The Case for Balanced Governance of Online Gaming in Nigeria
By Jopad Advisory
Recent developments have intensified the debate over who controls online gaming in Nigeria. On 3 April 2024, the Federal Inland Revenue Service issued a circular requiring all online operators to register and link their operations to the federally controlled Sentinel monitoring platform in collaboration with the National Lottery Regulatory Commission. Despite the prompt clarification by the Commission that this requirement was limited to remote operators (i.e. those operating outside Nigeria’s geographical borders), this development has reignited the lingering jurisdictional conflict between federal and state gaming authorities.
In Nigeria, “lottery” broadly encompasses all games of chance and skill. The National Lottery Act 2005 specifies that any arrangement where a person wins something based on chance or random selection qualifies as a lottery. Notably, “lottery” is absent from the exclusive and concurrent legislative lists in the 1999 Constitution. Consequently, states have legislated on lottery matters before and after the Act’s enactment to enhance revenue and support local development.
This situation raises a critical question: Should Nigerian states have the authority to govern lottery and gaming, including online versions? There are solid arguments for state governance supported by federal oversight. Reconciliation of the current divide is necessary to optimize lottery goals for the benefit of the Nigerian masses.
Online gaming has become a predominant fixture in the lottery landscape. With the diversity of Nigeria’s cultural and economic landscape, a one-size-fits-all approach, as enshrined in federal regulation, may not be the most effective way to manage this complex and rapidly evolving industry. Empowering states to regulate these activities while maintaining federal oversight could provide a balanced solution that respects local contexts and drives national growth.
State governance over lottery and gaming matters allows for customizing regulations to suit local cultural and social contexts. Nigeria’s diverse cultural landscape means that what works in one state may not be suitable in another. For instance, states with more conservative populations can implement stricter controls and measures to ensure that gaming activities align with local values and norms. In contrast, more liberal states can adopt policies encouraging growth and innovation in the gaming sector. This tailored approach ensures that regulations are more effective and widely accepted by local communities.
Localized regulation enhances economic benefits and revenue generation for individual states. Each state can design gaming policies that cater to its specific economic conditions and developmental goals. For example, states with solid tourism sectors, like Lagos, can leverage gaming to boost tourism revenue, while less economically developed states can focus on creating job opportunities and supporting small businesses through local gaming initiatives. A regional approach not only diversifies the economic base of these states but also promotes balanced national economic growth.
State control over gaming matters facilitates more efficient enforcement and compliance monitoring. Being closer to the ground, state authorities can respond more swiftly and effectively to regulatory breaches. They can establish dedicated enforcement units that understand local dynamics and can work closely with local law enforcement agencies. This proximity and familiarity with local conditions lead to better compliance rates and more effective consumer protection. Federal oversight can still be critical in ensuring consistency and setting minimum standards. Still, the primary regulatory responsibility should rest with the states to capitalize on their unique insights and capabilities.
Furthermore, at the heart of Nigeria’s governance structure is the principle of federalism, which emphasizes the division of powers between the federal and state governments. Since the 1999 Constitution does not explicitly place lottery and gaming under federal or concurrent jurisdiction, these matters should naturally fall under the states’ residual powers. Allowing states to regulate gaming within their jurisdictions respects their autonomy and reinforces the federalist structure, ensuring that states have the freedom to govern local matters effectively.
A landmark legal interpretation by a Federal High Court added a nuanced layer to this discussion. On 7 December 2009, the court interpreted “lottery” as interstate trade and commerce, which falls under the Constitution’s exclusive legislative list. This interpretation acknowledges the federal government’s role in overseeing activities that cross state boundaries to ensure uniformity and fairness. However, the court stopped short of recognizing the National Lottery Act as the exclusive legislation governing all aspects of lottery and gaming within the country. It affirmed the validity of the Lagos State lottery law as long as it pertains to activities within Lagos State.
By recognizing the validity of state-specific lottery regulations, such as those in Lagos, the court affirmed that states are best suited to handle gaming activities within their jurisdictions. Customized regulations reflect local cultural norms, economic conditions, and social attitudes, ensuring the regulatory framework is relevant, effective, and practical. For instance, Lagos can develop its gaming regulations to align with its bustling urban environment and economic strategies. At the same time, another state like Ekiti can tailor its policies to suit its unique socio-economic landscape.
Furthermore, the federalist approach mitigates the risk of over-centralization, which can lead to bureaucratic inefficiencies and a lack of responsiveness to local issues. States are better aligned to swiftly adapt to changing circumstances and emerging trends in the gaming industry. They can implement regulations that protect local consumers and address specific regional concerns, such as preventing underage gambling or funding community development projects.
Given this context, it becomes evident why states are critical stakeholders in the online gaming industry. Although online gaming may be perceived as interstate commerce, online gaming transactions commence and conclude within the geographical boundaries of a federating state. Players log in, place bets, and receive winnings while physically located within a particular state, making the state’s role in regulating these activities both practical and essential.
State control over lottery and gaming unlocks significant economic benefits and revenue opportunities. States can develop gaming policies that attract investments, create jobs, and generate substantial revenue through taxes and licensing fees. This decentralization fosters healthy competition among states, driving innovation and improving consumer services. Nigeria can achieve more balanced and inclusive economic growth by empowering states to harness their unique economic potential.
States can effectively refute the argument that they have no business regulating online gaming. With advanced technology, States can effectively track online gaming activity. For example, Lagos State utilizes geofencing technology to ensure that online gaming platforms operate only within its legal jurisdiction, thereby enhancing regulatory control. By investing in and using these technologies, states can demonstrate their capability to regulate and control online gaming effectively, addressing concerns about their ability to manage interstate activities.
States can also argue that collaborating with federal authorities is essential for effectively regulating interstate online gaming. This collaborative approach mirrors successful models seen in other areas of governance. Nigerian states and the federal government can establish a coherent regulatory framework that allows for local nuances while maintaining consistency. For instance, states can lead in enforcing regulations within their jurisdictions while the federal government provides overarching guidelines and support. This collaborative approach is evident in the banking sector, where states regulate banking operations within their territories while the Central Bank of Nigeria oversees the banking sector. This model demonstrates how collaboration between state and federal authorities can lead to effective oversight of complex industries.
In conclusion, the debate over online gaming regulation in Nigeria underscores the importance of finding a balanced governance approach that respects federal and state authorities. Nigeria’s diverse cultural, economic, and social landscape calls for customized regulations that reflect local contexts while ensuring national cohesion and growth. Empowering states to regulate gaming activities within their jurisdictions, supported by federal oversight and collaboration, can lead to a regulatory framework that is effective, responsive, and conducive to economic development. By leveraging technology, fostering collaboration, and respecting state autonomy, Nigeria can navigate the complexities of the online gaming industry while maximizing economic benefits and protecting consumers.
Source: Jopad Advisory
