The National Information Technology Development Agency (NITDA) may have made good plans of presenting a draft amendment bill to realign the NITDA Act 2007, but operators in the Nigerian tech ecosystem are worried that if passed into law it could worsen the ease of doing business for startups.
The NITDA Bill differs remarkably from the 2007 Act. For instance, the bill has Preliminary Provisions that are absent in the Act. These provisions clearly define the purpose of the bill, its application, and the savings and transitional provisions. Also in the description of the ‘Agency’, the NITDA bill now provides the power for the agency to acquire, hold or dispose of any property, movable or immovable, for the purpose of its functions and powers.
The function of the agency also increases to 24 in the NITDA bill from 14 in the 2007 Act. The powers of the agency also jump from a mere 5 in 2007 to 14 and the board no longer has separate powers from the agency.
Read also: NITDA’s 1% levy, licence plan for startups put ecosystem on edge
The bill which is 25 pages long is divided into Sections instead of Parts like the Act which is 18 pages long. We highlight some of the key features which in many cases are new compared to the 2007 Act and could pose serious threats to the growth and development of the tech ecosystem in Nigeria. However, a source said the proposed draft is not yet in the National Assembly but there is a plan to open it up to players in the tech ecosystem for contribution.
New multiple licence regime
The bill seeks to empower NITDA to issue and renew licences and authorisation for the provision of information technology and digital services. The licences and authorisation will come at a cost to the company applying for them.
The agency has the power to licensing and authorisation charges, collect fees and penalties as may be necessary for the exercise of its functions under this Act. These powers were absent in the 2007 Act.
The multiple licences and authorisations being proposed include product licence, service provider licence, and platform provider licence. The implication is that tech companies that intend to provide three services would get separate licences at different costs.
Mandate to determine and register operators
NITDA’s new sweeping powers allow it to determine and register operators in the information technology and digital economy sector. The register shall be published.
Company registration is usually done by the Corporate Affairs Commission (CAC). The latest mandate by NITDA that all operators in the digital economy must be registered with it presupposes a second company registration and duplicity of processes.
The NITDA amendment also does not also clarify what criteria it would use to “determine” who is an operator before registering them. But it has a very stern tone for companies that intend not to comply.
“Any person or body corporate who operates an information technology or digital economy service, product, or platform contrary to the provisions of this Act, commits an offence,” the amendment warns.
Jude Feranmi, a youth development advocate says the idea that startups should be registered is not a new one.
“NITDA currently has a portal where it tries to aggregate startups working in different sectors. But the idea of licensing for a fee, imprisonment, and fines of millions of naira is anti-progress. It won’t fly,” Feranmi said.
Startups to pay 1% levy
The one percent levy of the profit before tax of companies and enterprises with an annual turnover of N100 million ($200,000) and above was first established by the 2007 Act. However, the companies eligible to pay the levy were GSM Service Providers and all Telecommunications companies; Cyber Companies and Internet Providers; Pensions Managers and pension-related companies; Banks and other Financial Institutions; and Insurance Companies.
Startups have now been included in the amended bill before the National Assembly. Companies and enterprises to pay the levy include mobile and telecommunications companies; IT and ecommerce companies; digital platform operators and providers; foreign digital platforms targeting the Nigerian market; pensions managers and pension-related companies; banks, financial institutions, and companies providing financial services using information technology tools; insurance companies; and such other companies and enterprises as determined by regulations from time to time by NITDA.
Heavy fines for default
In the 2007 Act, NITDA does not get involved directly in ensuring a defaulting company or one not in compliance with the provision of the Act is punished. The FIRS for instance was mandated with compelling companies to pay the one percent tax.
The NITDA bill changes the agency’s role by giving it the mandate to ensure compliance with every aspect of the Act. While the FIRS is still in charge of the levy default collection, NITDA officials can now obtain an order of a court of competent jurisdiction to enter a company’s premises to inspect, seal, detain and impose administrative sanctions.
The agency will also be acting with security agencies to enforce the provisions of the act. People found in contravention of the Act will be fined not less than N3 million ($6000) or placed into custody for a year or more. The bill states NITDA can also decide to charge such a person both the fine and imprisonment.
Defaulting companies have within 60 days to pay their levy after the FIRS has served notice of assessment on a company in a manner it would decide. The FIRS would provide the records of the assessment to NITDA.
It doesn’t stop there. Should a person or company attempt to stop officials authorised by NITDA from entering their premises or access to records or data, there are heavy fines. Where it is an individual that is convicted, he or she would pay not less than N3 million or imprisonment for a term of not less than 1 year or both. And where it is the company that is liable, it would pay a fine of not less than N30 million and in addition, every director and principal officer of the company shall individually be liable to not less than N3 million or imprisonment for a term of not less than 2 years or both.
NITDA may not be anticipating resolving issues via arbitration because the amendment bill notes that even where no specific penalty is provided for an offence, a company when convicted is liable to a fine of N30 million. Individuals under this category will also face administrative sanctions and a fine not less than N30 million or imprisonment for a term of 2 years or both.
How the levy will be invested
The levy will be spent on “the purpose of this Act”, the cost of administration and operation of the agency, the development and maintenance of any property vested in or owned by NITDA, for investments in initiatives to attain the objectives of the agency, and other expenditure in connection with any of its listed functions.
While the agency pledges to “cause” its accounts to be audited within six months after each year by auditors it would appoint, the report of the audit would only be submitted to the Minister of Communications and Digital Economy. The bill doesn’t say whether it would be made public to the companies that have contributed to it.
Many experts make the point that the general tone of the draft amendment bill is rent-seeking and punitive.
“The draft NITDA Amendment Bill is not going to be favourable to the Nigerian tech ecosystem,” said Wale Adetona, convener of Lagos Digital Summit. “I read it and keep asking myself the significant contributions NITDA has made to the Nigerian tech economy. Truly, you can’t innovate your way out of bad leadership.”
