Nigeria: Legal Framework For Commencing Online Lottery Business In Lagos, Nigeria

Last Updated: 6 November 2017
Article by Emmanuel Ekpenyong

The Nigerian lottery and betting market is huge. The awareness on betting activities is growing at a tremendous rate. Many Nigerians are regular punters in online sports betting. The regulatory bodies at both the State and Federal level have re-positioned themselves to grapple with the challenges which the budding sector brings. Indeed, other States of the Federation are borrowing a leaf from Lagos State.

  1. What is the share capital for incorporating a lottery company in Lagos, Nigeria?

The share capital for lottery business at the national level as stipulated by the National Lottery Regulatory Commission ("the National Commission") is N30, 000, 000 (Thirty Million) shares while in Lagos, the Lagos State Lottery Board ("the Lagos Board") stipulates a share capital of N 20, 000, 000 (Twenty Million) shares.

In Lagos at least 15% of shares in predominantly foreign owned lottery companies must be held by Nigerians.

  1. What are the requirements, license fee and period of validity of public online lottery license in Lagos?
  1. Requirements 

The Lagos Board's brochure provides that the requirements for obtaining a public online lottery are as follows;

  1. An application letter

 

  1. Non-refundable application fee of N500, 000 (Five Hundred Thousand Naira)
  1. Documentary Evidence of Business Incorporation;
  1. Certificate of Incorporation
  2. MEMART
  3. A minimum share capital of N20,000,000 (Twenty Million Naira) (Form CAC2)
  4. Details of directors (Form CAC7)
  5. Address of registered office(s) and administrative office
  6. A detailed business plan/proposal on the proposed lottery scheme providing       the following information;
  1.  Business Structure;
    1. Name and profile of all directors and management staff.
    2. Tax clearance certificate of all directors in the preceding three (3) years
    3. Address of planned location, branches and outlets.
    4. Description of operations and management structure.
    5. A lottery industry analysis that demonstrates an understanding of the Lagos State Lottery industry.
    6. The analysis must include the names of major players and market share
    7. Marketing and distribution plans.
  1. Finance Structure
    1. Management account of your organization
    2. Company's Bank Statement for the last 1 (one) year in support of the financing plan
    3. Five year projection: profit and loss account, balance sheet and cash flow analysis. This should provide for license fee and monthly tax.
    4. Capital budgets and financing plan: Source of finance, foreign investment and terms of investment (if any).
  1. Details of Proposed Lottery Operation
  1. Proposed trademark, brand name, logo and colors
  2. Details of planned games, types of games
  3. Applicable odds system
  4. Price structure of lottery tickets
  5. Frequency and number of draws
  6. Applicant's game rules and participants code of practice.
  7. Responsible gaming policies

(vii) Technical Structure

  1. Detailed information and profile of technical service providers/partners, including but not limited to:
  2. Draw machine manufacturers and suppliers
  3. Web hosting providers
  4. Database/backup services
  5. Architectural diagram clearly illustrating the technical operational flow
  6. Information on software and hardware, including but not limited to:
  7. Types of servers to be used
  8. Details of firewalls, routers and other security features
  9. Redundancy implementations (if any).
  10. Detailed information on software, including but not limited to:
  11.  Operating system
  12. Database application specification.
  1. Process and System Quality Assurance

(b) License fee

The license fee for the first year is N50, 000, 000 (Fifty Million naira) and N10, 000, 000 (Ten Million naira) for subsequent years.

(c) Period of validity of License

The license is valid for a period of 1 (one) year and renewable annually. Renewal is not automatic but subject to satisfactory performance and compliance with terms and conditions of license.

  1. What taxes is an operator of public online lottery business in Lagos liable to pay?

The operator shall pay Good Causes Money (GCM) which is 2.5% of its sales turnover from gaming activities conducted in Lagos State as gaming tax on a monthly basis. The tax is based on sales from gaming activities and not all streams of the operator's income.

If the operator operates in Lagos State only, it would ordinarily not be liable to pay further tax to the Federal Government.

 

  1. Can punters purchase online lottery tickets through SMS payments in Lagos?

The Nigerian Communication Commission ("NCC") has provided for a wide range of services that can be paid for using mobile phone. Mobile payment services are generally regarded as value added services to the mobile network operators. Payments may be effected through the airtime of a mobile subscriber, mobile wallet, credit card details on a mobile handset, access to the merchant's platform via short codes.

The Central Bank of Nigeria ("CBN") has considered and granted approval to 16 Companies to embark on a pilot trial of mobile payments in Nigeria. Approvals are granted based on 2 (two) models namely; Bank led model and Consortium model which entails collaboration amongst Banks, mobile operators and led by a trusted third party.

An applicant for the license have an obligation of ensuring that equipment to be used  for Mobile payments are type approved and ensure interoperability between different networks operators and banks; must not interrupt or adversely affect the quality of service rendered by mobile network operators; services should be based on adequate privacy and security of consumers; ensure that mobile phone subscribers have registered their SIMs before enlisting them as subscribers of mobile payment services; comply with other guidelines and regulations from other regulatory bodies in Nigeria especially, the CBN.

The license fee is provisionally set for N 1, 000, 000 (One Million naira) and this is subject to review by the NCC.

The license is for a period of 5 (five) years in the first instance, renewable on equal terms upon fulfillment of the requirements for renewal which includes but not limited to the license terms and obligations.

  1. What is the mobile payment system in Lagos?

Recently, Paystack has gain prominence. Most Nigerians in Lagos pay their utilities bills through Paga and Interswitch payment systems.

  1. Are there any other issues you need to know on lottery business in Nigeria?

The loggerhead between the National Commission which regulates lottery business at the Federal level and the Lagos Board which regulates lottery business in Lagos State is a cause of concern to lottery operators in Lagos.

Lagos State believe it has power to regulate lottery business in their respective States because the Constitution provides that matters such as lottery which are outside the exclusive and concurrent list are to be regulated by the State Assemblies whereas the National Lottery Act, 2005 provides that the National Commission shall regulate lottery business in Nigeria.

The proponents in support of the Federal Government contend that the Federal Government has Constitutional powers over interstate commerce and since online lottery is facilitated through the internet which has no geographical boundary, it is an interstate or international operation as such the Federal Government has powers to regulate it.

This has resulted in the National Commission harassing Lottery operators in Lagos who obtained the Lagos license without the National License while the Lagos Board in turn harasses the National Lottery license holders operating in Lagos without the Lagos lottery license.

In a recent development, the National Commission in a Public Notice of 21st June 2017 informed the general public that only lottery Companies licensed by it will be allowed to conduct lottery business in Nigeria. The Commission called on lottery Companies to regularize their operations before 21st July 2017 and that strict enforcement exercise against defaulting lottery Companies will commence from 24th July 2017.

From the foregoing, lottery companies cannot carry out lottery business in Lagos without the Lagos lottery license. The National Commission insists that all lottery companies should obtain license from it before carrying on business in Nigeria. Hence, until the imbroglio is resolved, Companies who want to carry on lottery business in Lagos must obtain both the National Lottery license and the Lagos Lottery license. The disadvantage is that lottery Companies will spend more money on licensing. The advantage is that they will be free to carry on their lottery business in Lagos and punters in throughout Nigeria can validly place their online bets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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