Our NEXT market in focus: Nigeria
20 June, 2023
Nigeria is one of the most up-and-coming markets for the global gambling industry. Below, iGaming NEXT takes a deep dive to find out what drives its growth and potential for the future.
With a population of more than 200 million people and a rapidly expanding middle class, Nigeria presents a significant opportunity for gaming companies looking to tap into the African market.
In this African hotspot, nearly 100 licensed local and international sportsbooks are fiercely competing for market share.
However, a regulatory tug-of-war between the National Lottery Regulatory Commission (NLRC) and several state regulators has threatened to stunt the industry’s rapid progress.
Additionally, as discussions surrounding gambling in Africa continue, there is a growing concern regarding responsible gambling failures and the rising instances of gambling-related harm.
Industry experts agree that addressing these issues is paramount to ensuring Nigeria’s gaming sector can thrive sustainably.
Nigeria’s gaming market is experiencing rapid growth, with projected revenue set to triple by 2027, according to H2 Gambling Data.
In 2022, the country generated approximately $480m in gross gaming revenue (GGR).
Several factors contribute to Nigeria’s expanding market, including increased financial independence, a growing disposable income and the widespread use of smartphones and other devices.
Lawyer and Nigerian market expert Immaculata Mbaso told iGaming NEXT that estimates indicate close to 60 million Nigerians between the age of 18 and 40 actively participate in sports betting.
That’s almost a third of Nigeria’s population.
In Nigeria’s bustling gaming industry, sports betting takes the spotlight as the most sought-after product, although online slots and casino are increasing in popularity.
While comprehensive data is scarce, industry insiders consistently point to Bet9ja and 1xBet as the leading sportsbooks in the country.
However, it is more than a two-horse race: BetKing, 22Bet, Sportybet, and Merry Bet have all earned considerable acclaim among Nigerian players, garnering a loyal following in the process.
Currently, foreign companies are required to have a minimum of 20% local ownership to operate in Nigeria.
Betsson entered Nigeria in July following the acquisition of a 60% stake in local sportsbook Betbonanza, which was founded in 2019 and is licensed by the Lagos State Lotteries & Gaming Authority.
Another prominent player making waves in the Nigerian market is Betway, which is also licensed in Lagos via Digi Bay Limited.
However, it’s not only operators that have Nigeria on their radar.
Earlier this year, affiliate Better Collective formed a content and commercial media partnership with one of Nigeria’s leading newspaper groups.
“Sports betting has slowly emerged as a lucrative segment, leveraging Nigeria’s huge football culture,” Petra Zackrisson, Better Collective’s SVP of growth told iGaming NEXT.
“The Nigerian gaming industry is driven by a large and young English-speaking population, increasing internet and mobile penetration and passion for sports and entertainment,” she added.
Challenges to Overcome
While international companies are entering the market, there are challenges to navigate.
Zackrisson highlighted the importance of selecting the right partner and establishing robust local teams that possess a genuine understanding of the local sports fans and the broader online market.
Factors such as slow internet connection, basic mobile devices, and an evolving, yet still developing, online market also need to be taken into account when operating in Nigeria.
Additionally, Zackrisson said, it is essential to acknowledge that Nigerian betting behaviour differs from that commonly observed in Europe, with a strong preference for offline platforms.
As is the case in other African markets, a retail presence is important to build trust among consumers.
Although online betting has gained in popularity, particularly during the Covid-19 pandemic, having a physical store “reassures African bettors about a company’s authenticity” and commitment to fulfilling its obligation, lawyer Mbaso explained.
A significant point of contention in Nigeria’s gambling industry is the regulatory overlap at federal and state level as both have claimed the right to regulate the sector.
At the federal level, the NLRC is responsible for issuing licences, but 22 out of 36 federal states also have their own regulatory bodies.
Among these, the Lagos State Lotteries & Gaming Authority (LSLGA) is considered the most important.
As Nigeria’s largest federating state, Lagos is often described as a country within a country, boasting the seventh-largest economy on the African continent.
Under the oversight of CEO Bashir Are, the LSLGA oversees a substantial portfolio of more than 65 companies.
Concurrently, approximately 40 companies have obtained sports betting licences from the NLRC.
The regulatory dispute has persisted for years and the case has now reached Nigeria’s Supreme Court.
However, a decision on the matter is not expected until November 2023, prolonging the uncertainty surrounding regulatory jurisdiction in the country’s gambling industry.
LSLGA CEO Are told iGaming NEXT that the country is working to “resolve the issue”.
While most companies comply with the rules and regulations of the LSLGA, Are suggested that some “companies are exploiting the regulatory tussle.”
Operators, meanwhile, have expressed frustration over this “double regulation”.
In essence, the state regulators assert that regardless of the obligations imposed by the NLRC on operators, they must also comply with additional demands from the states in which they wish to operate.
This dual burden creates complexity and financial implications, including multiple taxes and double licensing fees.
Meanwhile, advocates for responsible gambling stress the ongoing regulatory conflict is detracting from the critical issues that really need addressing.
“We definitely need more provisions for responsible gambling,” said Mbaso.
“This starts with the issue of underage gambling, but we see a lot of adverts for sports betting products that don’t promote safer gambling,” she explained.
Fisayo Oke, founder of Gamble Alert, a Nigerian NGO dedicated to promoting responsible gambling and supporting those affected by addiction, shared a similar view.
He believes that while responsible gambling policies exist, the effectiveness of these measures are often compromised by a more pressing focus on revenue.
Oke pointed out that a verification platform has been created to ensure the authenticity of Know Your Customer (KYC) documentation collected by operators as well as to ensure operators adherence to anti-money laundering (AML) policies.
However, according to Oke, the existing regulations, although present on paper, require more rigorous evaluation of their impact on promoting responsible gambling.
A Remote Permit
The federal government’s recent proposal for a “remote operator permit” has stirred up significant controversy within the industry.
This permit would enable international operators to legally provide online gambling services to Nigerian players without the requirement of establishing a physical presence in the country.
The NLRC has suggested that operators would need to pay an initial fee of $100,000 to obtain the remote operator permit, followed by an annual fee of $50,000 for the subsequent four years.
However, little progress has been made due to the ongoing regulatory situation, creating a sense of uncertainty surrounding the implementation of the new law.
The NLRC has not responded to iGaming NEXT’s interview request.
A United Front
Are, the CEO of the Lagos regulator, believes that standardisation and harmonisation of state regulations are key to progress.
He also chairs the federation of state gaming regulators, an association comprising all state regulators, and underscores the significance of unity within the association.
“We are working on standardising our operations and regulations, so that when investors are coming in, they know they have the same standard, no matter which state they go to,” he explained.
Furthermore, he stated that Lagos is diligently working towards enhancing and fortifying its ecosystem for the gaming industry.
The state has widespread fiber optic infrastructure and hopes to attract more software developers and to develop homegrown gaming platforms.
Additionally, the local government is “highly supportive of esports and has plans to establish two large casino resorts in Lagos.”
Come November, the regulatory power dispute should be settled by Nigeria’s Supreme Court.
However, there are lingering doubts about whether states, including Lagos, will be willing to relinquish their licensing systems, as these systems serve as a significant source of state revenue.