Tunji Idowu: Nigeria’s Gaming Sector Profitable

Sitting atop one of the leading  financial and compliance advisory services company in the gaming industry, Mr. Tunji Idowu has a good understanding of what the future holds as he discussed with the Gaming Week crew

Your company recently organised a gaming symposium on data protection against compliance which is your core value. Why?

Data compliance is part of compliance because our company, Velex Advisory, is a compliance advisory firm for the gaming industry. We have offices in Africa because we are a global brand. We have Velex Advisory Nigeria, which handles West Africa, and Velex Advisory Kenya, which takes care of East Africa. What you need to understand is that data protection has regulations. In Nigeria, we have a law in place known as Data Protection Regulation 2019, and the Nigeria Data Protection Bureau has the mandate to drive data regulation and compliance in Nigeria. All the companies that process customers’ data in Nigeria are subject to data regulation, and you will observe that the gaming industry is heavy on data processing. We dabbled into two major issues: data protection and KYC (Know your customer). The key ingredient to complying and implementing data protection is within the KYC connection because KYC is about collecting information about customers and data collection regulation specify the sort of data you should collect, why you have to collect that data, what you need that data for and how you use such data and finally, how you ensure that the data you are collecting are secure.

Then, what was the main reason for organizing the symposium?

When you look at the gaming industry, the regulators in the gaming industry cuts across the Nigeria Lottery Regulatory Commission, Nigeria Data Protection Bureau, Nigeria Financial Intelligent Unit and the Economic and Financial Crimes Commission. But the mistake people make is that they feel Nigeria Lottery Regulatory Commission is the only regulatory body in the gaming industry (NLRC). NLRC is dealing with licensing, ensuring that all the operators comply with all the regulations, and even the Central Bank of Nigeria ensuring that Anti Money Laundry is complied with. The Nigeria Financial Intelligence Unit making sure that all the transactions are within the stipulated amount. Of course, the elephant in the room is the Nigeria Data Regulatory Bureau making sure that data regulation is complied with.

 Data protection is a critical part of gaming regulation. As we begin to see the government making move in a particular direction, as a compliance company, it is our responsibility to ensure that all our clients comply with the regulations regarding data. We spotted that and want to arrest issues that can really affect our clients quickly. Therefore, when the government established the Nigeria Data Regulatory Bureau (NDPB) to drive data compliance in Nigeria, we saw something coming to the gaming industry and therefore, we decided to partner with the Nigeria Data Protection Bureau and see how we can bring all the gaming operators, regulators and Nigeria Data Protection Bureau under one umbrella and interact so that NDPB is able to interact with the gaming industry. Therefore, having identified the gaming industry as a heavy collector and processor of data; it is now incumbent on us at Velex Advisory to ensure that all our clients comply with all gaming regulations in Nigeria. It is also important we do this because operators also face challenges when processing data because a lot of players share wrong information with operators. So the operators need to meet those challenges and know how to solve them.

What has been the feedback after the symposium from the operators in the gaming industry?

The feedback has been very positive from the operators because, after the symposium, we received lots of enquiries from the operators wanting to know how they can be a complaint. After partnering with the data bureau to sensitize the gaming industry, we then partnered the leading data protection compliance organization known as Infoprive. What we did was to have a comprehensive package for the gaming industry, and we then reached out to the Association of Nigeria Bookmakers (ANB). The association is very critical to protecting the interest of sports betting operators in Nigeria. We saw the opportunity because of the responsibilities that Nigeria Data Protection Bureau has placed on us.

The data regulatory body does not want to push compliance in a way that will hurt the operators. They are primarily concerned about the data of Nigerians being well processed. They saw us as a critical partner because of our reach within the gaming sector. Therefore when we got that responsibility, we first reached out to Infoprive to get the best deal for our clients. Thinking further, we reached out to the rest of the industry through ANB so that they could benefit from the discount we negotiated for our clients. ANB was very happy that we are negotiating with the entire sports betting industry, knowing that all of them are not our clients. The response has been really good because we have been having meetings with operators that want to come on board to help them meet up with regulatory data requirements in Nigeria. We are glad that we took up the responsibility to educate and enlighten operators on the need to be data-compliant.

What’s your take on the remote operators permit proposed by the NLRC?

The proposed remote operators permit from the Nigerian perspective is a good intention, especially for those of us who know the activities that go on in the online sector. On a weekly basis, we see illegal operators operating in that space penetrating the Nigerian gambling market. First of all, these illegal gambling operators collect the data of Nigerian players, register you, and after that, they now get you to start staking. When you start staking, and you win, and they refuse to pay you, who do you report to? From that point of view, NLRC is looking at how to curb illegal operators using online to penetrate the Nigerian gaming sector. Now, if you are looking at it from a national security standpoint, foreigners can easily come to your country and collect data on Nigerians. Therefore from the NLRC point of view, they feel that it will be better to get these companies on board legally. It is also capital-intensive to set up operations in Nigeria. Therefore, from the security standpoint and revenue standpoint, we can applaud NLRC.

However, on the other side, it has its own big issues, and they are quite a lot. If you look at the gaming ecosystem as a whole, you as a foreign brand coming to Nigeria, have to come in through the Corporate Affairs Commission and comply with the minimum shareholding, which is about N30,000,000, which in itself is a revenue-generating avenue for the CAC. Aside from that, there is a requirement for local input, meaning that you cannot have a hundred per cent of that company. That benefit to a Nigerian is completely eroded from the remote operator permit point of view and the revenue that goes to CAC. Aside from that, you are looking at setting up operations in Nigeria, setting up an office, and recruiting staff. Then, the staff are paying taxes to the state government and VAT to the federal government. That benefit to the nation is completely eroded also. Knowledge transfer is also important because you employ someone to manage your operations in Nigeria. You need to train and expose the person to some processes and tools to work with, which benefits the local economy. Looking deeply, you can see the defects of the remote offshore permit that NLRC wants to introduce. Another big defect of the proposed operator offshore permit is that foreign operators already in the country might want to close shop because of the other expenses they have to incur to set up operations locally. There will not be any need to spend all the money they are spending and the need to comply with all the regulations because they do their business abroad. All these will lead to massive job loss in Nigeria which will be against the policy of the present government of creating jobs for the citizens of Nigeria. The idea still needs to be thought through because NLRC will have to look deeply into the modalities guiding the offshore operators’ permit. I trust the leadership of the apex regulatory body to do that.

There have been multiple court judgments regarding who has the power to regulate gaming in Nigeria. How best do you think this can be settled once and for all?

I can see the case going all the way to the Supreme Court, and in all honesty, the case could go either way. By and large, in the interest of the operators and specifically our clients, there is a need for alignment of all federating l states and the apex body. NLRC needs to secure the buy-in of the states, and there must be fairness. NLRC is talking of a central monitoring system that will be able to pinpoint the IP address of a player, which to me is a good initiative because the central monitoring system is able to identify and locate where the player is staking from therefore, the revenue that is accruable to states can be ascertained. There is also the need for central coordination of licensing because of the need to ensure sanity in the gaming industry. In my recent engagement with the Director-General of the Nigeria Lottery Regulatory Commission, l can confirm that he wants to harmonize gaming regulation in Nigeria and l think the central monitoring system will solve a lot of issues. In fact, from our own office, we have to deal with compliance for all our clients. We have to deal with the regulatory requirements of different federating states and NLRC, and that has to be done on a monthly basis which is very cumbersome. Despite all these, the Nigerian gaming sector is still profitable, and the opportunities are still wide open. The space is still open to investors, though with challenges, but the challenges can be navigated. What is needed is a fair approach, a system that everybody can buy into. The federating states, in my opinion, want to sit down with the apex body in charge of gaming regulation in Nigeria and have that deep and difficult conversation on moving the gaming sector forward.

Which aspect of your business is most challenging?

For us, the most challenging part of our business as an advisory firm to our clients is the issue of foreign exchange repatriation because every investor wants to make a profit and should be able to recoup their investment. The repatriation of the investors’ fund is a major challenge we are having at the moment and that has different aspects from the point of view of the settlement to software providers, royalty settlement and loan settlement. The CBN policy is so stringent that if you inflow your capital into the country through the normal channel it becomes difficult to repatriate your funds to where you are coming from. What we have been able to do with different stakeholders within that sector is to take a critical look at regulation within that sector to ensure that we help our clients repatriate their funds. Multiple taxation and registration is another challenge. In Nigeria, federating states are collecting tax, NLRC and FIRS are also collecting tax, so in Nigeria you are dealing with so many interests within the Nigerian gaming sector. The Nigerian gaming market remains one of the most attractive markets in Africa but multiple registrations and taxation makes it cumbersome for operators to do business. What we are doing again at Velex Advisory is to have a very good relationship with the regulators at the federal and state levels and this has helped our clients reduce their exposure to too much taxation. The buoyancy of the gaming sector is the reason for what we are experiencing on the issue of taxation.

QUOTE

All the companies that process customer’s data in Nigeria are subject to data regulation and you will observe that the gaming industry are heavy on data processing. We dabbled into two major issues which are data protection as well as KYC (Know your customer). The key ingredient to complying and implementing data protection is within the KYC connection because KYC is about collecting information about customers and data collection regulation specify the sort of data you should collect, why you have to collect that data, what you need that data for and how you use such data and finally, how you ensure that the data you are collecting are secure