomedical research, and develop biomedical and healthcare data ledger Technology. Also, blockchain technology enables patients to set restrictions for their medical data, such as granting particular researchers access to sections of their data for a period of time. Through blockchain, patients can connect to other hospitals and have their medical data collected automatically Blockchain can also play a role in ensuring quick diagnosis of diseases as observed in “Care Ai” that was launched by The European
Commission in June 2018. It is a digital computer system connected to a blockchain that uses a patient’s blood sample to quickly diagnose diseases (malaria, typhoid fever, tuberculosis, etc.) without the presence of a physical doctor (Romanello, 2021). The computer system is engineered to help the invisible demographic of migrants, ethnic minorities, and those unregistered within traditional healthcare systems. So, it is possible for these invisible groups to get access to basic healthcare, and useful appropriate information without compromising their identities, for fear of deportation.
Smart Contract
A smart contract comprises lines of code that are programmed into a blockchain and executed automatically when certain conditions are met. Smart contracts can also be used to manage course content and distribution. Government institutions are seeking to improve the management of identities, assets, data, and contracts; this could be achieved through the adoption of blockchain technology. Smart contracts resolves the trust issues that arises with intermediaries between parties to an agreement. It enables parties with trust related issues to agree on the distribution of assets, temporal ownerships and potential assets transactions, ensuring transparency in businesses. The set of conditions, mutually agreed upon by all parties involved in the contract, is set and defined in a blockchain network. Whenever the mandatory conditions are met, certain actions are executed and all members of the network get to the same result by executing this action. Smart contract is useful in several government and non-governmental industry, such as insurance, properties and titles verification; making it easy to transact business without the fear of been swindled by a third party. Smart contracts are code written into a blockchain that executes the actions two parties agree to outside the chain. By automating these actions, the need for an intermediary or trust between the parties is removed.
Identity Management
Identity authentication and authorization is of great concern to Nigerian government. There are several identity database stored in different locations in the country such as Bank Verification Number(BVN), Voter Registration Information (VRI) and National Identification Number (NIN) to least a few. The harmonisation and unification of this data for interoperability, verification and synchronisation, is still a challenge. Blockchain technology offers a solution to Nigerian unique identity and cyber digital identity issues; where identity can be uniquely created, authenticated and updated in an irrefutable, immutable, and secure manner. Effective identity management would boost numerous sectors of the economy such as government digital promotions and development, cybersecurity, digital inclusion, healthcare, national security, banking and ecommerce.
Energy
Energy companies use blockchain technology to create peer-to-peer energy trading platforms and streamline access to renewable energy. For example, consider these uses: Blockchain-based energy companies have created a trading platform for the sale of electricity between individuals. Home owners with solar panels use this platform to sell their excess solar energy to neighbors. The process is largely automated: smart meters create transactions, and blockchain records them. With blockchain-based crowd funding initiatives, users can sponsor and own solar panels in communities that lack energy access. Sponsors might also receive rent for these communities once the solar panels are constructed.
Financial Industry
Government financial services, banks and other financial institutions, including credit bureaus are often faced with lack of synchronised database to access identity confirmation, availability of collateral, creditworthiness of individuals and small business owners; stiffening accessibility to funds. An effective ledger system like blockchain technology could save information about the financial states of their clients, customers and beneficiaries; including data about financial status, current loans, interest obligations, collaterals, repayment history and income levels. However, individual authorisation is required for data accessibility to protect data privacy. Blockchain has the potential to create fast, transparent and seamless global financial transaction; promoting an ease of business transactions across borders.
Traditional financial systems, like banks and stock exchanges, use blockchain services to manage online payments, accounts, and market trading. For example, Singapore Exchange Limited, an investment holding company that provides financial trading services throughout Asia, uses blockchain technology to build a more efficient interbank payment account. By adopting blockchain, they solved several challenges, including batch processing and manual reconciliation of several thousand financial transactions. Blockchain technology can circumvent conventional fraud prevention techniques that require several parties to validate transactions.
Media and entertainment
Companies in media and entertainment use blockchain systems to manage copyright data. Copyright verification is critical for the fair compensation of artists. It takes multiple transactions to record the sale or transfer of copyright content. Sony Music Entertainment Japan uses blockchain services to make digital rights management more efficient. They have successfully used blockchain strategy to improve productivity and reduce costs in copyright processing (AWS, 2023).
Education
Education has undergone tremendous changes, from traditional classroom settings to eLearning, and now we have progressed to blended learning. The COVID-19 pandemic accelerated the adoption of digital learning, and schools worldwide began using online platforms and Learning Management Systems (LMSs) to teach students. Blockchain technology is also poised to revolutionize the education industry. Blockchain has the potential to transform how academic data is managed, and how teachers and students interact. Let's look into how blockchain technology might affect education in the future. Blockchain technology has the potential to revolutionize the education sector by providing a secure, transparent, and tamperproof platform for storing and sharing academic records. As blockchain adoption continues to grow, we will see new and innovative use cases emerging in the education sector. Blockchain's distributed ledger technology can enhance transparency and accountability in the educational field. It can create an immutable record of educational data, including transcripts, degrees, and certifications, that is verifiable and tamperproof. This means that academic achievements can be validated with complete accuracy, and employers can be confident in the skills and knowledge of job applicants.
When a student transfers from one school to another, the transfer of documents and their verification is a time-consuming process. The verification process can be streamlined by introducing blockchain technology into schools and colleges. When a student transfers from one institute to another, the student records can be easily transferred to the new institute by granting access to the blockchain. Some blockchain development companies develop and issue certificates that are immutable and non-forgeable, but easily verifiable for authenticity.
LEGAL & REGULATORY FRAMEWORK OF BLOCKCHAIN IN NIGERIA
Generally speaking, Nigeria, currently, has no specific legal framework aimed at regulating the use of cryptocurrencies and BT technology, although in second quarter of 2023, the National Blockchain Policy for Nigeria was approved by the Federal Executive Council, which is to serve as a roadmap for Nigeria’s adoption and utilisation of BT. The policy lays out a comprehensive framework for integrating BT into different spheres of life, so as to fully realise the potential of BT. The policy aims to encourage the use, adoption, and integration of BT in the various sectors of Nigeria’s digital economy, in order to increase economic prosperity, efficiency, innovation, transparency, security and trust. Currently, an executive bill is being prepared for transmission to the National Assembly. The bill seeks to modernise revenue administration, including establishing a legal framework for crypto regulation. There is, however, an Investments and Securities Bill, presently, at the National Assembly, which seeks to repeal the Investments and Securities Act, 2007 and to establish the Securities and Exchange Commission as the apex regulatory authority for the Nigerian capital market as well as the regulation of the market to ensure capital formation, the protection of investors, maintenance of fair, efficient and transparent market and reduction of systematic risk. However, the policy is not law and until this Bill is passed, it has no legal effect. Currently, the principal law regulating the production, issuance, use and circulation of currencies, in their various denominations, is the Central Bank Act, 2007. However, there are other laws, whose contents, directly or indirectly, affect currencies in Nigeria. These laws includes:
THE CENTRAL BANK OF NIGERIA
Section 1 of the Central Bank Act33 established for Nigeria an independent corporate entity called the CBN, the objectives of, which, as encapsulated in section 2 of the Act, are to: ensure monetary and price stability; issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency; promote a sound financial system in Nigeria; and act as banker and provide economic and financial advice to the federal government of Nigeria. Section 20 of the CBN Act, especially, bestows on the CBN, the power to regulate all forms of transactions involving currencies, including virtual currencies and other forms of digital assets. Consequently, the production, issuance and use of any form of currencies in Nigeria, not emanating from the CBN, become illegal, an affront and a usurpation of the powers of the CBN, being the statutory issuer of legal-tender currencies in Nigeria. The CBN has, unequivocally, declared, as direct contravention of existing law, the use of cryptocurrencies in Nigeria. It went further to direct the closure of all accounts owned by individuals or entities transacting in or operating cryptocurrencies’ exchanges in Nigeria. However, reading in- between the lines of the relevant CBN Circular, it is clear that there is no outright ban or prohibition on trading in virtual currencies. The CBN is empowered by the Central Bank of Nigeria Act 2007 (the ‘CBN Act’) to, among other things, issue legal tender currency in Nigeria and promote a sound financial system in the country. Given that there is no legislation prohibiting cryptocurrency, the CBN’s approach to regulating it has been in the form of directives or guidance to its regulated entities, including banks and other financial institutions.
In the financial services sector, the CBN’s approach to blockchain technology is streamlined to the use of virtual/digital currencies/assets in financial services. The CBN has adopted a cautious position as expressed in various circulars and press releases4. According to the CBN, transactions in virtual currencies are largely untraceable and anonymous, making them susceptible to abuse by criminals especially in money laundering and financing of terrorism. Thus, pending the issuance of substantive regulation by the CBN, banks and other financial institutions are prohibited from holding, trading, facilitating or transacting in any way in virtual currencies. In line with the above, in April 2021 and 2022 respectively, the CBN fined three (3) Nigerian banks a sum of Eight Hundred Million Naira (N800,000,000) and another six (6) banks over One Billion Naira (N1,000,000,000) for non-compliance with its directives on virtual currencies.6 Notably, while the CBN has not outrightly banned trading in virtual currencies, its position implies that persons or entities in Nigeria cannot facilitate the trade or transmission of virtual currencies through the Nigerian financial system thereby crippling virtual currency- based businesses in Nigeria. Given its stance on virtual currencies, it is therefore interesting that the CBN has also explored digital currency in the form of the e- Naira, which is a central bank digital currency (CBDC). Although the e-Naira was launched on 25th October 2021,7 its adoption level remains slow due to insufficient awareness and acceptance.
THE CBN INITIAL POSITION ON CRYPTOCURRENCY
On 12 January 2017, the CBN, through its Circular to Banks and other Financial Institutions on Virtual Currency Operations in Nigeria (the ‘Circular’), instructed banks and other financial institutions to: avoid using, holding or transacting in any way in virtual currencies;[4] implement effective anti-money laundering controls and controls that counter the financing of terrorism (AML/CFT) controls for existing customers that are virtual currency exchanges; and report any suspicious transactions by these customers.
Subsequently, on 5 February 2021, the CBN, through its Letter to all Deposit Money Banks, Non-bank Financial Institutions and other Financial Institutions (the ‘Letter’), took additional measures to restrict trading in cryptocurrency via official channels. In the Letter, the CBN stated that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited for regulated institutions. Furthermore, the CBN directed the regulated banks and institutions to identify and close accounts of persons and/or entities involved in cryptocurrency transactions or operating cryptocurrency exchanges within their systems. The Letter effectively excluded cryptocurrency businesses from accessing services provided by financial institutions in Nigeria.
It is important to note that the CBN’s position, as communicated through the Circular and Letter, did not place a ban on cryptocurrency in Nigeria. Instead, it only prohibits banks and other financial institutions that are statutorily under its regulatory control from processing/enabling such transactions. Consequently, individuals and exchanges seeking to transact in cryptocurrencies were forced to pivot to/adopt peer-to-peer (P2P) cryptocurrency business models.
CBN’s Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs) (the ‘VASP Guidelines’) and proposed amendment to the Digital Assets Rules
In December 2023, following the advent of a new administration, the CBN released the VASP Guidelines and relaxed its over two-year restriction on financial institutions operating accounts for cryptocurrency service providers or processing crypto-related transactions. While financial institutions remained banned from dealing in cryptocurrency, the ban on facilitating transactions for crypto businesses was lifted. Therefore, pursuant to the VASP Guidelines, financial institutions are now permitted to open bank accounts for crypto businesses, provided they fulfil the requirements set out in the VASP Guidelines. One such requirement is that the crypto platform must have obtained a relevant licence or registration from the SEC.
Following the CBN’s issuance of the VASP Guidelines, there were high hopes that Nigeria’s cryptocurrency regulatory environment would become more favourable in 2024. Indeed, there were private indications that the SEC was preparing to implement the Digital Assets Rules and begin registering and licensing qualified companies across the various licence categories. It was reported that some crypto startups had already approached the SEC[9] to initiate the registration process.
Shortly after the issuance of the VASP Guidelines, the SEC issued a proposed amendment to the Digital Assets Rules (the ‘Proposed Digital Assets Rules’). A notable amendment is the inclusion of crypto in the term ‘virtual asset’. Thus, ‘virtual asset’ is now written as ‘virtual (crypto) asset’, retaining the same definition. This proposed amendment, particularly the renaming of ‘virtual asset’, supports the position that the SEC’s earlier statement excluding cryptocurrency from the Digital Assets Rules was superficial and that the SEC’s delay in operationalising the Digital Assets Rules was primarily in connection to the CBN’s initial hostile stance on cryptocurrency.
The Proposed Digital Assets Rules and VASP Guidelines address some major concerns regarding the adoption of cryptocurrency, such as money laundering, terrorism financing and fraud. These regulations address these concerns through the requirement for licensing, robust AML/CFT provisions and disclosure of information about the directors, beneficial owners and principal officers of the entities. In theory, the regulatory framework was being established to enable cryptocurrency businesses to operate in Nigeria.
RECENT DEVELOPMENT WITHIN THE CBN
In parallel with the cryptocurrency regulatory reforms noted above, the CBN also implemented a currency float, allowing the value of the Nigerian Naira to be determined by market forces. Initially, these reforms remained separate. However, by February 2024, there were allegations that Binance, a major crypto trading platform operating in Nigeria, was involved in or enabling currency manipulation, contributing to a downward spiral in the value of the naira. This resulted in the arrest and prosecution of Binance executives and restrictions on Binance’s operations in Nigeria, ultimately leading to Binance removing the naira as a currency on its platform.
There is now a clear shift in the regulatory stance of both the CBN and SEC, with the SEC signalling its intent to crack down on illegal trading activities in the cryptocurrency space, including delisting the naira from P2P trading platforms in order to mitigate its manipulation. Similarly, the CBN has suspended the onboarding of new customers in four Fintech companies, due to alleged complacence in money laundering and foreign exchange (‘forex’) speculation activities linked to cryptocurrency. Some of these Fintech companies immediately put disclaimers up emphasising that they are licensed by the CBN and do not allow any cryptocurrency or virtual currency trading transaction on their platforms. The disclaimers noted that any account in violation will be closed.
Additionally, in April 2024, the Economic and Financial Crimes Commission, a law enforcement agency, secured a court order to freeze 105 accounts across nine Fintech companies in relation to unauthorised forex trading, money laundering and terrorism financing. This action is part of a broader investigation into 1,146 bank accounts suspected of manipulating the forex market through crypto platforms.
SECURITIES AND EXCHANGE COMMISSION/INVESTMENT AND SECURITIES ACT
The Investments and Securities Act, 2007, is enacted to regulate capital market activities in Nigeria and in section 1, the Securities and Exchange Commission (SEC) was established. The specific powers of the Commission include: regulating investments and securities business in Nigeria, as defined in this Act; registering and regulating securities exchanges, capital trade points, futures, options and derivatives exchanges, commodity exchanges and any other recognised investment exchange; regulating all offers of securities by public companies and entities; registering securities of public companies; rendering assistance as may be deemed necessary to promoters and investors wishing to establish securities exchanges and capital trade points; preparing adequate guidelines and organising training programmes and disseminating information necessary for the establishment of securities exchanges and capital trade points; and registering and regulating corporate and individual capital market operators, as defined in this Act.
The SEC has taken a different position from the CBN on the regulation of virtual/digital assets in Nigeria. The SEC’s position is that virtual assets that qualify as securities fall within the SEC's regulatory purview. Staying true to this position, on 11th May 2022, the SEC issued the New Rules on Issuance, Offering Platforms and Custody of Digital to regulate digital and virtual assets in Nigeria (the “Digital Asset Rules”). The Digital Asset Rules regulate digital asset offering platforms; digital asset custodians; digital service providers; and digital asset exchange platforms. In 2021, the SEC introduced the Regulatory Incubator (RI) program, a platform aimed at providing startups with a supportive environment to test innovative products, services, business models, and delivery mechanisms related to the capital market and initiated the application process for the first cohort of the RI on April 28, 2023.11 However, the acceptance of blockchain products and developers into the SEC RI remains uncertain. In its February 2021 press release, the SEC stated that individuals affected by the CBN’s position would only be eligible for the RI program once they are allowed to operate Nigerian bank accounts. Surprisingly, the SEC's call for applications did not specifically exempt virtual and digital assets from the program even though the CBN’s position has remained unchanged. However, crowdfunding, robo advisory/digital investment advisory, and digital sub-brokers innovators were explicitly excluded from the program due to the existence of SEC regulations governing those models.
The SEC’s position and the new Rules on Issuance, Offering Platforms and Custody of Digital Assets (the ‘Digital Assets Rules’)
On 11 September 2020, the SEC issued a statement recognising virtual/digital assets as securities, in line with recommendations from its Fintech Roadmap Committee. However, given the CBN’s subsequent letter in February 2021, the regulatory stance on cryptocurrency became unclear. The impact of the CBN ban on licensed institutions, against the statement issued by SEC, triggered a perceived conflict between the regulators. To dispel speculation as to perceived regulatory conflict, the SEC issued a press statement on 11 February 2021, clarifying that the CBN’s actions aligned with its role as the apex regulator of the banking sector. To demonstrate its collaboration with the CBN, the SEC suspended admission into the SEC’s Regulatory Incubation Program (SRIP) until the affected entities could operate accounts within the Nigerian banking system. Notwithstanding the SEC’s statement and suspension of the SRIP, in 2022, the SEC issued the Digital Assets Rules, which was the first attempt at a comprehensive regulation of digital and virtual assets in Nigeria. The Digital Assets Rules define virtual assets as a digital representation of value that can be transferred, digitally traded and can be used for payment or investment purposes. The Digital Assets Rules also create various categories of digital assets with their respective registration and licensing requirements.
Recent Development Within the SEC
The Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, has revealed that the Service would be seeking the support of the National Assembly to enact a law on the crypto industry. Adedeji said this on Saturday at a stakeholder engagement with the Senate and House Committee on Finance organised by the Intergovernmental Relations Department of the Service with the theme, ‘Repositioning The FIRS To Achieve Its Mandate.’ He said, “The plan first is to have the law that regulates it, and that is why you see that we are here with the legislature, which will be the base of charging. And that is done in any other place in the world when you have this innovation or system, so you just have to get ready for it because you can’t go away from it. So we just have to plan to regulate it in such a way that it is not injurious to the economic development of Nigeria.”
NITDA
NITDA, the regulatory body saddled with the responsibility of developing and regulating information technology practices in Nigeria has on its part focused on the general sphere of blockchain not just virtual and digital currencies/assets. Together with other stakeholders in the eco-system, NITDA developed the recently approved National Blockchain Adoption Strategy (the “Strategy”) to serve as a roadmap for the adoption of blockchain technology in the government's digital transformation agenda. The Strategy encompasses several key elements, including the establishment of a Nigeria Blockchain Consortium, the enhancement of the regulatory and legal framework governing blockchain, and the implementation of blockchain business incentive programs to support small and medium-sized enterprises (SMEs) and startups. The Strategy also recognises the scepticism of regulators like the CBN about the adoption of blockchain technology which has slowed down the adoption process and resulted in a high entry barrier into the blockchain space. To address this challenge, the Strategy introduces a blockchain sandbox framework which will be spearheaded by these regulators particularly the CBN, SEC, NITDA, FIRS and the Nigeria Deposit Insurance Corporation (the “NDIC”). It is worth noting that while the Strategy is commendable, it is not an act of the national assembly or a regulation/guideline. Instead, it is an explanatory document that lacks the force of law. This raises concerns about how effectively the initiatives outlined in the Strategy will be enforced, which is particularly significant in Nigeria, where laws and government initiatives often lack proper enforcement.
MONEY LAUNDERING (PREVENTION AND PROHIBITION) ACT
The Money Laundering (Prevention and Prohibition) Act, 2022, provides for the comprehensive legal and institutional framework for preventing and prohibiting money laundering in Nigeria, including detection, prosecution and punishment for money laundering and other related offences, placing certain anti-money laundering requirements on financial institutions and designated non-financial businesses and professions in Nigeria. Under the Money Laundering (Prevention and Prohibition) Act, financial institutions include banks, bodies corporate, associations or group of persons, whether corporate or incorporate, which carry-on the business of investment and securities, virtual assets service providers, discount houses, insurance institutions, debt factorisation and conversion firms, bureaus de change, finance companies, money brokerage firms whose principal businesses include factoring, project financing, equipment leasing, debt administration, fund management, private ledger service, investment management, local purchase order financing, export finance, project consultancy, financial consultancy, pension funds management and such other businesses as the CBN, or other appropriate regulatory authorities, may designate.
FEDERAL COMPETITION AND CONSUMER PROTECTION ACT
The Federal Competition and Consumer Protection Act (FCCPA) establishes the Federal Competition and Consumer Protection Commission and the Competition and Consumer Protection Tribunal, for the purpose of promoting competition in Nigerian markets, at all levels, through the elimination of monopolies, prohibition of abuse of dominant market positions and penalising other restrictive trade and business practices. It, generally, protects consumers of goods and services in Nigeria against unfair business practices, including misrepresenting material facts in the marketing of goods and services.43 In its definition section, the Act defines a consumer as including any person to whom a service is rendered. It is submitted that, although virtual currency operators are not, expressly, mentioned in the Act, individuals receiving the services of virtual currency operators in Nigeria are protected by the provisions of the Act and by extension, a customer has cause of action, under the FCCPA, for damage suffered because of misrepresentations made to him by a virtual currency operator.
NIGERIA DATA PROTECTION REGULATION 2019 (NDPR)
This regulation was made by the National Information Technology Development Agency (NITDA) in pursuance to its statutory mandates which include developing regulations for electronic governance and monitoring the use of electronic data interchange and other forms of electronic communication transactions, as an alternative to paper-based methods in government, commerce, education, the private and public sectors, labour and other fields, where the use of electronic communication may improve the exchange of data and information. These rules make provisions for the rights of data subjects, which include the existence of the right to request from the controller, access to and rectification or erasure of personal data or restriction of processing concerning data subjects or to object to processing, as well as the right to data portability, right to lodge a complaint with a relevant authority, right to withdraw consent, et cetera. However, it has been opined that the decentralised and immutable nature of virtual currencies, as blockchain-based creations, poses an obstacle to executing this right and might make the right functionally impossible to exercise but that technical or practical solutions may be needed to facilitate the erasure or rectification of personal data so as to ensure compliance with NDPR provisions.
CYBERCRIMES (PROHIBITION & PREVENTION,) ACT
The Cybercrimes (Prohibition, Prevention,) Act, provides an effective, unified and comprehensive legal, regulatory and institutional framework for the prohibition, prevention, detection, prosecution and punishment of cybercrimes in Nigeria. This act also ensures the protection of critical national information infrastructure and promotes cyber-security and the protection of computer systems and networks, electronic communications, data and computer programs, intellectual property and privacy rights. The objectives of this Act are to:
(a) provide an effective and unified legal, regulatory and institutional framework for the prohibition, prevention, detection, prosecution and punishment of cybercrimes in Nigeria;
(b) ensure the protection of critical national information infrastructure; and
(c) promote cyber-security and the protection of computer systems and networks, electronic communications, data and computer programs, intellectual property and privacy rights.
THE NATIONAL BLOCKCHAIN POLICY FOR NIGERIA
Nigeria’s digital economy sector has experienced significant growth in the last 4 years. Noteworthy examples of this growth include the unprecedented 18.44% contribution of the Information and Communications Technology (ICT) sector to our Gross Domestic Product (GDP) and the outstanding performance of the digital economy sector based on the independent assessment of the KPMG and the Foreign, Commonwealth and Development Office (FCDO). The sector's generation of an average quarterly revenue of N594 billion for the Federal Government is also highly commendable. As the leading digital economy in Africa, we have again taken the lead in developing a policy for the adoption of this important technology. We will use BT to boost innovation, improve public services, create job opportunities, reduce corruption and drive economic growth. As the world prepares for a BT-driven injection of $1.76 trillion to the global GDP by 2030, our development and implementation of the National Blockchain Policy for Nigeria will prepare
us to be active players and to benefit from this emerging global source of revenue. The National Blockchain Policy for Nigeria has therefore been developed to serve as a roadmap for Nigeria's adoption and utilisation of BT. The Policy lays out a comprehensive framework for integrating BT into different spheres of our national life in order to fully realise the potential of BT. It also addresses key issues such as governance, interoperability, security, and regulatory compliance. In addition to these, it offers direction and guidance to stakeholders in both the public and private sectors in order to ensure the adoption, innovative and responsible use of BT. The National Digital Economy Policy and Strategy (NDEPS) was developed to realign the Nigerian economy to take advantage of the numerous opportunities that digital technology offers. As part of the implementation of the NDEPS, the Federal Ministry of Communications and Digital Economy (FMC&DE), on behalf of the Federal Government of Nigeria, has developed the National Blockchain Policy in line with the 7th Pillar of the NDEPS, which focuses on Digital Society and Emerging Technologies
The implementation of the Policy will contribute to strengthening Nigeria's digital economy by expanding financial inclusion and enhancing openness and accountability. It will also enhance public trust in governance and promote citizen engagement by increasing transparency and accountability. Furthermore, it will ensure the growth of indigenous talent in Blockchain Technology solution development, in line with the Federal Government’s commitment to develop our nation’s human resources.
On behalf of the Federal Government of Nigeria, and as part of the implementation of the NDEPS, the Federal Ministry of Communications and Digital Economy (FMC&DE) has developed over twenty (20) national policies and law that are all being implemented, including the following:
Nigeria Startup Act 2022;
National Digital Innovation & Entrepreneurship Policy
National Policy for the Promotion of Indigenous Content in the Telecommunications Sector;
In keeping with this trajectory, the FMC&DE has developed the National Blockchain Policy (hereinafter referred to as the “Policy”) in line with Pillar 7 of the NDEPS, which focuses on Digital Society and Emerging Technologies, tying the development of the digital economy to indices of the well-being of ordinary citizens. This builds on the gains of other strategic activities deployed under this Pillar, like the National Policy for the establishment and management of the National Centre for Artificial Intelligence and Robotics (NCAIR). The Centre was established in 2021 and was the first of such centres in Africa. The Policy aims to grow domestic talent in Blockchain solutions development, foster innovation, and catalyse the adoption and use of Blockchain Technology
FOCUS AREAS OF THE POLICY
Talent Development: The development of talent in the field of Blockchain is critical for the growth and success of the Blockchain industry. This Policy seeks to provide a framework for the development of talent to support the growth of the industry and to ensure that the National Blockchain ecosystem has the necessary human capital to drive innovation and growth. This focus area will facilitate the development of a skilled and knowledgeable workforce in the industry; attract and retain talent; promote innovation and growth; and enhance the competitiveness of the National blockchain ecosystem. The Government will collaborate with relevant stakeholders to develop capacity-building programmes to enhance the skills and knowledge of Blockchain professionals. These programmes will be tailored to meet the needs of the industry and will include training, workshops, and certification programmes that incorporate ethical considerations and best practices. The Government will develop talent attraction programmes to attract and retain Blockchain talent. These programmes will provide incentives to encourage Blockchain professionals to develop and sustain the Nigerian Blockchain industry.
Innovation: To facilitate innovation in Blockchain, a multi-pronged approach is needed, involving creating an environment that encourages experimentation, providing resources to support innovation, and addressing regulatory and legal barriers. The Government and other stakeholders will provide support for research and development in the Blockchain industry. This will help entrepreneurs and researchers develop innovative Blockchain solutions that can be used in various sectors. The Government will collaborate with industry experts and thought leaders to identify key trends, challenges, and opportunities in the Blockchain industry. This will help the Government policies that are informed by industry experts and are relevant to the current needs of the industry. The Government will create regulatory sandboxes where Blockchain Start-ups can test their innovative ideas without being subject to stringent regulations. This will allow for more experimentation and innovation in the industry. The Government will provide support for Blockchain start-ups in the form of incentives, incubation centres, mentorship programmes etc. This will help start-ups to grow and thrive in the competitive Blockchain industry.
Blockchain Adoption: The adoption of Blockchain Technology is poised to support the continuous growth of the digital economy in Nigeria by fostering a more secure, transparent, accountable, efficient service delivery, and trusted ecosystem. The below-listed areas are approved by the FGN for adoption to achieve the Policy's mission and vision.
Financial Services: Blockchain Technology has the potential to transform financial services by providing secure, transparent, and efficient transactions without the need for intermediaries. Nigeria recognises the potential benefits of Blockchain Technology and its ability to provide decentralised payment services, particularly with the advent of cryptocurrencies, which are digital assets designed to work as a medium of exchange of value within the Blockchain. Cryptocurrency has been a subject of interest in Nigeria in recent years, with a growing community of cryptocurrency enthusiasts and traders in the country. The Government will establish a regulatory framework that enables the integration of Blockchain Technology into the financial system while ensuring the protection of consumers and the stability of the financial system. The Government will establish a regulatory framework that enables the safe responsible and optimal use of cryptocurrencies in Nigeria in a way that ensures consumer protection, market stability and financial inclusion
Government and Corporate Digital Services: Blockchain Technology has the potential to transform the way the Nigerian Government and businesses operate and deliver services. It offers increased transparency, accountability, and efficiency, which can lead to improved trust between citizens and organisations. Further, it can also be used in various functions, such as:
Identity Management: In today's digital world, there is a growing need for secure and reliable methods of identity verification to prevent fraud and identity theft. By implementing a blockchain-based identity management system that incorporates device management and tracking, personal IDs, professional credentials, and certificates, it would be possible to create a more secure and reliable system for online identity verification and authentication. This can be applied in different areas and sectors of the economy including voter registration, identification and tracking of devices and goods, healthcare management and financial services.
Land Registration and Record System: In a traditional land registration and record system, the process of transferring ownership can be complicated and time- consuming, often involving multiple intermediaries such as lawyers and government agencies. There may also be concerns about fraud or errors in the documentation. A blockchain-based land registry would consist of a distributed ledger that records all land transactions and ownership changes. Each transaction would be verified by multiple nodes in the network, ensuring that no single party can manipulate the data. This would create an immutable record of ownership that would be difficult to alter without the consensus of the entire network. This will create a more transparent and secure system for recording and verifying property ownership, with little to no human error.
BENEFITS OF BLOCKCHAIN AND CRYPTOCURRENCY ADOPTION
The implementation of Blockchain Technology can contribute to strengthening Nigeria's digital economy by expanding financial inclusion and enhancing openness and accountability. The inherent characteristics of Blockchain, such as its immutability and decentralization enable secure and transparent transactions and activities through some of its applications, like smart contracts, which have the potential to bring several benefits to the economy. Below are some of the benefits of adopting Blockchain in Nigeria;
Improved Transparency and Accountability: Blockchain Technology can help to increase transparency and accountability in various sectors in Nigeria. By using a distributed ledger system, all transactions are recorded and can be accessed by anyone on the network. This can help to reduce corruption, fraud, and other illegal activities.
Increased Efficiency: Blockchain Technology can also help to improve the efficiency of various processes, such as payment processing, supply chain management, and identity verification. By leveraging Blockchain features like smart contracts, transactions can be executed automatically, reducing the need for intermediaries and streamlining the process.
Enhanced Security: Blockchain Technology is highly secure due to its decentralised nature. Transactions are recorded on multiple nodes, making it nearly impossible to tamper with the data. This can
Financial Inclusion: Blockchain Technology can help to increase financial inclusion in Nigeria by providing access to financial services to those who may not have had access before. By using blockchain-based payment systems, individuals can send and receive money easily and securely.
Job Creation: Blockchain adoption in Nigeria has the potential to create significant job opportunities across a range of sectors. With a young and tech-savvy population, Nigeria is well-positioned to become a blockchain hub in Africa. The adoption of Blockchain Technology creates new job roles, such as blockchain developers, cybersecurity experts, and smart contract engineers. Furthermore, Blockchain Technology enables the creation of new industries, such as cryptocurrency exchanges and blockchain-based payment systems, which could create jobs across various sectors, including finance, technology, and manufacturing. The implementation of Blockchain Technology in Nigeria shall also improve transparency and reduce corruption, which boosts investor confidence and create additional job opportunities. Overall, the job creation benefits of blockchain adoption in Nigeria have the potential to play a significant role in the country's economic development and growth.
Decentralization: In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. Decentralized networks strive to reduce the level of trust that participants must place in one another, and deter their ability to exert authority or control over one another in ways that degrade the functionality of the network. In a decentralized blockchain network, no one has to know or trust anyone else. Each member in the network has a copy of the exact same data in the form of a distributed ledger. If a member’s ledger is altered or corrupted in any way, it will be rejected by the majority of the members in the network.
Case Study - Note (NBA Digital Stamp)
On 19 June 2024, the Nigerian Bar Association (NBA), under the leadership of Mr. Yakubu Chonoko Maikyau, OON, SAN entered a contract for the implementation of a Secured Digital Stamp and Seal with Verification System for the NBA. The NBA Digital Stamp and Seal is a groundbreaking innovation powered by cutting-edge blockchain technology. It is fully integrated into Microsoft Word (2017 Edition and above), ensuring a streamlined and efficient process for affixing digital stamps from within Microsoft Word interface, and because it rests on the blockchain technology, members are assured every stamp is unique, tamper-proof, and verifiable. Also, the Digital Stamp and Seal comes with a user-friendly e-commerce portal that allows members to purchase digital stamps conveniently and securely. Alongside this portal is the NBA Digital Stamp & Seal Verification App, available on both Android and iOS, empowering the public to verify the authenticity of a legal document with a simple smartphone scan. Generally, the NBA leadership has developed this solution to protect the lawyer's job and bolster public confidence in the authenticity of legal documents. The NBA leadership did the unveiling of this NBA Digital Stamp and Seal on Monday, 19 August 2024.
CHALLENGES AND LIMITATIONS TO THE ADOPTION OF BLOCKCHAIN TECHNOLOGY
Blockchain adoption in Nigeria has faced several challenges that have impeded its growth and potential impact on various sectors of the economy. Some of the key challenges include:
Lack of awareness
One of the main challenges associated with blockchain technology in Nigeria is a lack of awareness of the technology and a widespread lack of understanding of how it works. Many companies and individuals alike do not understand what blockchain is or what it can do, and this lack of understanding is hampering investment in and adoption of the technology. Additionally, blockchain is often associated with cryptocurrency in the mind of many and the negative press that has shrouded the use of cryptocurrency has been extended to blockchain technology generally. It is important to educate people on the versatility of blockchain technology and how it can be deployed to solve a variety of problems in Nigeria. There exist a low level awareness and education towards understanding blockchain technology development, applications and usage within the Nigeria tech-communities, academic and business sectors. Blockchain could be complex with a developing environment that is not completely user friendly; thus, there are few professionals with the requisite knowledge and experience to develop blockchain solutions. Also, most government policymakers and private sector stakeholders are not aware of the benefit blockchain might bring to their organisation.
Technical Complexity
There are infrastructure challenges that could limit blockchain processes and efficacy. For instance, very few Nigerians have internet access; less than half of those with internet accessibility barely have good quality uninterrupted internet service. Increase in quality internet penetrations is required for blockchain application to be successfully deployed and maximised by the Nigerian economy.
Regulatory Uncertainty
The lack of legislative clarity is a significant obstacle to the widespread use of blockchain technology in Nigeria. Although the SEC introduced Digital Assets Rules in 2022, they remain non-operational due to challenges in implementation and conflicts with the CBN's stance on virtual currencies. The absence of clear guidelines and licenses has created uncertainty, slowing down innovation and investment in blockchain-based startups. To address this issue, the Nigerian government must develop clear and comprehensive regulatory frameworks for the blockchain industry. The government should also collaborate with relevant stakeholders in the blockchain industry, including startups, investors, and industry associations, to ensure that the regulatory frameworks are practical and effective.
Resources
Implementing blockchain technology can be expensive, especially for small and medium-sized enterprises (SMEs). The costs include not only the initial deployment of the technology but also ongoing maintenance, updates, and potential scaling solutions. Additionally, there may be costs associated with training staff and integrating blockchain with existing systems. These financial barriers can prevent smaller businesses from leveraging blockchain technology. Finding ways to reduce implementation costs, such as developing more cost-effective blockchain solutions and providing support for SMEs, is essential to make blockchain more accessible.
Electricity
The epileptic state of the Nigerian power sector is another significant clog in the wheel of blockchain adoption in Nigeria. A recent report by the Electricity Think Tank Group indicates that about 75 per cent (75%) of electricity consumed in Nigeria, comes from diesel and petrol-powered generators13 which account for about 25,000MW, while the national grid provides about 4,000MW. This poses a significant challenge to the implementation and adoption of blockchain technology in Nigeria, as many blockchain-based solutions require a stable and reliable source of electricity to function effectively. To overcome these challenges, the Nigerian government and relevant stakeholders in the power sector need to invest in improving the country’s power infrastructure as well as the adoption of renewable energy sources such as solar, hydro, and wind power. Another potential solution is to explore the use of energy storage technologies, such as batteries and fuel cells, to store excess power generated during times of high demand. This excess power can then be used to supplement the grid during periods of low supply or power outages.
Security
Another key issue with blockchain technology is security. Despite being more secure than traditional computer systems, blockchain-based applications, networks, and organizations are not immune to vulnerabilities.14 In addition, due to its largely untraceable nature, criminal elements have adopted cryptocurrencies for their criminal activities including money laundering, drug trafficking, human trafficking, and financing terrorism. To address these security challenges, organizations that use blockchain technology need to implement robust security measures, such as two-factor authentication, encryption, and regular security audits. Additionally, collaboration between blockchain experts, law enforcement agencies, and regulatory bodies can also play a significant role in combating criminal activities related to blockchain technology.
Skill gap
There is a shortage of skilled professionals who understand blockchain technology and can implement it effectively. The rapid growth of the blockchain industry has outpaced the availability of trained developers and experts. This skills gap can slow down the adoption and innovation of blockchain solutions. Investment in education and training programs is crucial to address this gap. Universities, online courses, and industry initiatives are beginning to offer specialized blockchain education, but more efforts are needed to build a workforce capable of driving the technology forward. While blockchain technology holds great promise, several challenges need to be addressed for its widespread adoption. Scalability, regulatory uncertainty, interoperability, security, energy consumption, complexity, cost, network congestion, data privacy, and the lack of skilled professionals are significant hurdles. Overcoming these challenges will require collaboration among developers, businesses, policymakers, and educators. By addressing these issues, we can unlock the full potential of blockchain technology and pave the way for a more decentralized and secure future.
Data Protection
Some important tensions between blockchain technology and data protection include:
(I) The distributed peer-to-peer network architecture of blockchain technology often makes it difficult to determine the data controller, especially with respect to public block;
(ii) Applying jurisdictional data protection regulations to decentralized blockchain which is often multi-jurisdictional may prove difficult;
(iii) The decentralized nature of the blockchain poses a challenge to the enforcement of these cross-border restrictions16; and
(iv) The immutability of blockchain which underpins the technology itself makes it difficult to enforce the data subject’s right to rectification17 and the right to erasure (right to be forgotten) under the Nigeria Data Protection Act (the“DPA”) without compromising the structure and integrity of the blockchain. In the absence of regulatory guidance from relevant authorities to reconcile these issues, organisations should consider the following to mitigate possible areas of conflict
Environmental Cost
Recent reports have shown that cryptocurrency mining and transaction processes have resulted in significant climate damages, with the average cost ranging from 35% between 2016 to 2021 and increasing to 58% from 2020 to 2021.19 This places cryptocurrencies in the same category as other energy-intensive or highly polluting goods like meat, and electricity produced from gasoline.20 The growing concerns about climate change in Nigeria may create challenges with the adoption of blockchain technology. However, the use of renewable energy sources for the deployment of blockchain technology could alleviate these environmental fears and concerns. Additionally, the use of energy-efficient hardware and mining techniques could further minimize the energy consumption and environmental impact of blockchain technology.
Ethical Issues
One significant ethical concern with blockchain adoption is the use of cryptocurrency for criminal activity. This was one of the underlying reasons given by the CBN for its stance against the use of cryptocurrencies in the Nigerian financial sector. To tackle these ethical concerns, the Nigerian government must establish robust regulatory frameworks for the use of cryptocurrencies and other blockchain-based solutions. These regulations should include measures to combat money laundering, terrorist financing, and other illegal activities associated with the use of cryptocurrencies. Additionally, there needs to be increased collaboration between stakeholders in the blockchain industry, law enforcement agencies, and regulatory bodies for the development of policies and regulations that promote transparency, accountability, and compliance in the use of blockchain-based systems and cryptocurrency.
THE NEED TO REGULATE CRYPTOCURRENCY IN NIGERIA
It requires emphasis that there are some benefits derivable from the adoption and use of BT and cryptocurrency for Nigeria, which include improved transparency and accountability, increased efficiency, financial inclusion, enhanced security, job creation’; yet, there is need to regulate the use of cryptocurrencies and BT because of their volatility, high-risks and adverse consequences on the economies of nations of the world, including Nigeria. One of the negative effects of cryptocurrencies is that the rapid spread, high-value volatility and growing volumes of the crypto market could become a real threat to the stability of the global finance system and create serious problems for regulators and tax authorities in many countries; hence, the urgent need for international rules and regulatory practices. According to IMF, increased demands for crypto assets contribute to the outflow of capital, which, in turn, affects the foreign exchange market. The (pseudo) anonymity of crypto assets creates data gaps for regulators and can open unwanted doors for money laundering, as well as the financing of terrorism. Threats to the fiscal policy of states may increase, given that crypto assets contribute to tax evasion. The central banks profits that are earned from the right to issue currency could also decline. There is the need to regulate crypto-assets, crypto exchanges and wallets in the crypto market because the risks associated with it are higher than in the regulated financial market. The rights of investors and consumers are not, in any way,
Protected. Also, cryptocurrency mining requires a lot of energy and creates a huge carbon footprint, overloading power grids and generating capacity, and this can no longer be ignored. Thus, advocates of green energy are at the forefront of the fight aimed at discouraging the use of cryptocurrencies.
Anonymous payments are allowed in the cryptocurrency market. Thus, criminal groups involved in the sale of drugs, extortion, human organ trafficking, terrorism and other illegal operations can use it, as a way of transferring money, without being detected. Another important reason necessitating regulation is the fact that cryptocurrency is unreliable because any of these Bitcoin platforms may fold up, unexpectedly, and without due consideration to the users. Recently, Paxful, a peer-to-peer Bitcoin platform, with over one million five hundred users in Nigeria, shot down its operations and marketplaces. This unexpected shot down will, no doubt, affect users of the platform, negatively. What is required of the CBN is to evolve a very robust regulatory framework and highly technological monitoring mechanism that will be most suited for supervising the use of cryptocurrencies in Nigeria. Such robust regulatory framework and highly technological monitoring regime should be so dynamic as to, always be far ahead of dubious entities that may attempt to use to use cryptocurrencies for money laundering, terrorism financing, advanced fee fraud and other malfeasances and to beat such dubious entities to their game.
THE FUTURE OF BLOCKCHAIN AND CRYPTOCURRENCY IN NIGERIA
Nigeria has a vibrant tech startup ecosystem, with many focusing on blockchain and cryptocurrency applications. This entrepreneurial spirit could drive innovation and create new use cases for these technologies in various sectors, including finance, agriculture, and healthcare. the future of blockchain and cryptocurrency in Nigeria appears promising, with the potential for significant growth and impact across various sectors. However, this future will be shaped by a complex interplay of regulatory, economic, technological, and social factors. The government's approach to regulation and support for innovation will be crucial in determining the extent to which Nigeria can harness the benefits of these technologies while mitigating potential risks.
Complex Blockchain Legal Issues Require Skilled Guidance
Blockchain businesses face the same legal issues every other entity must face, from raising capital to hiring employees to securing their intellectual property. However, businesses in the blockchain industry face the additional challenges of operating in an uncertain and rapidly evolving legal landscape. To help blockchain businesses overcome these challenges, our blockchain lawyers provide comprehensive counsel on a wide range of legal issues, including:
Business Formation: Compliance starts with the basics. Blockchain attorneys advise businesses regarding their everyday operations, including entity formation, corporate governance, and capital-raising activities.
Cybersecurity and Data Privacy: While blockchain technology offers enhanced security and privacy features, it also comes with unique risks. Blockchain and crypto attorneys address issues related to data protection, privacy laws, and cybersecurity, ensuring that clients’ blockchain implementations comply with applicable regulations.
Smart Contract: Blockchain lawyers also play a crucial role in drafting and reviewing smart contracts—self-executing contracts with the terms directly written into code. They ensure these contracts are legally binding and enforceable, helping clients navigate potential disputes that may arise from misunderstandings of the technology.
Tax Planning and Structuring: Cryptocurrency taxation can be complex. Our cryptocurrency lawyers work alongside knowledgeable cryptocurrency tax advisors to ensure you get seamless advice.
Regulatory Compliance: The cryptocurrency market is subject to a web of ever-evolving regulations. One of the primary roles of blockchain lawyers is to ensure that businesses comply with the complex and often changing regulatory landscape surrounding cryptocurrencies and blockchain technology. A blockchain attorney helps businesses comply with state-level licensing requirements, federal securities regulations,anti-money laundering laws, and tax regulations. Blockchain attorneys also advise clients on the legislative developments related to blockchain worldwide.
Intellectual Property: Blockchain businesses must safeguard their intellectual property (IP). A blockchain attorney helps clients devise a comprehensive IP strategy, including patent applications, trademark registration, and protection of proprietary technology.
Litigation: Litigation involving blockchain technology has skyrocketed in recent years. Businesses facing investor lawsuits, government enforcement actions and investigations, and business litigation require robust representation.
CONCLUSION
The concept of currency is associated with the power of the sovereign to establish a legal framework providing for the central issuance of banknotes and coins. Naira and Kobo are the official legal tender (currency) in Nigeria which is legally backed up by many Acts. As it is now, the closest law in the regulation of cryptocurrency in Nigeria is the CBN Guidelines which is not a law for the regulation or otherwise of the use of cryptocurrencies. At best the said Guidelines can be described as caveat emptor, as the Supreme Court decided in Oladejo Adewuyi v Fadele Akanni and Ors (1993) LPELR-SC.36/1987.
Despite its volatility and other demerits, cryptocurrencies are widely accepted in Nigeria, as the high volume of trade in the virtual currencies, in the country, show. This provides the justification for making cryptocurrencies legal in Nigeria and imposing on the CBN, the obligation to fashion a very robust and dynamic regulation mechanism for the virtual currencies. Doing so will fill the current gap occasioned by near-absence of regulation of cryptocurrencies in the country and will allow the maximization of the various benefits inherent in cryptocurrencies.
Blockchain technology is a digital technology that allows people to create a digital record of transactions that cannot be altered. It is primarily used in the financial world, but it is also being explored in other fields outside finance. Based on the technology impact, the technology can be used in Nigeria, as it has the potential to help reduce corruption, electoral result manipulation, increase transparency, provide data security, and improve education management systems. With a very promising future, it can be observed that Blockchain technology has the potential to foster innovations and is expected to revolutionize computing in several areas such as voting, Healthcare services, Education, Business industries, and where centralization was unnatural and privacy important. Therefore, the governments need to embrace this new and disruptive technology.
RECOMMENDATIONS
Despite the identified risks associated with virtual currencies and the reluctant attitude of even developed countries in totally accepting cryptocurrencies, as an alternative currency, it has come to stay and any law aimed at prohibiting or criminalising the usage of cryptocurrencies may not be effective. It is recommended that the Nigerian government should, as a matter of urgency, enact a comprehensive law and also come up with policies that will regulate the use of virtual currencies in the country. Such laws and policies should aim at protecting the rights of the users of cryptocurrencies. The Nigerian government should partner with willing Nigerian Universities by sponsoring and adequately funding research works on BT and cryptocurrencies. Furthermore, those circumventing existing CBN policies on crypto transactions should be punished. It is also recommended that the robust regulatory mechanism for cryptocurrencies earlier recommended should include efficacious strategies aimed at preventing cryptocurrencies from serving as a means of financing terrorism (both internationally and domestically) and other criminal acts. Also, there should be increased awareness to educate cryptocurrency users on the nature, gains and high risks attached to BT and cryptocurrencies.
SOURCES
The Imperative of Blockchain Technology in Nigeria General Election: International Journal of Social Science Research and Anthropology; Vol. 3
The Place of Industrial Policy in the Adoption of Blockchain Technology in Nigeria: GPH Jornal of Applied Management Science; Vol. 5
Possible Impact and Potentials of Blockchain Technology in Nigeria: Academy Journal of Science and Engineering
https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency
An Overview of Blockchain Technology Adoption: Journal of Computer Science and Information Technology; Vol 7
National Blockchain Policy for Nigeria 2023
SHAPING TOMORROW’S ENERGY TODAY: AFRICA’S RESPONSE TO NEW HYDROCARBON FRONTIERS
Our recent energy webinar themed ' Shaping Tomorrow's Energy Today, Africa's Response to New Hydrocarbon Frontiers' brought together key stakeholders/ industry experts to tackle the complex issues surrounding decarbonization and energy transition amidst Africa's new hydrocarbon discoveries. We discussed the impact of new discoveries on carbon emissions and energy transition pathways, strategies for decarbonization, green projects, and responsible governance, and lots more.
Download our report below to delve deeper into the key insights and discussions during the webinar.
THE FIRMA ADVISORY FACILITATES A 2-DAY TRAINING ON THE ETHICAL USE OF AI FOR HEIRS HOLDINGS LIMITED
The Firma Advisory successfully facilitated a comprehensive capacity-building training program on Artificial Intelligence and the Law for legal practitioners and secretaries of Heirs Holdings Limited, one of Nigeria's largest investment holding companies. The training took place from August 29 to 30, 2024, marking a significant milestone not only for the Firm and Heirs Holding, but also for the broader legal landscape in Nigeria. This two-day training initiative reflects the commitment of several companies in Nigeria to staying at the forefront of technological advancements and aligns with global best practices in the use and regulation of artificial intelligence.
The global community can no longer deny or neglect the presence and impact of artificial intelligence (AI). The advent of AI has sparked controversial and critical conversations for and against using AI tools across various sectors of the world. These conversations have spanned over time and have not yielded a proposed desire to eradicate AI.
Conversely, AI has to be embraced since there is little or nothing to be done against it. The earlier we accept that AI is here to stay and find ways to mitigate the adverse effects it may pose, the better it will be for humans. In light of this reality, global efforts have been put together to harness the ‘powers’ of AI, regulate its use, and prescribe ethical standards for using AI tools. Following global efforts, private institutions have taken the initiative to regulate the use of AI tools in their organizations and this is what Heirs Holdings seeks to do. Therefore, they took the first step in this direction by seeking guidance on deploying AI tools and the regulatory standards to be upheld.
ABOUT THE FIRMA ADVISORY
The Firma Advisory is a law and consulting firm headquartered in Abuja, Nigeria. We are a dynamic team of young and visionary people who provide solutions that cut across legal advisory, public policy advisory, social impact, legislative drafting, and support services to clients within the private sector, and government and non-profit organizations. Our practice areas span tech law, energy law, intellectual property, business law, banking, and finance & equity among others. As a law firm specializing in technology, creativity, and innovation, we are dedicated to delivering exceptional legal and advisory services to meet the unique needs of our clients in the sector. We are also committed to fostering meaningful dialogue within the technology sector. This training on the use of artificial intelligence is one of many platforms where The Firma Advisory has championed the deployment of AI.
ABOUT HEIRS HOLDINGS LIMITED
Heirs Holdings is a family-owned investment company committed to improving lives and transforming Africa. Their portfolio spans the power, oil and gas, financial services, hospitality, real estate, and healthcare sectors, operating in twenty-three countries worldwide. They are inspired by ‘Africapitalism’, the chairman, Tony O. Elumelu’s belief that the private sector is the key enabler of economic and social wealth creation in Africa.
Driven by this philosophy, they invest long-term, bringing strategic capital, sector expertise, a track record of business turnaround, and operational excellence to companies they invest in. Their philanthropy, the Tony Elumelu Foundation catalyzes entrepreneurship across Africa through its $ 100 million commitment to empowering young African entrepreneurs.
DAY ONE OF THE WORKSHOP
RESOURCE PERSONS:
Ms. Chinenye Uwanaka – Co-Founder, Co-Convener, Africa Policy Conversations; Managing Partner, The Firma Advisory.
Ms. Lavina Ramkissoon – aiMom, Adviser to AU/UN
Arun Godwin Patel – CTO & Co-founder of Audico and Director of Halo Technology Lab.
Chinedu Albert – Senior Associate, The Firma Advisory.
MODERATOR: Naomi Oboma – Associate, The Firma Advisory.
On the first day of the training, we saw an array of activities. The first speaker was Ms. Chinenye Uwanaka of the Firma Advisory, who spoke on understanding and defining the concept of artificial intelligence, and quick facts about AI globally, in Africa, and in Nigeria. The distinction between AI and human intelligence was drawn to understand how artificial intelligence works. A conclusion was reached that there are various aspects where human intelligence and artificial intelligence are bridged to produce excellent results. There was an activity where participants were asked to criticize the definition of AI by the EU AI Act, and a case study showing how Kenya is revolutionizing its agricultural sector by using AI.
The aiMom took the second session which looked into the evolution of AI & the African landscape of AI including developments, opportunities, and challenges. She began the evolution of AI from the foundation of science and technology, innovations accelerations – emerging and future accelerators, and future scenarios such as smart homes, smart grids, and smart cities; autonomous vehicles, energy internet, next-generation education, artificial narrow intelligence, and connected cars etc. She showed an AI timeline that began with the Turing Test of 1950 to Google’s Alphago of 2017, as well as global definitions of AI by countries such as the United States, China, Japan, the European Union, and Japan. Africa’s definition of AI as “a field of computer science that emphasizes the creation of intelligent machines that work and react like humans”. Key areas of AI include learning, reasoning, problem-solving, perception, and language understanding.
On the African overview, there are AI strategies by countries such as Mauritius, Egypt, Benin Republic, Senegal, Morocco, Sierra Leone, Algeria, and Tunisia. And AI Policies from Rwanda in 2023, and Nigeria in 2024.
There was a quiz session facilitated by Ikpuho Ikpe of the Firma Advisory where the AI tool Mentimeter was used to pose questions to the participants and a winner emerged.
The third session was facilitated by Chinedu Albert of the Firma Advisory and he spoke on global, regional, and national AI governance: an analysis of governance frameworks relevant to AI, including national policies and international laws. Globally, there exists the United Nations Resolution on AI, and the UNESCO Recommendation on the Ethics of AI. Regional efforts include the European Union’s AI Act, the ASEAN Guide on AI Governance and Ethics 2024, The Santiago Declaration for Latin America and the Caribbean, the OECD Recommendation on AI, and the United States Executive Order 14110 on artificial intelligence. He emphasized the need for policy collaboration among countries, the risks of uncoordinated policies, and the benefits of global coordination.
There was data on the top 10 countries working on AI innovation in Africa; South Africa, Egypt, Morocco, Tunisia, Tanzania, Zimbabwe, Cote d’Ivoire, Senegal, Zambia, and Botswana. In terms of governance frameworks on AI in the African continent, there is the Africa Transformation Strategy (2016-2025), the Continental AI Strategy 2024, the Malabo Convention, the Africa Continental Free Trade Area Agreement, the African Intellectual Property Organization, the African Telecommunications Union instruments, the Model Law on Access to Information for Africa 2013, AU Charter on Human and People’s Rights, the AU Competition Policy, the AU Gender Policy, the AU Youth Charter, the AU Disability Rights Protocol, the AU Convention on Preventing and Combating Corruption, and the Model Law on Whistleblowing for Africa 2020.
Nationally, it was noted that there is currently no specific legislation that directly regulates AI in Nigeria. However, Nigeria is actively developing its AI governance strategy, recognizing the transformative potential of this technology for economic growth and social progress. On policies and strategies, there is the National Digital Economy Policy and Strategy (NDEPS) 2020-2030, the National AI Strategy which is currently being developed, the signing of the Bletchley Declaration on AI in November 2023, the adoption of a new US-led coalition to ensure AI is secure by design, along with 17 other countries. Nigeria has produced about 1,349 AI publications and aims to engage top researchers of Nigerian descent globally in crafting its National AI Strategy.
He concluded his session by analysing the legal basis for AI governance in Nigeria looking at the existing laws such as the Constitution of the Federal Republic of Nigeria 1999, the Nigerian Data Protection Act 2023, the Federal Competition and Consumer Protection Act 2018, the Cybercrime (Prohibition and Prevention) Act 2015, and the laws on intellectual property in Nigeria.
The fourth session facilitated by Arun Godwin Patel focused on getting started with AI: Practical steps and tools for beginners to initiate AI adoption, covering basics, resources, and implementation strategies. He began by questioning the distinct qualities of AI projects, whereby a distinction was made between traditional IT and AI in terms of scope, process, dependency outcome, and ethics. Another point was on AI as a framework, the key components of an AI project ranging from business case, data engineering, AI experimentation, ‘productionisation’, and lifecycle management. AI experimentation was further broken down into business understanding, data understanding, data preparation, modeling, evaluation, and deployment. On AI readiness, three factors for ascertaining company readiness were discussed; availability and quality of available data, expertise and resources, and commitment to using AI tools. Speaking about the feasibility matrix, he said that the simple test would be how feasible the AI project, is and how valuable it is. In evaluating the success of an AI project, the accuracy of the AI system, and how much money and time is saved are the likely yardsticks to measure such success.
In conclusion, he said that AI needs specific attention, tools, and resources, the right people, and a valid business case.
Next on the agenda was a break-out session for the participants. It was facilitated by Monica Umeche of the Firma Advisory which included a case study of Samsung’s ban on using AI tools after a data leak incident. The participants in their various break-out rooms studied the case study, answered the questions assigned to them following the case study, proffered their definitions of AI, and came up with suggested policy areas for an in-house AI policy.
The activities for the first day ended at about 4:00 PM with a practical session facilitated by Ikpuho Ikpe of the Firma Advisory who displayed the use of certain AI tools for legal research, contract review, and contract drafting.
DAY TWO OF THE WORKSHOP
RESOURCE PERSONS:
Ms. Chinenye Uwanaka – Co-Founder, Co-Convener, Africa Policy Conversations; Managing Partner, The Firma Advisory.
Ms. Lavina Ramkissoon – aiMom, Adviser to AU/UN
Chinedu Albert – Senior Associate, The Firma Advisory.
MODERATOR: Naomi Oboma – Associate, The Firma Advisory.
The second day of the training began with a session facilitated by Ms. Uwanaka, it started with the question, “Will AI take your job?” The question was answered by discussing the legal risks and future of work in deploying artificial intelligence in legal practice. It noted the current situation of the Nigerian Legal System in using AI, the efforts towards adaptability, how AI is revolutionizing the legal profession in Nigeria, the challenges of integrating AI into legal practice in Nigeria, and the way forward for the Nigerian legal system.
Furthermore, there was a discussion on the legal risks and challenges in AI adoption; cybersecurity vulnerabilities; unfairness, bias, and discrimination; autonomous weapons powered by AI; lack of AI transparency and explainability; social manipulation through AI algorithms; AI hallucinations and delusional outputs (a case study on ChatGPT’s fabricated accusation of sexual harassment); job losses due to AI automation; privacy and data protection issues; accountability and liability frameworks; and intellectual property rights. The discussion highlighted these legal risks, the best practices for risk mitigation in AI adoption, proposed global legal framework for AI risk assessments i.e. the EU AI Act, OECD’s AI risk evaluation framework, UNESCO’s Ethical AI Recommendations, and the expectations for Nigerian companies.
The second session titled “The start-up and investment landscape of AI” was facilitated by Ms. Lavina Ramkisson (the aiMom). It contained an overview of Africa's AI start-up ecosystem, investment opportunities, funding trends, and success stories driving innovation.
The third session was facilitated by Mr. Chinedu Albert of the Firma Advisory. The discussion looked into regulatory frameworks and compliance with the risks of using AI. He talked about AI governance, the international framework for AI regulation, viewing the EU AI Act which categorizes the use of AI into unacceptable risk, high risk, limited risk, and minimal risk, and also provides mandatory compliance measures for those seeking to use those AI tools. Furthermore, he talked about the developments in AI legislation in Africa: Mauritius was the first African country to adopt a national AI Strategy in 2018, Egypt established the National Council for Artificial Intelligence in 2019, launched its AI Strategy in 2021, and endorsed the Egyptian Charter for Responsible AI in 2023. Ethiopia, Mauritius, Rwanda, and Tunisia have national AI Policies, and several countries have data protection laws influencing AI. The provisions of the AU Digital Transformation Strategy 2020-2030, the Continental AI Strategy, the AU Convention on Personal Data Protection and Cyber Security: the Malabo Convention, the AfCFTA Protocol on Digital Trade, and the ECOWAS E-commerce Strategy all regulate the risks of using AI in Africa. In Nigeria, there is the Nigeria Data Protection Act 2023, the Cybercrime Act 2015, the National Digital Economy Policy and Strategy 2019, the upcoming National AI Strategy, the Digital Economy and E-Governance Bill 2024. All of this addresses the risks involved in deploying AI tools. The recent Guidelines on the Use of AI released by the Nigerian Bar Association was discussed and its provisions were made available to the participants.
Lastly, Mr. Albert looked at the ethical and social implications of using AI such as bias and discrimination, transparency and accountability, AI and deep fakes, and social implications such as employment and workforce displacement, digital divide, impact on social interactions, and cultural impact.
CONCLUSION:
The two-day exercise marks an important milestone not just for Heirs Holdings but also for Nigeria. The initiative to train its legal managers and secretaries on the use of AI is indeed fast-paced and aligns with global practices on using and regulating artificial intelligence. This is applauded and the Firma Advisory hopes that entities and individuals will take the initiative to get trained in the deployment of AI.
THE FIRMA ADVISORY FACILITATES A 3-DAY CAPACITY BUILDING WORKSHOP ON E-COMMERCE
The Firma Advisory facilitated a three-day capacity-building workshop for public and private stakeholders in the e-commerce sector, focusing on recent policy and regulatory development globally and regionally. The workshop provided insights into key regional governance documents such as the AfCFTA Digital Trade Protocol, the AU Continental AI Strategy, the ECOWAS e-Commerce Strategy, and global initiatives like the WTO Joint Statement on e-commerce. Additionally, discussions were held on the draft Nigeria’s National E-Commerce Policy and Strategy.
This workshop was held in collaboration with the Federal Ministry of Industry, Trade, and Investment, the Federal Ministry of Communications and Digital Economy, Firma Advisory, and GIZ. It aimed to strengthen Nigeria's e-commerce policy framework and build the capacity of key stakeholders. The engaging discussions highlighted the immense opportunities e-commerce presents for Nigeria's economic growth and development, while also addressing the challenges that need to be navigated.
This collaborative effort underscores the commitment of the Nigerian government, in partnership with international development organizations, to harness the power of e-commerce and position the country as a leading digital economy in Africa.
LEVERAGING INTELLECTUAL PROPERTY TO DRIVE INNOVATION AND ECONOMIC GROWTH
Our Managing Partner, Ms. Chinenye Uwanaka, recently shared her expertise on Leveraging Intellectual Property to Drive Innovation and Economic Growth in Nigeria at the Ernest Shonekan Centre for Legislative Reforms and Economic Development. She shed light on key intellectual property rights issues and offered practical solutions to address them. To learn more about her insights and our firm's IP expertise.
CORPORATE COMMERCIAL NEWS LETTER
We are excited to bring you the latest happenings within the corporate, commercial, and finance world with our exciting mid-year newsletter!
Are you enthusiastic about the corporate commercial and finance sector? Then this newsletter is for you. Click on the link below to read more
ENERGY NEWSLETTER
We are excited to bring to you the latest insights and developments within the energy landscape. Our energy newsletter for the second quarter covers a range of significant events and initiatives shaping the future of energy. We also share some of the transformative work The Firma Advisory is doing within the sector.
So take a seat, relax and enjoy!
DIGITAL LENDING IN NIGERIA: A CLOSER LOOK AT NIGERIA'S REGULATORY LANDSCAPE
EXECUTIVE SUMMARY
The emergence of digital lending platforms in Nigeria has revolutionised the financial landscape, providing a seamless and convenient way for customers to access loans online. With the exponential growth of digital lending, it has become crucial to highlight the established regulatory frameworks that ensure legality, customer protection and data privacy within the digital lending space. This article explores the emergence of digital lending platforms, highlighting its contributions to Nigeria’s financial sector as well as the concerns surrounding the operations of such platforms; particularly as it relates to data protection, data privacy etc. It also delves into the regulatory institutions tasked with monitoring the operations of digital platforms in the country, with the aim of establishing better understanding of how these platforms are regulated to ensure stability within the financial sector.
INTRODUCTION
The traditional model of lending requires approaching a financial institution to obtain a loan on the condition that repayment of such loan will be made at a future date as agreed by the parties. The process often involves conducting a financial review of the borrower’s financial standing, filing of required documents such as guarantor statements, bank statements, address verification documents, etc, coupled with frequent visits to the bank throughout the loan application process which could take weeks or months depending on the type and size of the loan(1). Nigeria’s financial sector recorded a shift from the traditional model of lending to modern lending procedures with the emergence of digital lending platforms(2). These platforms revolutionised the financial landscape in Nigeria, such that customers may obtain loans online seamlessly and within the shortest time possible. The post covid-19 era witnessed the exponential growth of digital lending in Nigeria, as it became an alternative source of accessing funds for addressing pressing financial needs by Nigerians(3). With the growing popularity of digital lending platforms, it became imperative to establish regulatory frameworks to ensure legality, customer protection and data privacy within the financial sector.
OVERVIEW OF DIGITAL LENDING PLATFORM
Digital lending is an innovative approach to obtaining financial support using technology to streamline the application and approval processes(4). It is simply the process of accessing and obtaining loans online using digital platforms. These platforms leverage technology to streamline the lending process, making it more convenient and accessible for borrowers. Whilst the traditional lending process requires loan applicants to physically approach financial institutions to obtain loans, digital lending platforms can be accessed anywhere, anytime online. The process usually involves obtaining and filing an online application form from the desired digital lending platform, providing financial documents such as income statement, credit history, employment details, as well as a valid means of identification(5). An assessment is carried out to ensure the applicant's credit worthiness based on the information submitted, thereafter, the applicant is provided loan offers to choose from with the accompanying interest rate and repayment plan(6). Once final checks are concluded, the application is approved and the funds are disbursed. Asides the convenience occasioned by accessing and obtaining loans online, digital lending platforms process loan applications faster and offer competitive rates(7). In addition, these platforms use artificial intelligence (AI) to offer customer support through virtual assistants, online chats etc. For lenders and debt investors, these platforms allow them tailor their portfolios according to their preference and risk tolerance(8). They can browse through available loans and conduct research before making investment decisions. Despite the many benefits associated with these platforms, there were concerns regarding customer protection and data privacy, as some of the digital lending platforms resorted to unethical debt recovery practices to recover loans from customers(9). Others offered absurd terms for loans with exorbitant interest rates; there were also concerns for lenders as most borrowers obtain loans and refuse to repay, making loan retrieval difficult(10). As a result, it became imperative to establish regulatory frameworks to regulate the operations of digital lending platforms.
REGULATORY LANDSCAPE OF DIGITAL LENDING IN NIGERIA
Federal Consumer and Competition Protection Commission Act (FCCPA) 2018
The FCCPA ( or the ‘Act’) established the Federal Consumer and Competition Protection Commission (the ‘Commission’) as an agency tasked with the responsibility of protecting consumer rights and regulating competition in markets(11). The Commission is dedicated to ensuring that consumers have access to healthy and quality products and services, free from exploitation and harm(12). The Act empowers the Commission to make regulations geared at promoting consumer protection and healthy competition within Nigeria’s competitive market. Particularly, Section 17(b) of the Federal Competition and Consumer Protection Act 2018 provides that the Commission is charged with the responsibility of initiating broad based policies and reviewing economic activities in Nigeria to identify anti-competitive, anti-consumer protection and restrictive practices which may adversely affect the economic interest of consumers and making rules and regulations under the Act and any other enactment with regards to competitions and protection of consumers.
Consumer protection in the digital lending space revolves around ensuring fairness, transparency, and responsible practices for borrowers. Various actions can breach consumer protection principles in the digital lending space. For instance, some digital lenders obscure essential terms within lengthy contracts or use complex language that borrowers may struggle to comprehend fully. This lack of transparency can result in misunderstandings or exploitation of borrowers. Furthermore, aggressive debt collection tactics, such as incessant phone calls, threats of legal action, or contacting employers and family members, infringe upon consumer rights and privacy. Moreover, digital lending platforms that advertise loans with no credit checks or guaranteed approval without clearly disclosing terms and conditions mislead consumers regarding the actual costs and risks associated with borrowing.
In 2022, the Commission issued the Interim Guidelines for the Registration of Digital Lending Platforms in Nigeria (the ‘Guidelines’). The Guidelines were introduced to ensure, amongst others, registration of digital lending platforms in Nigeria with the FCCPC, so as to promote better regulation of their operations(13). Accordingly, all digital lending platforms are required to undergo registration with the Commission. This involves obtaining and filling a form known as ‘form DGL 001’, providing details of their source of funding, website, email address, initial key players, agents, amongst others. Documents such as certificate of incorporation, service level agreements with service providers, evidence of tax payments or tax waivers, evidence of membership in any trade or professional associations, etc are also required to be submitted upon registration with FCCPC. Applicants are also required to fill ‘form DGL 002’, confirming that their business is legitimate and lawful, also indicating that the information provided is accurate and complies with applicable regulatory requirements.
DOES THE FCCPC HAVE THE POWERS TO REGULATE DIGITAL LENDING IN NIGERIA?
There are debates as to the powers of the FCCPC to regulate digital lending in Nigeria. Many are of the opinion that financial services such as digital lending fall under the purview of the Central Bank of Nigeria (CBN) as the apex financial regulatory institution in Nigeria; and that the FCCPC does not possess regulatory powers over financial institutions in the country. Section 65(1)(a) of the Banks and Other Financial Institutions Act (BOFIA) 2020 expressly states that the provisions of the FCCPA shall not apply to any function, act, financial product, or financial services issued or undertaking, and transaction howsoever described by a bank or other financial institution licensed by the Bank (the ‘Bank’ being the CBN). This explains that the FCCPC may make rules and issue directives, except with regards to financial products or services issued by financial institutions licensed by the CBN. Furthermore, BOFIA defines ‘other financial institutions’ to include any individual, body, association, group of persons, whether corporate or unincorporated, other than banks licensed under this Act which carries on the business of a finance company, whether such business is conducted virtually, digitally or electronically(14).
The definition of a ‘finance company’ was adequately captured in the CBN Revised Guidelines for Finance Companies in Nigeria 2014, and refers to companies licensed to carry on the business of providing financial services to individual consumers. Such financial services include consumer loans, particularly the provision of consumer and business loans to individuals and MSMEs, a service digital lending platforms provide (15). The combined reading of the above provisions explains that digital platforms may be regarded as ‘finance companies’ that fall under the regulatory powers of the CBN. More so, where a latter statute is inconsistent with the provisions of an earlier statute on the same subject matter, the provisions of the latter statute will prevail. In this case the provisions of the BOFIA will take precedence.
Therefore, the CBN retains its role as the primary regulatory authority for financial institutions in Nigeria, including licensed digital lending platforms. The FCCPC cannot position itself as a regulator of financial institutions including digital lending platforms, as this would exceed its legal authority. Nevertheless, the FCCPC does have jurisdiction over consumer protection violations within the digital lending sector. Therefore, if digital lending platforms contravene consumer protection principles, the FCCPC has the authority to impose sanctions on these platforms without directly regulating their financial operations.
NIGERIAN DATA PROTECTION DATA PROTECTION ACT 2023
The Nigeria Data Protection Act (NDPA) complements the Nigerian Data Protection Regulations 2019 (NDPR) as the main regulation on data protection in Nigeria, such that where there is conflict between both laws, the Act prevails. The NDPA established the Nigerian Data Protection Commission, tasked with the responsibility of regulating the deployment of technological and organisational measures to enhance personal data protection. The Commission is also mandated to accredit, licence and register suitable persons to provide data protection compliance services. Data protection breaches in the digital lending space can manifest in several ways. This includes instances where lenders mishandle or misuse borrowers' personal and financial information, or neglect to establish strong cybersecurity measures to safeguard sensitive data from unauthorised access. Additionally, breaches may occur through unauthorised sharing of borrowers' personal and financial details with third parties without obtaining explicit consent or disclosing the intended purposes for such sharing. Furthermore, failure to inform borrowers about the methods of data collection, usage, storage, and sharing, along with associated risks, also constitutes breaches in data protection practices.
The NDPA provides rules and regulations governing data protection which applies to data processors or controllers domiciled, resident or operating in Nigeria. Data processors or controllers are individuals, entities or agencies that process personal data of data subjects resident in Nigeria. Digital lending platforms are considered data processors and controllers subject to the provisions of the NDPA because they process personal data provided by applicants during the loan application process. In processing data, such platforms are required to obtain consent of their data subjects or applicants in line with section 25(a) of the NDPA. The section provides that data processing shall be lawful where a data subject has given and not withdrawn consent for the specific purpose or purposes for which personal data is to be processed. Furthermore, the request for consent must be made clearly and the consent given by the data subject must be in the affirmative(16). It may also be provided orally, in writing, or through electronic means(17). The NDPA also highlights principles governing the processing of personal data which all data processors or controllers, including digital lending platforms are mandated to adhere to. Accordingly, a data controller or data processor shall ensure that personal data is processed in a fair, lawful and transparent manner(18). Such data must also be collected for specified, explicit, and legitimate purposes, and not to be further processed in a way incompatible with these purposes(19). In addition, it must be adequate, relevant, and limited to the minimum necessary for the purposes for which the personal data was collected or further processed (20). Digital lending platforms that fail to comply with these principles as well as other provisions under the NDPA, are liable to penalties including fines or imprisonment. As such, digital lending platforms must ensure complete adherence to the provisions of the Act, particularly as it relates to obtaining and processing of customers’ data.
MONEY LENDERS LAWS OF VARIOUS STATES
The Money Lenders Law of various states is the primary legislation which governs money lending across various states of the federation. These laws are targeted at regulating money lending, including digital lending within respective states and sets out the licensing requirements for companies intending to run money lending operations. One of the few states to establish a robust money lenders law is Lagos state; having established the Lagos State Money Lenders Law 2018 (‘MLL’). According to the MLL, a money lender includes ‘every person whose business is that of money lending or who carries on, advertises, announces himself or holds himself out in any way as carrying on that business..’(21). Furthermore, It requires such persons to obtain a licence before engaging in the business of money lending and provides sanctions for persons that fail to do so(22). To obtain the required licence, the money lender must be registered with the Corporate Affairs Commission as a limited liability company with at least two directors(23). Furthermore, an application must be made to the Chief Magistrate within the District where the money lending business is situate(24). A further application is made to the Lagos State Ministry of Home Affairs together with accompanying documents as stipulated in the MLL(25). It is imperative to note that money lenders, including digital lending platforms are only authorised to provide their services within the state under which law the money lenders licence was issued(26), thus in the event that a state is yet to enact a money lenders law, digital lenders operating within such state will have to be licensed by the CBN as a finance company under the CBN Revised Guidelines for Finance Companies in Nigeria 2014.
COMPANIES AND ALLIED MATTERS ACT 2020
The Companies and Allied Matters Act 2020 regulates companies and businesses that operate within Nigeria. The Act establishes the Corporate Affairs Commission as the regulatory body tasked with ensuring compliance with the provisions of the Act. According to section 8 of the Act, the Commission is empowered to supervise the formation, incorporation, management and dissolution of companies, incorporated trustees and business names in Nigeria. Therefore, any business enterprise, corporation or organisation must comply with the provisions of the Act and be duly registered by the Commission. Upon registration, such company is issued a certificate of incorporation, rendering it a valid entity licensed to carry out business operations within Nigeria. Registration with the Commission is a licence requirement for digital lending platforms as lenders are required to provide a certificate of incorporation issued by the Commission before they can be licensed by the CBN, FCCPC or the Money Lenders Law under various states.
CONCLUSION
Digital lending platforms have provided an easier and efficient way to access loans in Nigeria. However, with the rapid growth of digital lending, it is crucial to establish a harmonious relationship among regulatory institutions. This collaboration will promote consistency, protect borrowers and create a favourable environment for the growth and success of digital lending platforms. By working together these institutions can establish clear guidelines and responsibilities, ensuring that digital lending platforms operate within a regulated framework. Additionally, the requirement for money lenders to be licensed under the laws of each state they intend to operate makes the licensing process somewhat cumbersome due to the several steps and requirements involved in obtaining a money lenders licence in each state. This buttresses the earlier point on the need for a robust framework that caters to the needs of both borrowers and lenders.
REFERENCE:
Ibid.
Ibid.
https://p2pmarketdata.com/articles/digital-lending/ accessed 12th May 2024.
Ibid.
Ibid.
https://www.linkedin.com/pulse/explore-future-lending-how-digital-software-help-lenders accessed 12th May 2024.
https://p2pmarketdata.com/articles/digital-lending/ accessed 12th May 2024.
https://www.dataphyte.com/latest-reports/digital-lending-platforms-are-good-but-their-activities-are-suspect/ accessed 12th May 2024.
https://fccpc.gov.ng/resources-library/fccpa/#:~:text=The%20FCCPA%20established%20the%20Federal,to%20safe%20products%20and%20secure accessed 12th May 2024.
Section 17(a) Federal Consumer and Competition Protection Act 2018
Ibid.18(b)
FCCPC Interim Guidelines for the Registration of Digital Lending Platforms in Nigeria
Section 131 Banks and Other Financial Institutions Act 2020
Section 2 CBN Revised Guidelines for Finance Companies in Nigeria, 2014
Section 26(7) Nigeria Data Protection Act 2023
Ibid.
Section 24(1)
Ibid.
Ibid.
Section 2 Lagos State Money Lenders Law 2018
Ibid.Section 5(1)
https://trustedadvisorslaw.com/procedure-for-money-lenders-license-in-nigeria/ accessed 7th July 2024.
Ibid.
Ibid.
https://trustedadvisorslaw.com/procedure-for-money-lenders-license-in-nigeria/ accessed 7th July, 2024.
FROM POLICY TO PIPELINE: THE EVOLUTION OF NIGERIA'S GAS SECTOR IN THE DECADE OF GAS
EXECUTIVE SUMMARY
“From Policy to Pipeline: The Evolution of Nigeria's Gas Sector in the Decade of Gas” explores Nigeria's journey in harnessing its abundant natural gas resources to drive economic growth and industrialization. The article begins by highlighting Nigeria's position as a major gas producer but notes that much of its gas is still exported, pointing to the need for a comprehensive approach to domestic gas utilisation. It examines key policy, legislative, and regulatory frameworks that support the Decade of Gas initiative, including the Petroleum Industry Act, the Nigerian Energy Transition Plan, and the Nigerian Gas Flare Commercialisation Programme. These initiatives demonstrate Nigeria's commitment to prioritising gas development and utilisation. The article also delves into the critical gas infrastructure projects, such as the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline, the Escravos-Lagos Pipeline System (ELPS), and the NLNG Train 7 project, highlighting their significance in enhancing domestic gas utilisation and supporting economic growth. Despite facing challenges such as inadequate funding and security concerns, Nigeria has significant opportunities in the commercialisation and utilisation of gas, which can improve the power sector, increase domestic consumption, and drive industrialization. By addressing these challenges and leveraging these opportunities, Nigeria can realise the benefits of the Decade of Gas initiative and transform its economy.
INTRODUCTION
Nigeria's vast natural gas reserves present a significant opportunity for the country's power sector, especially with policies aimed at boosting LPG and CNG production. However, a considerable amount of gas is still being exported, highlighting the need for a comprehensive approach to address current challenges. This article examines the Decade of Gas so far, as it relates to Policy, Legislative and Regulatory Frameworks as well as gas infrastructures in Nigeria that are advancing the course of the industrialisation and commercialisation of the economy of Nigeria in this Decade of Gas.
President Muhammadu Buhari declared the 2020s as Nigeria's “Decade of Gas” in March 2021. This initiative signifies a strategic shift towards prioritising natural gas as a critical engine for the nation's industrial development. While boasting some of the largest gas reserves in Africa, Nigeria's current production falls short compared to regional neighbours. In 2021, production stood at 1.62 trillion standard cubic feet (1.62 TSCF), lagging behind Algeria (3.56 TSCF) and Egypt (2.4 TSCF). This highlights the significant potential waiting to be unlocked through the “Decade of Gas” initiative. [1]
To fully capitalise on its gas potential, there is a need for Nigeria to focus on increasing domestic gas utilisation for power generation and other industrial applications. This requires investment in infrastructure, policy reforms, and collaboration between the government and private sector.
POLICY, LEGISLATIVE AND REGULATORY FRAMEWORKS SUPPORTING THE DECADE OF GAS
Policy and regulatory changes have significantly influenced Nigeria's gas sector, with key initiatives aimed at prioritising gas development and utilisation as a national priority. The declaration of the 2020s as the Decade of Gas by the previous administration led by President Mohammadu Buhari is dedicated to industrialising Nigeria through domestic gas utilisation. Following this, several policy and regulatory changes have been implemented to support these objectives, including the following:
1. The Petroleum Industry Act, 2021
2. Gas Flaring, Venting And Methane Emissions (Prevention Of Waste And Pollution) Regulations, 2023
3. The Nigerian Energy Transition Plan
4. Nigerian Gas Flare Commercialization Programme
THE PETROLEUM INDUSTRY ACT, 2021
The Petroleum Industry Act, 2021 (the “PIA”) enacted in 2021, marked the culmination of a 20-year effort to reform Nigeria's oil and gas sector. This comprehensive legislation aims to address longstanding challenges and create a more efficient and competitive industry. One of its key provisions is the prohibition of natural gas flaring or venting, aligning with global efforts to reduce emissions and protect the environment.
Section 105 of the PIA prohibits gas flaring or venting, emphasising the need to conserve natural resources and minimise environmental impact. However, section 107 provides exemptions for specific situations, such as facility start-up or strategic operational reasons. This demonstrates a balanced approach to regulation, allowing for flexibility while promoting responsible gas utilisation.
GAS FLARING, VENTING AND METHANE EMISSIONS (PREVENTION OF WASTE AND POLLUTION) REGULATIONS, 2023
Regulation 6 of the Gas Flaring, Venting And Methane Emissions (Prevention Of Waste And Pollution) Regulations, 2023, (the “Regulation”) empowers the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), who is the Upstream Regulator to grant exclusive permits for accessing flare gas. These permits are granted based on specified terms and conditions, including commercialising or utilising disposed gas. This regulatory framework encourages the industrialisation and commercialisation of Nigeria's gas resources, creating opportunities for economic growth and development.
Furthermore, Regulation 10 outlines the obligations of permit holders, including the execution of milestone agreements, gas sales connection agreements, and agreements with licensees or lessees.
These requirements highlight the focus on establishing commercial relationships and infrastructure for the sale and distribution of gas, supporting industrial and commercial activities that depend on a stable and accessible gas supply. From the above, it could be inferred that the PIA and its associated regulations provide a near-comprehensive framework for the sustainable development of Nigeria's gas sector, promoting economic growth and environmental stewardship.
THE NIGERIAN ENERGY TRANSITION PLAN
The Nigerian Energy Transition Plan (ETP) was released in 2022. The ETP recognizes natural gas as a crucial transition fuel on the path to net-zero emissions. This recognition underscores the importance of gas in the nation's energy mix, which is essential for industrial and commercial activities. The plan acknowledges Nigeria's abundant gas reserves as a key factor in ensuring energy security, which is important for industrialisation and commercialisation efforts, as a reliable energy supply is essential for driving economic growth. [2]
Gas is also considered essential for stabilising the grid, which is necessary for integrating renewable energy sources at scale. This indicates that gas will not only support industrial and commercial activities directly but also enable the growth of renewable energy, which is crucial for sustainable industrialisation. The ETP also acknowledges the role of gas, particularly Liquefied Petroleum Gas (LPG), in addressing the nation's clean cooking deficit. This highlights the diverse uses of gas beyond industrial and commercial applications, showing its importance in improving the quality of life for Nigerian citizens. [3]
Moreover, the ETP emphasises the commercialization of gas as a priority for the Nigerian government. This indicates a strategic focus on leveraging gas resources for economic development, which is fundamental to industrialisation and commercialisation efforts. The ETP's recognition of the critical role of gas in Nigeria's energy transition and its emphasis on its commercialisation demonstrate a clear commitment to using gas as a driver for industrialisation and commercialisation in the country.
THE NIGERIAN GAS FLARE COMMERCIALISATION PROGRAMME (NGFCP)
The Nigerian Gas Flare Commercialisation Programme was initially launched in 2016, demonstrating the Federal Government of Nigeria's (FGN) unwavering commitment to ending the unacceptable practice of gas flaring in the country's oil fields. This commitment is further exemplified by the FGN's ratification of the Paris Climate Change Agreement and its membership in the Global Gas Flaring Reduction Partnership (GGFR), which aims for a global flare-out by 2030 and a national flare-out target by 2025. [4]
Recognising the untapped potential of flared gas, the NGFCP seeks to harness these resources to stimulate economic growth, drive investments, and create job opportunities, particularly in oil-producing communities and for Nigerians at large. The program acknowledges the importance of innovative technologies in maximising the value of flared gas. The NGFCP 2022 represents a new phase of the programme, redesigned to align with evolving market dynamics and to effectively implement the FGN's policy objectives for eliminating gas flares. This strategic approach is expected to yield significant multiplier effects and development outcomes for Nigeria. [5]
These policy, legislation and regulatory changes reflect the Nigerian government's commitment to leveraging its abundant gas resources to drive economic growth, energy security, and sustainable development. Effective implementation and monitoring will be crucial to ensure the success of these initiatives and maximise their impact on Nigeria's gas sector.
GAS INFRASTRUCTURE DEVELOPMENT IN NIGERIA
1. The Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline
The Ajaokuta-Kaduna-Kano (AKK) gas pipeline is a critical infrastructure project spearheaded by the Nigerian National Petroleum Corporation (NNPC). This 614km pipeline, valued at $2.8bn, is a vital component of Nigeria's Gas Master Plan, designed to efficiently transport natural gas from the southern region to central Nigeria. The AKK pipeline is the first phase of the larger 1,300km Trans-Nigerian Gas Pipeline (TNGP) project, aimed at leveraging Nigeria's abundant gas resources for power generation and domestic consumption. [6] Furthermore, the TNGP project is part of a larger vision that includes the proposed 4,401km-long Trans-Saharan Gas Pipeline (TSGP), which aims to export Nigerian natural gas to customers in Europe. [7] This demonstrates Nigeria's ambition to play a significant role in the global gas market and highlights its commitment to economic growth and development.
Scheduled for completion in July 2024, the AKK pipeline is projected to significantly enhance domestic and regional gas utilisation, particularly for power generation and industrial development. The project includes plans to process hydrocarbon liquids at Ajaokuta, producing LPG, while the bulk of the gas will be transported to supply feedstock for new power plants and petrochemical facilities in Abuja, Kaduna, Kano, and Katsina. This strategic infrastructure investment is poised to stimulate economic growth, improve energy access, and drive industrialisation in Nigeria. [8]
2. Escravos-Lagos Pipeline System (ELPS)
The Escravos-Lagos Pipeline System (ELPS) is a critical component of Nigeria's gas infrastructure, facilitating the transportation of natural gas from the Niger Delta to various consumption areas, including power plants in the South-West region of the country. It is operated by the Nigerian Gas Company Limited, and has a capacity of 1.1 billion standard cubic feet (1.1BSCF) of gas per day. [9]
The ELPS, a 36-inch pipeline constructed in 1989, plays a key role in supplying gas to support industrial and commercial activities. While the pipeline begins at the Nigerian Gas Company's gas treatment plant in Warri, the gas originates from Chevron's Escravos gas plant in Delta State. In addition to supplying gas to power plants in the South-West, the ELPS also feeds into the West African Gas Pipeline System, which is part of the broader Nigeria-Morocco Gas Pipeline project (which is also referred to as the Trans-Saharan Gas Pipeline). [10]
In line with Nigeria's commitment to enhancing its gas transportation infrastructure, the ELPS underwent a significant expansion. The construction of the Escravos–Lagos Pipeline System II, announced in April 2019 and completed in February 2021, effectively doubled the pipeline's production capacity to 2.2 billion standard cubic feet of gas per day (2.2BSCF/D). [11]
This infrastructure plays a vital role in supporting industries reliant on natural gas as a primary energy source, and demonstrates Nigeria's commitment to enhancing its gas transportation infrastructure, thereby contributing significantly to economic growth and industrialization.
3. Obiafu - Obrikom - Oben Gas Pipeline Project
The Obiafu-Obrikom-Oben (OB3) Gas Pipeline, also known as the East-West pipeline, stretches from the Obiafu-Obrikom gas plant near Omuku, Rivers State, to Oben, Edo State. It is owned by NNPC and operated by the Nigerian Gas Company. [12] This pipeline has the capacity to produce 2 billion standard cubic feet of gas per day (2BSCF/D). The OB3 Gas Pipeline Project stands as one of the largest gas transmission pipelines in Nigeria and Africa, distinguished by its impressive 48-inch diameter and 127-kilometre length. Additionally, the project features an associated Gas Treatment Plant (GTP) capable of producing 2 billion standard cubic feet of gas per day (2BSCF/D). [13]
The OB3 gas pipeline project is designed to supply the Assa North-Ohaji South (ANOH) gas project, a significant greenfield gas condensate development venture operated by Seplat Energy PLC. [14] The ANOH project aims to produce 300 million standard cubic feet of gas per day (300MMSCF/D), supporting the domestic market and generating an equivalent of approximately 2.4 gigawatts of electricity for the country.[15] The ANOH Project is also a key gas infrastructure in the Decade of Gas.
These strategic pipeline projects represent Nigeria's commitment to commercialising and industrialising its gas resources, as it will facilitate the transportation of natural gas essential for various industrial activities, particularly power generation, upon completion.
4. NLNG Train 7
Nigeria LNG Limited (NLNG) stands as one of the world's premier LNG suppliers, leveraging Nigeria's abundant natural gas resources. Established on May 17, 1989, NLNG was tasked with producing Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export. The NLNG Train 7 Project represents a pivotal expansion endeavour, set to augment production capacity by 35% from the current 22 Million Tonnes Per Annum (MTPA) to 30 MTPA. [16]
This expansion is poised to solidify Nigeria's position as a leading, dependable, and favoured LNG supplier in the continuously expanding energy landscape. While the Final Investment Decision was made in 2019, predating the declaration of the Decade of Gas by former President Muhammadu Buhari, it was not until June 2021, following the announcement of the Decade of Gas, that the construction of Nigeria LNG Limited's (NLNG) Train 7 project was thereafter inaugurated by him.[17]
The Train 7 project signifies substantial growth for Nigeria's oil and gas sector, with an anticipated investment exceeding $10 billion encompassing both Train 7 and the upstream segment of the LNG value chain. This initiative is expected to unlock new development prospects within the industry, bolstering Nigeria's Foreign Direct Investment (FDI) profile and instilling confidence in foreign investors.[18]
The NLNG Train 7 Project aligns perfectly with Nigeria's Decade of Gas initiative, which aims to leverage the country's abundant natural gas resources for economic development and industrialization. By increasing LNG production capacity, the project contributes directly to the goals of the Decade of Gas by promoting gas as a key driver of economic growth, diversification, and energy security.
Furthermore, the investment in the NLNG Train 7 Project demonstrates Nigeria's commitment to developing its gas sector and expanding its LNG export capabilities. This not only enhances Nigeria's position as a major LNG supplier but also supports the country's efforts to reduce gas flaring and monetize its gas resources more effectively.
It is safe to say that the NLNG Train 7 Project is a key component of Nigeria's strategy to maximise the benefits of its gas resources and drive sustainable development across various sectors of the economy, in line with the objectives of the Decade of Gas.
5. Floating Liquefied Natural Gas Project in Nigeria
A floating LNG (FLNG) is an LNG plant constructed on a ship or a barge which has LNG storage and offloading facilities.[19] FLNGs produce, liquefy, store and transfer liquefied natural gas via carrier ship to the mainland where both the market and the money is based. [20]
In 2023, the Nigerian National Petroleum Corporation (NNPC) and UTM Offshore signed a Heads of Terms (HoT) agreement for the construction of Nigeria's first indigenous floating LNG project. This agreement considered a significant step toward bolstering Nigeria's energy security and promoting the utilisation of its abundant gas resources, was signed on 20 July 2023 in Abuja. [21] Similarly, in December 2023, UTM Offshore, NNPC Limited, and the Delta State Government signed an agreement regarding Nigeria's first floating LNG (FLNG) project. The planned vessel will have a capacity to handle 1.8 billion metric tons per year for both domestic supplies and exports. The Final Investment Decision (FID) is expected to follow shortly, with construction set to begin in 2024. [22]
It is also noteworthy to highlight that Wison and NNPC signed a Memorandum of Understanding (MoU) at COP28 in Dubai on December 6, 2023. The agreement will see the two companies work together to chart a roadmap for the FLNG project development, ultimately leading to an investment decision. [23]
The agreement between NNPC and UTM Offshore for the construction of Nigeria's first indigenous floating LNG project represents a significant milestone in the country's efforts to commercialise and industrialise its gas sector. This project is in line with the goals of the Decade of Gas initiative, which seeks to leverage Nigeria's abundant gas resources for economic development and industrialization.
The floating LNG project will allow Nigeria to monetize its gas resources more effectively by converting them into LNG for both domestic use and export. This will not only help to meet the country's energy needs but also position Nigeria as a major player in the global LNG market, contributing to economic growth and job creation.
Furthermore, the signing of the above agreements demonstrate the commitment of the Nigerian government and NNPC to developing the country's gas sector and attracting investment in the industry. By partnering with UTM Offshore and other stakeholders, Nigeria is taking concrete steps towards realising the objectives of the Decade of Gas and unlocking the full potential of its gas resources for the benefit of its economy and people.
6. The Maiduguri Emergency Power Project (MEPP)
The Maiduguri Emergency Power Project represents a crucial initiative aimed at providing reliable and sustainable electricity to Maiduguri, the capital of Borno State, and its surrounding areas. This project is not only essential for meeting the energy needs of the region but also aligns with the Federal Government's commitment to deepening gas utilisation in Nigeria's domestic markets, as outlined in the "Decade of Gas" (2021-2030) declaration. By leveraging domestic gas resources for power generation, the MEPP contributes to the overall goal of improving access to electricity and stimulating economic activities in Maiduguri and across Borno State. [24][25]
The MEPP's significance extends beyond electricity provision, as it is part of a broader strategy to enhance domestic gas utilisation, reduce gas flaring, and promote economic development in the region. This project exemplifies the government's proactive approach to addressing energy challenges while supporting sustainable development goals. As the MEPP progresses, it is expected to have a positive impact on the socio-economic landscape of Maiduguri and Borno State, demonstrating the transformative potential of strategic energy infrastructure projects in Nigeria.
CHALLENGES AND OPPORTUNITIES
The development of gas infrastructure in Nigeria, despite its potential impact, has faced several challenges that have hindered progress. These challenges include inadequate funding, which has resulted in delays and multiple missed deadlines for gas infrastructure projects. Additionally, the country's security concerns, including pipeline vandalism and attacks on infrastructure, have contributed to the slow development of gas infrastructure.
Furthermore, while the Petroleum Industry Act prohibits gas flaring, there is still a limited gas gathering and distribution network in Nigeria. This limitation is primarily due to the high cost of gas infrastructure projects and the need for significant investment in infrastructure development. Additionally, the lack of adequate infrastructure has led to inefficiencies in the gas supply chain, hindering the country's ability to fully utilise its gas resources, especially in addressing its energy poverty.
Despite these challenges, there are significant opportunities for Nigeria in the commercialization and utilisation of gas, as outlined in the Decade of Gas initiative. Utilising gas in the economy can improve the power sector, increase domestic gas consumption for cooking and transportation, and provide industries with a reliable and cost-effective energy source. By addressing these challenges and leveraging these opportunities, Nigeria can further develop its gas sector and realise the benefits of the Decade of Gas initiative.
CONCLUSION
In the journey from policy to pipeline, Nigeria's gas sector has witnessed a transformative decade marked by significant strides in policy, legislation, and infrastructure development. The declaration of the 2020s as Nigeria's Decade of Gas set the stage for a renewed focus on gas as a catalyst for industrial growth, underscored by key initiatives such as the Petroleum Industry Act and the Nigerian Energy Transition Plan. These policy and regulatory changes have laid a solid foundation for advancing the industrialisation and commercialisation of Nigeria's economy through the sustainable development of its gas resources.
The implementation of major gas infrastructure projects like the AKK Gas Pipeline, ELPS, and NLNG Train 7 reflects Nigeria's commitment to expanding its gas sector and enhancing energy security. Despite facing challenges such as funding constraints and security risks, Nigeria has positioned itself as a key player in the global gas market. Looking ahead, sustained investment in infrastructure, continued policy support, and collaboration between the public and private sectors will be crucial in realising the full potential of Nigeria's gas sector, driving economic growth, and ensuring a sustainable energy future.
REFERENCES
1. https://energy-utilities.com/assessing-the-first-years-of-nigeria-s-decade-of-news122255.html accessed on 19 February, 2024
2. https://www.energytransition.gov.ng/natural-gas/ accessed on 19 February, 2024.
3. Ibid
4. https://ngfcp.nuprc.gov.ng/about-ngfcp/ accessed on 19 February, 2024.
5. Ibid
6. https://pemedianetwork.com/petroleum-economist/articles/midstream-downstream/2024/nigeria-s-biggest-gas-pipeline-advances/ accessed on 19 February, 2024.
7. https://www.nsenergybusiness.com/projects/ajaokuta-kaduna-kano-akk-gas-pipeline/ accessed on 19 February, 2024.
8. Supra
9. https://www.gem.wiki/Escravos%E2%80%93Lagos_Pipeline_System
10. Ibid
11. Ibid
12. https://nairametrics.com/2023/09/29/nnpcl-gas-petroleum-ministers-assure-of-ob3-gas-pipeline-completion/#:~:text=The%20Obiafu%2FObrikom%2FOben%20 accessed on 20 February, 2024.
13. https://www.gem.wiki/Obiafu-Obrikom-Oben_Gas_Pipeline accessed on 18 February, 2024.
14. https://www.seplatenergy.com/our-company/our-operations/midstream-gas/anoh-gas-processing-plant/ accessed on 20 February, 2024.
15. https://anohgas.com/anoh-field/ accessed on 20 February, 2024.
16. https://www.nigerialng.com/Train7-Project/Pages/Background.aspx accessed on 21 February, 2024.
17. Ibid
18. Ibid
19. https://www.chiyodacorp.com/en/service/offshore/ accessed on 20 February, 2024.
20. https://www.oilandgasiq.com/fpso-flng/articles/guide-to-flng accessed on 20 February, 2024.
21. https://www.offshore-energy.biz/nnpc-and-utm-offshore-ink-deal-on-nigerias-first-indigenous-floating-lng-project/ accessed on February, 2024.
22. https://www.offshore-mag.com/vessels/article/14303007/nigerias-first-flng-project-close-to-fid accessed on 20 February, 2024.
23. https://www.offshore-energy.biz/nnpc-teams-up-with-wison-for-floating-lng-project-in-nigeria/ accessed on 20 February, 2024.
24. https://nnpcgroup.com/ accessed on 20 February, 2024
25. https://x.com/nnpclimited/status/1631353485504524290?s=46&t=y0lLsWAKUISw-yzLf93qSQ accessed on 19 February, 2024.
ENERGY LAW NEWSLETTER
As April comes to an end, we are thrilled to unveil our quarterly newsletter, marking its inaugural edition. As We have curated an array of exciting updates on some of our latest work and insights on the latest
developments in the energy landscape.
So, grab your favourite drink, settle in, and let's delve into the latest happenings!
Click on the link above to read.
NIGERIA INTERNATIONAL ENERGY SUMMIT (NIES)
At the recently concluded Nigeria International Energy Summit (NIES), themed, “From Blueprint to Reality: Navigating Nigeria's Gas Decade and Balanced Narrative on Energy Transition,” our Managing Partner, Ms. Chinenye Uwanaka, who participated as a panellist, emphasised the following points:
Implementation is key! Despite having several blueprints such as the Gas Masterplan and Energy Transition Plan, Nigeria struggles with execution. We need the right people in the right roles and stakeholders to drive change. It is time for a private sector-led approach to ensure Nigeria's decade of gas becomes a reality.
The process must be private sector-led. Everyone is a key player in ensuring that Nigeria’s decade of gas moves from blueprint to reality.
Without a clear vision, industrialisation becomes a challenge. Nigeria's path to industrialisation hinges on clear energy goals as well as the need for coordination in our laws and policies. We need to decide if gas is our destination fuel.
Do we want gas to be our destination fuel? What do we want to achieve in the short/medium term?
The issue is not the inadequacies of laws and policies, but rather the challenges in Nigeria's rule of law, enforcement of contracts, and access to justice. She stressed the need for effective enforcement to attract investors. To leapfrog, we must rethink our approach to energy, enforcement of contracts and industrialisation.
Do you agree that the state of Nigeria’s rule of law, enforcement of contracts, and access to justice has stalled its energy sector from leapfrogging into a dominant position in the global energy market?
NIGERIA INTERNATIONAL ENERGY SUMMIT (NIES)
At the recently concluded Nigeria International Energy Summit (NIES), themed, “From Blueprint to Reality: Navigating Nigeria's Gas Decade and Balanced Narrative on Energy Transition,” our Managing Partner, Ms. Chinenye Uwanaka, who participated as a panellist, emphasised the following points:
Implementation is key! Despite having several blueprints such as the Gas Masterplan and Energy Transition Plan, Nigeria struggles with execution. We need the right people in the right roles and stakeholders to drive change. It is time for a private sector-led approach to ensure Nigeria's decade of gas becomes a reality.
The process must be private sector-led. Everyone is a key player in ensuring that Nigeria’s decade of gas moves from blueprint to reality.
Without a clear vision, industrialisation becomes a challenge. Nigeria's path to industrialisation hinges on clear energy goals as well as the need for coordination in our laws and policies. We need to decide if gas is our destination fuel.
Do we want gas to be our destination fuel? What do we want to achieve in the short/medium term?
The issue is not the inadequacies of laws and policies, but rather the challenges in Nigeria's rule of law, enforcement of contracts, and access to justice. She stressed the need for effective enforcement to attract investors. To leapfrog, we must rethink our approach to energy, enforcement of contracts and industrialisation.
Do you agree that the state of Nigeria’s rule of law, enforcement of contracts, and access to justice has stalled its energy sector from leapfrogging into a dominant position in the global energy market?
THE BINDING NATURE OF EXECUTIVE ORDERS ON SUCCESSIVE GOVERNMENTS IN NIGERIA
INTRODUCTION
Leadership in Nigeria takes place within the framework of a Federal Presidential republic and representative democracy where the executive power is held by the president. The 1999 constitution of the Federal Republic of Nigeria vests all the executive powers of the federation in the person of the president which can be exercised directly by him or his vice president or members of his cabinet. In the dynamic landscape of Nigerian politics, the question of an outgoing administration's executive orders binding a succeeding government arises frequently. As a democratic nation, Nigeria upholds the principle of continuous governance, but transitions can create uncertainties around inherited policies and directives. In carrying out the administrative functions of the office, the President in a presidential system may issue orders to ministries and agencies setting out government policies, issuing directives or command actions relating to functions of the executive arm. For the purpose of continuity of good governance, the coming into power of a new administration does not expressly terminate an existing executive order made by the outgone administration except where that order is ultra vires, unconstitutional and illegal. This is because executive orders are often grounded in the constitutional authority of the President and are considered part of the institutional memory and continuity of government operations. Abruptly nullifying all previous executive orders could disrupt ongoing policies and initiatives, leading to inefficiencies and uncertainty. Instead, the new administration typically evaluates existing executive orders on a case-by-case basis, considering their legality, effectiveness, and alignment with the administration's priorities. This approach allows for a smooth transition while ensuring that governance remains consistent and responsive to evolving needs and circumstances. However, an executive order issued by the President becomes rather controversial when it appears ultra vires. This is because law-making is ordinarily within the remit of the legislature while the President is empowered to execute laws made by the legislature. Moreover, the 1999 Constitution does not set out to make the Presidency a lawmaking body working in competition against the Legislature.
DEFINITION AND NATURE OF EXECUTIVE ORDERS
The expression, “executive order”, is neither defined in the 1999 Constitution nor is it interpreted in any legislation of the National Assembly or House of Assembly of any State. However, the very few Acts of the Legislature that contain the expression ‘executive order’ do not define nor interpret it. The Interpretation Act also does not contain any definition of the expression. In situations like this where there is no executive, legislative or judicial definition, the enquirer has to turn to the academia for an unofficial but weighty clarification. The American author, K. R. Mayer, defines an executive order as “a presidential directive that requires or authorizes some action within the executive branch. The 10th Edition of the Black’s Law Dictionary defines an Executive Order as “An order issued by or on behalf of the president, intended to direct or instruct the actions of executive agencies or government officials, or to set policies for the executive branch to follow.” Executive orders are basically directed at the executive branch of government and its agencies. It is not and should not be directed at individuals, although individuals would be invariably affected by it.
THE LEGALITY AND USE OF EXECUTIVE ORDERS
The 1999 Constitution provides for the powers of the president. Where the constitution sets limits to the powers of the President, any executive order outside the express instructions of enabling law will be adjudged invalid. Although executive orders serve essentially as administrative tools, they serve as legislative tools where they create rules, modify laws or set out the parameters for their implementation. It is usually argued that executive orders violate the doctrine of separation of powers which may result in the creation of a monstrous executive. Legal scholars have however justified the use of executive orders in Nigeria by reference to section 5 of the Constitution of the Federal Republic of Nigerian, 1999 (as amended) (“the Constitution”) which vests the executive powers of the Federation and the States on the President and Governors respectively, and extends same to the “execution and maintenance” of the Constitution and all laws made by the national and state legislatures. Section 130(2) of the Constitution further provides “The President shall be the Head of State, the Chief Executive of the Federation and Commander in Chief of the Armed Forces of the Federation.” It is submitted with respect that inherent in the powers of the President (as Chief Executive of the Federation) includes the power to issue orders and provide policy guidelines to officials under his control as well as ensure the execution and maintenance of the Constitution, all laws made by the National Assembly and all matters with respect to which the National Assembly can legislate on.
Executive law-making has also been justified by reference to section 315 (2) of the Constitution which empowers the President or the Governor to, modify any existing law to bring it into conformity with the Constitution by an order. This provision was held to be valid in A.G Abia State v A.G Federation (2003) where the Supreme Court held that the powers given under Section 315 (2) of the Constitution “is not an abuse of the principle of the doctrine of separation of powers” but rather “it is essential to giving meaning to an existing law so that the Constitution itself is not abused.” The Supreme Court stated that the two tests for determining the constitutionality of modification to an existing law are: whether the modification order brings the relevant Act into conformity with the provisions of the Constitution; and whether there has been an infraction of the Constitution by the order.
THE BINDING NATURE OF EXECUTIVE ORDERS
The Nigerian Constitution empowers the President to issue executive orders, but their precise legal weight remains a subject of ongoing debate and interpretation. While they hold some authority, they operate within specific boundaries. Primarily, they cannot contradict existing legislation or overstep the executive's constitutional powers. The binding nature of executive orders is hinged on the following;
The subject matter of the executive order greatly influences its binding nature. Policy-oriented orders addressing general administrative matters typically hold less legal weight and can be readily modified by the incoming government. Take for instance the subsidy removal, this can be altered/changed by a new administration. Quasi-legislative orders, however, implementing existing laws or filling regulatory gaps, might hold more force. Yet, their validity can be challenged in court if deemed to exceed the executive's legal authority.
Contractual orders, creating agreements with third parties (e.g other countries), carry more weight due to contractual obligations. However, the incoming administration still holds the power to renegotiate or revoke them on legal grounds or based on national interest.
Procedural hurdles also play a role. If the outgoing administration followed proper legal procedures and adhered to their authorized powers while issuing the order, it strengthens its validity and reduce the chance of easy reversal.
Ultimately, the courts stand as arbiters in disputes concerning executive orders. The incoming administration or affected parties can challenge the order's legality, potentially leading to its nullification or modification. This judicial review process adds another layer of complexity to the question of binding nature.
Beyond legal intricacies, political realities also influence the fate of executive orders. The incoming administration's stance towards the previous government's policies and priorities significantly impacts the order's longevity. If the order aligns with its objectives, it might remain in effect even without strong legal grounding. Conversely, a stark ideological shift could lead to swift changes, regardless of the order's legal merits.
LIMITATIONS OF EXECUTIVE ORDERS
Executive orders cannot purport to enact a law or create a right and/or a duty which is not backed up by an enabling law validly enacted by the legislature. Where they do this, such right and/or duty is only valid until properly challenged in court.
Executive orders cannot override the Constitution or Acts of the National Assembly and are subject to whether or not the National Assembly has legislative authority over the subject matter and has delegated relevant law-making powers to the President, laws of States’ Houses of Assembly.
It cannot restrict the power of the (future) President to amend its provisions. Thus, they can be amended, or repealed by future occupants (or even the same occupant) of the office. However, in order to show political willingness to see the implementation of the Order through and to assure the organised private sector that the word of the President will be his bond, the President especially if the same President or one sponsored under the platform of the same political party may choose not to without reasonable cause amend an Executive Order.
Where an EO is an exercise of delegated power, the delegate must act in accordance with the terms of the delegation. For instance, where power is delegated by the legislators to the President, his Attorney General, cannot purport to act under this power and vice versa.
CONCLUSION
The binding nature of an executive order in the Nigerian context cannot be determined with a blanket statement. Each case demands a thorough examination considering the subject matter of the specific order, procedural compliance, potential for judicial review, and the incoming administration's political position. Executive orders form an integral part of the Presidential System of Government operating in Nigeria, however, what is required in making executive orders effective tool for positive change, is to ensure that the Executive stays within its range of responsibilities and does not attempt to cross into regions which have been constitutionally delimited to the legislative arm of government and/or other levels of government. The 1999 Constitution does not set out to make the Presidency a law-making body working in competition with the Legislature, but it rather vests the legislative powers of the Federal Republic of Nigeria in the National Assembly to make laws. The Constitution further vests the executive powers in the President to implement these laws. This demarcation of powers reflects the traditional idea that each arm of government is separate and co-equal.
BRIEF OVERVIEW OF THE LAW MAKING PROCESS IN NIGERIA
INTRODUCTION
Nigeria is governed under a three-arm structure; the executive, legislative and judiciary. Each arm of government is tasked with fulfilling specified obligations as contained in the 1999 Constitution of the Federal Republic of Nigeria (“Constitution”). Ideally, the executive and judiciary are saddled with the responsibility of enforcing and interpreting laws respectively; whereas, the legislature is recognized for its law making powers, and responsible for enacting laws that govern Nigeria. Our focus is on the legislature; particularly, the processes involved in making laws in Nigeria.
Nigeria operates a bicameral legislature, which means that there are two primary law making bodies or chambers; the Senate and the House of Representatives (the ‘house’). Both chambers make up what is referred to as the National Assembly, which is empowered by the provisions of section 4(1) of the Constitution to make laws for the peace, order and good government of the federation. In performing its law making obligations, the senate and house must comply with laid down law making procedure.
STAGES IN THE LAW MAKING PROCESS
Stage 1; Presentation of the Bill
Before any document can be recognized as law, it must be tabled as a bill before the National Assembly. A bill is a draft of a proposed law which is presented before the senate and house for deliberation. Such bill can be presented by a member of the senate (or a ‘senator’), the public or a member of the house, and in certain instances, a member of the executive arm of government. Where a bill is proposed by a senator, it is usually presented before the presiding officer, in the person of the senate president. The senate president then forwards the proposed bill to the speaker of the house (or ‘speaker’) for consideration. The speaker is responsible for presiding over the proceedings of the house and where a member of the house presents a bill, the speaker must follow the same procedure employed by the senate president. In the case of an executive proposing a bill, such document is often referred to as an executive bill and presented through the office of the president to the senate president and speaker of the house.
Stage 2; First Review of the Bill
Upon receipt of the bill by the senate or house as the case may be, the bill is forwarded to relevant committees for review. The senate and house have established committees responsible for reviewing bills to ensure that they meet the required standard. One of these committees is the Rules and Business Committee and the Committee on the Rules and Procedure for the house and the senate respectively. In the event that the bill falls below the required standard, the respective chamber committee must send the bill to the legal department of the National Assembly for redrafting. After which, the bill is sent out for gazetting and a date and time for the first reading of the bill is scheduled.
Stage 3; Gazetting of the Bill
Gazetting of the bill involves officially informing the public that the National Assembly is considering a proposed law, and inviting them to make their presentations for or against such bill. The clerk of the appropriate chamber is usually saddled with the responsibility of obtaining a copy of the bill and publishing same in the official gazette (similar to a publication), however where the bill emanates from a member of either the senate or house of representatives, permission must be granted by the appropriate chamber leader before the member sponsoring such bill can publish same in two successive issues of the official gazette.
Stage 4; First Reading
The first reading is done to introduce the bill to members of the appropriate chamber. At this stage the clerk must have distributed copies of the published bill to the members, before proceeding to read out the short title of the bill ( an example of a short title is ‘the constitution of the Federal Republic of Nigeria). The bill is then tabled before the presiding officer and members of either the senate or house are precluded from discussing or debating the contents of such bill until its second reading.
Stage 5; Second Reading
Here, the legislators proceed to debate the bill in their chambers. To begin, a motion to discuss the bill must be moved by a member of the appropriate chamber, and seconded by another member. Where the motion is not seconded, that bill is considered rejected; whereas, a seconded motion will open the floor for debate. Members will be given the opportunity to make presentations for or against the bill, stating reasons why it should be considered or not. Thereafter, the bill will be put to vote and if a simple majority of members vote in favor of the bill, it will proceed to the next stage. It is imperative to note that a motion to commence debate for an executive bill is moved by the presiding officer and must be seconded by another member.
Stage 6; Committee stage
A further review of the bill is conducted by two special committees, namely; the Standing Committee and the Committee of the Whole House. The House and the Senate have the two types of committees charged with the responsibility of examining the bill and making necessary adjustments. The process of analyzing the bill may involve inviting members of the public to make contributions to the bill through a public hearing, and putting such observations into consideration. After which, a report is made and presented together with printed copies of any adjustments to the bill to members of the appropriate chamber. Thereafter, a motion to proceed with the amended bill must be moved by a member before the commencement of the next stage of the law making process.
Stage 7; Third & Final Reading
At this stage, there are no debates or discussions concerning the bill. The clerk reads the long title of the bill and members are only required to study the bill for any mistakes or errors. Where there are none, the bill is accepted and passed into law by the appropriate chamber. Any amendments to the bill made by a member at this stage must be by motion, which must be approved by the presiding officer. In such case, the bill will revert to the Committees discussed earlier for re-evaluation.
Stage 8; Signing of the Bill
After the bill is passed into law, the clerk will print a final copy of the bill and sign same. The bill is thereafter forwarded to the appropriate presiding officer to append his signature and later sent to the other chamber for deliberation and passage. As Nigeria operates a bicameral legislature, a bill which has been passed by the senate must be forwarded to the house of representative for concurrence, and vice versa. Thus, upon receipt of such bill, the receiving chamber must initiate the same law making process as highlighted above and make a decision to pass the bill, reject it in its entirety or make adjustments to it. Where the decision is to make adjustments to the bill, a committee comprising of members of both chambers is formed to deliberate on the amendments and reach a compromise. Such compromise is presented as a report to both chambers for consideration and approval. Upon approval by both chambers, a copy of the updated version of the bill is sent by the clerk of the receiving chamber to that of the originating chamber to produce a final copy of the bill for the president’s assent. However, where the committee fails to reach a compromise, the initial bill will be presented to and passed by the National Assembly before it is sent to the president.
Stage 9; President’s Assent/Signature
The final copy as approved by both chambers is presented to the president for his signature. The signature of the president is required to convert a bill into law and section 58(4) of the Constitution requires the president to append his signature on the bill within 30 days of receipt. Where the president withholds his signature and proposes some amendments to the bill, the National Assembly will consider such amendments and agree to incorporate same into the bill. However, where the president rejects the whole bill, the National Assembly is empowered by the provisions of section 59(4) off the constitution to recall the bill and re-pass it into law by a two-third majority vote in both chambers. Thereafter, such bill will be regarded as law, regardless of the absence of the president’s signature.
This sums up the law making process in Nigeria.
CLASSIFICATION OF DATA CONTROLLERS AND PROCESSORS OF MAJOR IMPORTANCE UNDER THE NDPC GUIDANCE NOTICE
The Nigeria Data Protection Act, 2023 ("the Act") establishes a requirement for a specific category of data controllers and processors to mandatorily register with the Nigerian Data Protection Commission (NDPC). This mandatory registration serves as a crucial compliance measure, considering the heightened risks associated with mishandling or breaching data security in their operations. The criteria for this category, designated as data controllers and processors of major importance, are to be determined and outlined by the NDPC. In a Guidance Notice issued by the NDPC in February 14, 2024, the following criteria have been established for such a designation:
A data controller or processor is considered of major importance if it:
Keeps or has access to a system for processing personal data (like a database), whether it is physical or digital, and meets one of the following conditions:
Processes personal data of more than 200 individuals within six months.
Provides commercial Information Communication Technology (ICT) services on digital devices owned by others, with storage capacity.
Operates in specific sectors such as finance, communication, health, education, insurance, export and import, aviation, tourism, oil and gas, or electric power.
2. Is in a fiduciary relationship with a data subject, meaning it holds confidential information on behalf of the data subject. This is particularly significant because of the potential harm to the data subject if the controller or processor fails to protect their data properly.
For the purpose of registration, data controllers and processors of major significance are further classified into 3 levels:
(a) Major Data Processing-Ultra High Level (MDP-UHL)
(b) Major Data Processing-Extra High Level (MDP-EHL)
(c) Major Data Processing-Ordinary High Level (MDP-OHL)
Implications of Registrations
Compliance with the Act
Publication on the NDPC website for being in compliance.
Close monitoring by the NDPC as data controllers or processors are required to notify the Commission of any significant changes to the information provided during registration. This ensures that the Commission remains informed about developments in data processing activities and can assess their compliance with regulatory requirements.
Although there is no requirement for incorporation in Nigeria, registration mandates providing the name and address of the data processor or its representative, whether operating directly or indirectly, acting on behalf of a data controller. Additionally, it is required to specify the country to which the data controller or processor intends to transfer the personal data, either directly or indirectly.
Finally, data controllers and processors are mandated to finalise their registration within the designated period, which commences on January 30th, 2024, and concludes on June 30th, 2024. Neglecting to register within this timeframe or registering after the designated deadline will constitute a breach of the Act. Furthermore, data controllers or processors found to be in default of this obligation will be subject to penalties as outlined in the Act. Notably, data controllers and processors of major importance may face penalties at the maximum amount of Ten Million Naira or 2% of their annual gross revenue for the preceding financial year, whichever is higher.
THE FIGHT FOR SOCIAL JUSTICE: TALES FROM NIGERIAN CORRECTIONAL SERVICE, KUJE.
Today, February 20th, is World Social Justice Day, and we would like to share an experience that profoundly impacted some of us as we reflect on social justice. November 27, 2023, was a sunny Monday, and though the day was beautiful, the lessons it brought have forever changed our outlook on life.
At around 10 AM that day, some of my colleagues and volunteers from the Access to Justice Initiative, the social justice advocacy and Corporate Social Responsibility arm of The Firma Advisory, embarked on a journey to the Nigerian Correctional Service, Kuje Command (“Facility”) for the "Prison Decongestion" program. The journey from Wuse to Kuje felt lengthy by Abuja standards. However, upon arrival and after passing through the security checks, we were ushered into a neat and well-maintained facility. Thereafter, we were granted access to interact with some of the inmates and get a first-hand account of their experiences there.
Kuje Correctional Centre is a male detention facility. Upon entering, we were introduced to some of the inmates, some of whom had been incarcerated for what lay people would consider "minor offences." Despite having a capacity for 500 persons, the facility housed 692 inmates at the time of our visit. During our conversations with them, some inmates mentioned that their families were unaware of their whereabouts, and this violates Section 6 of the Administration of Criminal Justice Act, 2015, which provides that “the authority having custody of the suspect shall have the responsibility of notifying the next of kin or relative of the suspect of the arrest at no cost to the suspect.” Some purposely kept their families uninformed to spare them worry. One inmate, whom we will refer to as Kay (not his real name), shared that neither his family nor his employer knew he was there, except the Complainant, even his mother was unaware as well. This made me contemplate how individuals can be in detention facilities without their families' knowledge, contributing to the issue of missing persons and overcrowded correctional facilities.
Akpos (not his real name) had a different situation. His family was aware of his incarceration; in fact, his father is a lawyer and a religious leader. However, when Akpos reached out to his father for assistance, his father informed him that he could not attend to him. Akpos had come to Abuja to work and support his family back in his home state. Despite holding two informal jobs, one of which was a security guard, he struggled to make ends meet, including finding accommodation. While on guard duty, he was arrested and charged with wandering. Unable to secure his bail, Akpos did not receive aid from his father.
We also inquired about the access to healthcare in the facility from the Chief Warder of the facility. He informed us that the facility has only one doctor which is worrisome how one doctor can efficiently attend to 692 inmates, excluding staff. However, it is crucial to note that since there is a state of emergency in our health system, these people will also be affected.
Our interest in healthcare access stemmed from the condition of one of the inmates, whom we will call Abu (not his real name). Abu had a swollen and red eye, with both eyes visibly injured. He also appeared to be on the autism spectrum. Abu was arrested for pickpocketing. As we are aware, jungle justice is still prevalent in Nigeria. Abu was severely beaten before his arrest by law enforcement agents. He did not understand English, so Danladi (another inmate) had to translate for him. Abu was homeless but informally employed. He worked offloading vehicles transporting fruits in one of Abuja's markets but barely earned enough. He lacked skills, but we learned that he was learning furniture making in the correctional facility, which was a positive development.
Kay, Akpos, Abu, and Danladi were not the only inmates we counselled or helped secure bail for. Their stories highlight the need for improved social justice in Nigeria. For some of these inmates, their bail was set at ₦20,000 (Twenty Thousand Naira) equivalent to $12.5 (Twelve Dollars, Five Cents), but neither they nor their families could afford it as some of them slept on the streets while free, and others could barely make enough to live by. Now incarcerated, it is more difficult for them and their families to pay the bail sum themselves. As the United Nations emphasises, "World Day of Social Justice reminds us each year of the need to build fairer, more equitable societies." A fairer and more equitable society means access to healthcare regardless of circumstances, access to education, and access to justice.
It is important to note that Kay and others whose whereabouts are unknown are not isolated cases. Every other day, people go missing in Nigeria. While some of their family members and good neighbours may post on social media asking for help in locating them, they may be languishing in prison or even in police detention cells because the database management system is not digitised and cannot be accessed from any of their facilities across the country. It is worth considering that even if some people wanted to inform their families about their whereabouts, they may not have access to their phones due to various reasons and may not even have anyone's phone number memorised. Danladi's (not his real name) case exemplifies this. Neither his wife nor friends knew where he was not because he did not want them to know but because he lacked the means.
On a positive note, we were able to secure bail for a few of the inmates, including covering their transportation expenses home, and their joy knew no bounds.
So, how can the government and good people help build a fairer and more equitable society? - Pay living wages. - Improve the healthcare system. - Digitise the justice system, including police and correctional services facilities records.
“Until we are all free, none of us are free.” - Emma Lazarus
To learn more about the Access to Justice Initiative and how you too can be a part financially or by volunteering, please contact +234-810-584-7051.
THE CONCEPT OF “NO RETURNS, NO REFUNDS” IN E-COMMERCE AND CONSUMER RIGHTS UNDER THE FEDERAL COMPETITION AND CONSUMER PROTECTION ACT (FCCPA) 2018
EXECUTIVE SUMMARY
It is a fact that e-commerce has revolutionized business transactions by leveraging technology and the internet, enabling broader and streamlined customer access and interactions. This shift which spawned a surge in online marketplaces, nonetheless still adopts conventional business practices with the inclusion of terms, both express and implied, to govern transactions. In Nigeria, a prevalent term often seen in receipts or other documentary proofs of payment is "Goods sold in good condition cannot be returned or refunded." More sophisticated organizations encapsulate this in a formal Return Policy to inform customers of their stance on returns and refunds.
It is on this premise that this article discusses the legality of such "no returns, no refunds" policies in the context of Nigerian consumer protection law.
INTRODUCTION
*Madeline (not her real name) was excited to receive her pair of beautiful white sneakers which matched with the pair her husband *Benjamin (not his real name) got for their Valentine's getaway trip. While excitedly trying on her gorgeous pair in the bathroom of the executive suite of the five (5) star hotel where they lodged, she discovered a shocking problem in paradise: Neither sneaker foot fit her feet!
Quickly, Benjamin called and sent direct messages to the online vendor he bought the undersized sneakers from; requesting a replacement or a full refund, in hopes of comforting his beautiful Madeline who was now upset that her dreams of a photo shoot by the clear blue sea around the hotel, in matching outfits and footwear, were about to be ruined, all to no avail.
Several calls and messages later, the vendor responds the following week with this text: “PLEASE REFER TO REFUND POLICY ON OUR WEBSITE WHICH SPECIFICALLY STATES THAT THERE SHALL BE NO REFUND OR RETURNS FOR ITEMS SOLD IN GOOD CONDITION”, At this point, Benjamin and Madeline are stunned and confused, especially after confirming this policy on the vendor’s website and like many customers are on the brink of resigning to their fate.
This scenario is not uncommon with business transactions (online and offline) in Nigeria and a good number of buyers find themselves in circumstances like this so it begs the question: “What can they do when faced with this situation?”
PRELIMINARIES
To get the appropriate context for this conversation, a few questions may arise:
What is a Refund and Return Policy? A Return and Refund Policy is a statement that describes a business's process, policies and requirements for accepting returns.[1] or making refunds to their customers.
Why are such policies used? Retailers usually make use of "no refund/return" policies to reduce costs and risks associated with returns, as some sellers argue returns can be exploited by dishonest buyers at the company's expense and where such instances of returns are on the rise, it may cast a negative light on the business therefore occasioning reputational damage and loss of business.
Is there a standard format for such? A “No refund policy” or clause varies between vendors. Some allow exchanging the purchased item for a similar product while others refuse any returns or exchanges under a strict "no refunds" rule. Some others may permit cancellations for a fee while refunding the remaining prepaid balance while in other cases, refunds are made for defective goods within a short window after purchase.
It is pertinent at this juncture to consider the position of Nigerian Law as it relates to this practice to ascertain if there are reliefs available to customers like Madeline and Benjamin following their ordeal.
THE REGIME OF CONSUMER PROTECTION LAW IN NIGERIA
The good news is that the predicament of our fictional couple is not without a remedy under Nigerian Law as they can seek redress primarily under Nigeria’s principal legislation on competition and consumer protection, which is a Federal law applicable in all states of the Federation, known as the Federal Competition and Consumer Protection Act (FCCPA) 2018.
Before the enactment of the FCCPA, the Consumer Protection Act [2] was the primary legislation on consumer protection in Nigeria which, amongst other things, established a Council “to provide speedy redress to consumers' complaints through negotiation, mediation and conciliation.”[3]
However, as the awareness of the importance of providing a more robust protection of consumer rights grew, it became evident that the existing Act needed to expand its scope of operations and be more efficient in line with modern approaches of Consumerism - a vibrant movement for the protection of the consumer against useless, inferior, or dangerous products, misleading advertising, unfair pricing, etc.[4]
This led to the repealing of the Consumer Protection Act and the enactment of the Federal Competition and Consumer Protection Act in 2018 as the supreme legislation on matters of competition and consumer protection in Nigeria, to the exclusion of any other law on such matters[5].
The FCCPA, has among its objectives, to protect and promote the interests and welfare of consumers by providing consumers with wider variety of quality products at competitive prices, and prohibit restrictive or unfair business practices which prevent, restrict, or distort competition or constitute an abuse of a dominant position of market power in Nigeria [6]. These objectives it achieves through the establishment of the Federal Competition and Consumer Protection Commission (FCCPC) [7] and the Competition and Consumer Protection Tribunal (CCPT) [8]
On the specific consumer rights protected under the FCCPA, Part XV of the Act which comprises Sections 114-131 provides for the following:
Right to be given information in a plain and understandable language;
Disclosure of the prices of goods and services;
Disclosure of second hand or reconditioned goods;
Right to sales records;
Right to select suppliers
Right to adequate trade description and to have products labelled;
Right to cancel reservations, bookings or orders made in advance;
Right to choose or examine goods;
Right to return goods;
General standards for marketing of goods and services;
Right to fair dealings;
Right against goods with false, misleading, and deceptive representations;
Representation test and publication testimonials;
Rights against unfair, unreasonable or unjust contract terms;
Notice required for certain terms and conditions;
Prohibited Transactions, agreements, terms or conditions
Rights pertaining to the quality and safety of goods and services;
Right to safe, good quality goods.
The essence of these rights under the FCCPA is to create a legal, protective ambit within which customers as consumers can hold vendors and service providers accountable and ensure there is greater satisfaction and value for the goods or services paid for by them.
Consequently, given the provisions of Sections 122 (Consumers right to return goods) and 129(1)(b)(1) (Prohibited Transactions, agreements, terms or conditions) of the FCCPA, it is safe to conclude that Madeline and Benjamin have a justiciable right to return the undersized sneakers and request a refund of the full price paid by them to the vendor within a reasonable period [9], as the Refund Policy on the online vendor’s website violates these express provisions of the FCCPA and is therefore, illegal, null and void.[10]
Additionally, where the online vendor is unwilling or uncooperative to their demands, Madeline and Benjamin can thereafter explore any of the following options:
Approach the regulators of the online vendor, if such vendor operates within the organised sector [11] for redress;
Approach the FCCPC by filing a complaint before it outlining the violation/breach and providing supporting documents to that effect.[12] It is noteworthy to state that where any party is aggrieved with the decision of the FCCPC, it may apply to the Competition and Consumer Protection Tribunal (CCPT). Following the decision of the CCPT, if either party is still aggrieved, it may within 30 days of the judgment/order/decision of the CCPT appeal to the Court of Appeal for Judicial Review;[13]
Seek relief before a court of competent jurisdiction, in addition to any redress the FCCPC may impose.
Notwithstanding the obvious position of the FCCPA vis-a-vis Refund Policies in commercial contracts in Nigeria, there may be instances where it might be difficult or impracticable to refund a consumer who is dissatisfied with a purchase or service, such as:
Where the product was not returned to the vendor within a reasonable period after being found unsuitable by the consumer;
where a product or service has been customized or personalized to meet the specific needs or preferences of the customer,
where the product or service is a digital product, such as software or a downloadable file, it may be difficult to verify whether the product has been used or copied;
where the customer has used the product or service in an unauthorized manner or has abused it, then the seller or vendor may have grounds to refuse a refund upon return of such product;
where the product or service is perishable or time-sensitive. In this instance, the product or service may be said to be already utilised by the customer, making it difficult to return the product in its original form and as purchased.[14]
RECOMMENDATION
The FCCPC should organise periodic awareness campaigns to educate members of the public about these specific rights and the available mechanisms for remedying violations of these rights by unscrupulous vendors.
There should be in place practice directions and the establishment of specialized courts to aid the accelerated hearing of consumer rights violation cases in courts of competent jurisdiction to encourage victims of such actions to approach the judicial system with the assurance of speedy dispensation of justice.
The FCCPC should foster dialogue between policymakers, stakeholders in the e-commerce industry and consumer groups to address gaps that may exist as matters of consumer protection in business transactions continue to evolve.
CONCLUSION
It is apparent that the Federal Competition and Consumer Protection Act (FCCPA) 2018 has advanced the frontiers of consumer rights protection beyond the province of merchantability of goods and services to the suitability and fitness for purpose which is one of the major cornerstones of Consumerism globally. By proscribing no refund policies in the main, vendors, online and offline, will be held to a higher standard of customer service and consumer satisfaction, which will in turn strengthen brand reputation and inspire more confidence in consumers who patronise their organisations regardless of the platform.
REFERENCES
https://www.termsfeed.com/blog/sample-return-policy-ecommerce-stores/ accessed 13th February 2024
CAP C25 LFN 2004
Ibid, Section 2
https://www.dictionary.com/browse/consumerism accessed 13th February 2024
Section 104, FCCPA 2018
Ibid, Section 1 (c) and (d)
Ibid, Section 3
Ibid, Section 39
Ibid, Sections 122 (a) and 146 (a) FCCPA 2018
Ibid, Section 129
Ibid, Sections 146 (b) and 147
Ibid, Sections 146 (c) and 148
Ibid, Sections 38, 47 and 55 of the FCCPA
https://www.mondaq.com/nigeria/dodd-frank-consumer-protection-act/1305004/the-legality-of-no-refund-policies-adopted-by-online-vendors-in-nigeria accessed 13th February 2024