Opinion: Nigeria and the opportunities for European businesses

Nigeria has been identified as the growth market for the gaming industry in Africa. PricewaterhouseCooper’s gaming outlook estimates that the sports betting industry in Nigeria alone is valued at NGN40bn (£130m) with a projected growth of 10% for the next 10 years.

However, the general consensus is that this estimate is very conservative and is far from the reality given the informal nature of our economy and the dearth of data.

The bullishness of this industry is not farfetched, it can be tied to both media, technology and internet access. This year Nigeria’s teledensity is projected at 98% while the median age of its 180 million population is 19 years.

While internet usage figures look very exciting, 82% of Nigerians access internet through their mobile phones and mostly for the purpose of social media engagement. According to Jumia, Nigeria’s largest online retail store, 60% of its transactions are through mobile devices.

However, most online operators maintain that promotions and bonuses have resulted in punters opening up online accounts but it is retaining them after which has been the challenge. In short barely one percent of first time players return, making online an unsustainable model for local operators.

So why hasn’t online gaming taken off in light of these glowing statistics?

Barriers to growth

While the Jumia statistics sounds exciting, the untold side of that story is that most those of transactions are paid on delivery.

Nigeria is grossly under banked. Despite Central Bank of Nigeria’s “cashless society” policy, there are currently only about 35 million debit cards and about one million credit cards in circulation – including those holding multiple cards. European payment processing is ordinarily suited to credit cards, which automatically disenfranchises about 98% of debit cardholders.

Owning a credit card in Nigeria simply means that you are in the middle-income bracket, most likely well-travelled and familiar with some of the popular European operators but the credit card holder is about one out of 35 cardholders.

From available statistics, some of those in this bracket are already engaged actively in some form of wagering but they account for a very small share of the eligible market. Besides, Africans have traditionally been suspicious of technology especially ecommerce – the lack of the local visibility of even the most trusted European brands only exacerbate the fear.

Legally speaking there is no legal framework, guidelines or regulation for online gaming in most of Nigeria’s 36 different jurisdictions, which are constitutionally allowed to make their own laws.

So in the light of this, is online gaming illegal in Nigeria? Individual companies can only answer that from the prism of their corporate ethics. At worst I will label Nigeria a grey market and it has evolved and will continue to at a faster pace because of the obvious opportunities.

I see a bottom-up approach in the development of the legal framework, i.e. staring from local governments where the states are slow in responding, then states and finally at the national level because of the cumbersome law making process.

In spite of these challenges, are there opportunities in the Nigerian market for European businesses?

Making it pay

Some operators are already reaping great rewards by partnering with local brands who have strong retail presence to run their online platform through affiliate marketing – local companies lack the experience and resources to deploy customer acquisition and retention strategies through social media and ecommerce optimization techniques.

Software-licensing (and other technologies) using the profit share model has also been a very good model for some of the European companies. There is also a big funding gap, which creates an opportunity given Nigeria’s favourable foreign investment, tax laws and ROI.

Lastly resolving the nagging challenges of a reliable but trustworthy payment-processing platform either via mobile or web seems like the game changer in the industry. Kenya has made great strides in meeting this challenge through the creation of a mobile payment system.

In my mind there is no doubt that there are opportunities in Nigeria for every kind of support service or product relevant to the industry, so long as the business takes into account costs and is able to bridge our infrastructural deficit.

Yahaya Maikori is the senior partner of Nigerian law firm Law Allianz and is also the president of the Gaming Association of Nigeria