NIGERIA Digital Economy Diagnostic Report NIGERIA Digital Economy Diagnostic Report © 2019 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbankgroup.org Some rights reserved 1 2 3 4 21 20 19 18 This work is a product of the staff of The World Bank Group with external contributions. The findings, inter- pretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org CONTENTS Acknowledgments v Foreword vii Acronym List ix EXECUTIVE SUMMARY 1 1  INTRODUCTION 5 1.1 Country at a Glance: Nigeria 5 1.2 Background on Digital Economy and DE4A Moonshot 6 1.3 Rationale for Digital Economy Development 8 1.4 Diagnostic Methodology 9 2 DE4A FOUNDATIONAL ELEMENTS 11 2.1 Digital Infrastructure Pillar 11 2.1.1 Importance of Digital Infrastructure Pillar 11 2.1.2 Diagnostic Findings: Current State of Digital Infrastructure Pillar 12 2.1.3 Digital Infrastructure Recommendations and Next Steps 21 2.2 Digital Platforms Pillar 23 2.2.1 Importance of Digital Platforms Pillar 23 2.2.2 Diagnostic Findings: Current State of Digital Platforms Pillar 23 2.2.3 Digital Platforms Recommendations and Next Steps 33 2.3 Digital Financial Services Pillar 34 2.3.1 Importance of Digital Financial Services Pillar 34 2.3.2 Diagnostic Findings: Current State of Digital Financial Services Pillar 35 2.3.3 Digital Financial Services Recommendations and Next Steps 47 2.4 Digital Entrepreneurship Pillar 49 2.4.1 Importance of Digital Entrepreneurship Pillar 49 2.4.2 Diagnostic Findings: Current State of Digital Entrepreneurship Pillar 50 2.4.3 Digital Entrepreneurship Recommendations and Next Steps 55 2.5 Digital Skills Pillar 59 2.5.1 Importance of Digital Skills Pillar 59 2.5.2 Diagnostic Findings: Current State of Digital Skills Pillar 60 2.5.3 Digital Skills Recommendations and Next Steps 67 3 CONCLUSION: A WAY FORWARD 71 4 REFERENCES 73 5 ANNEXES 77 5.1 Digital Infrastructure Indicators and Indexes 77 5.2 Digital Entrepreneurship Indicators and Indexes 78 5.3 Innovation Hubs in Nigeria (accelerators, incubators, and co-working spaces) 80 5.4 Investors Active in Nigerian Digital Ecosystem (angel network and venture capital) 81 iv   Nigeria Digital Economy Diagnostic Report ACKNOWLEDGMENTS This Report was prepared by a World Bank Group team led by Marc Lixi, Siegfried Zottel, and Isabel Neto, and included Feyi Boroffice, Karol Karpinski, Lindsey Tan Lim, Maryam Lawal, Natalia Agapi- tova, Olatunde Adetoyese Adekola, and Parminder Brar. Ivan Gonzales provided editorial support, which is gratefully acknowledged. The team benefitted from the insights of Nigeria’s country office technical staff and from the techni- cal support provided by Kofi Nouve, Muna Salih Meky, Saeeda Rashid, and Jana Kunicova. Overall guidance was provided by Rachid Benmessaoud, Indira Konjhodzic, Michel Rogy, Rashmi Shankar, and Douglas Pearce Additional guidance and contributions were provided by Andrej Popovic, Pierre Chrzanowski, Les- ley Denyes, Amandine Lobelle, Prasanna Las Das, Denny Mahalia Lewis-Bynoe, Inye Kemabonta, and Olasupo Olus. Furthermore, the team is grateful to the peer reviewers of this report—Ana Paula Cusolito, Cem Dener, Elena Babkova, Lyudmila Bujoreanu, Onur Ozlu, and Samuel Nganga—for their valuable comments. The team would like to express their sincere gratitude to all government and private sector organi- zations for their insights and generous cooperation during the diagnostic consultation and drafting of this report. The team would especially like to thank participating organizations and individuals that contrib- uted during the stakeholder workshop, including: Afrilabs, Benue State Ministry of Finance, Central Bank of Nigeria (CBN), COLAB, COMNavij, Edo State Government and Edo State ICT Agency, Federal Ministry of Communications (FMoC), Federal Ministry of Education (FMoE), GRID3-MFBN, HeckerBella, Kaduna State Government, National Information Technology Development Agency (NITDA), Nigerian Investment Promotion Commission (NIPC), Office of the National Security Advi- sor, (ONSA), Office of the Vice President (OVP), State House, and Ventures Platform Foundation. The report benefited from the funding provided by the Digital Development Partnership (DDP) and from IFC’s Creating Markets Access Window. The team also thanks Bill and Melinda Gates Foundation for their contribution to the DFS foundation under the overall DE4A framework. In addition, some funding from the Governance Partnership Facility was provided for the finalization of this report. The team thanks Naylor Design, Inc. for design and layout assistance. Nigeria Digital Economy Diagnostic Report   v FOREWORD N igeria is uniquely positioned to reap the benefits Internet via five undersea international links. Similarly, of the digital economy. Nigeria accounts for 47% Nigeria is home to several high-growth digital companies of West Africa’s population, and half of the coun- that provide hopeful examples of the country’s digital try’s 200 million people are under the age of 30. Nige- potential. Lagos is a mature and active ecosystem with ria has the largest mobile market in Sub-Saharan Africa, dynamic incubators, venture capital companies, digital supported by strong mobile broadband infrastructure and start-ups, and private services via digital platforms. And improved international connectivity; yet minimal fixed the potential of digital financial services remains untapped broadband infrastructure and connectivity in rural areas is despite the large share of unbanked population. leaving a significant number of the most marginalized seg- To deliver on the 2030 aspirations of greater access ments of the population without Internet access. to the digital economy and meet the bold objective of This Digital Economy for Africa (DE4A) Diagnostic creating 100 million jobs in Nigeria, the country needs to Report highlights the challenges and opportunities of the increase investment in infrastructure, create an enabling digital economy for Nigeria. This diagnostic argues that regulatory environment for the digital economy to grow accelerating access to digital technologies spurs innova- (e.g., regulatory enablers of DFS), pursue radical reforms tion, efficiency, and productivity, and as a result brings that bring about improved skills and a more competitive about choice and opportunities for greater growth and digital job market, support public-private partnerships to inclusion. stimulate and sustain demand for the use of digital plat- The report shows that many Nigerian citizens and busi- forms, and improve the current business climate to boost nesses remain excluded from the digital ecosystem as a more investment opportunities. result of limited access to broadband and nonavailability The World Bank Group stands ready to support of adequate devices (mobile devices and computers) to Nigeria in pursuing context-specific approaches that will fully utilize the Internet. It also highlights good progress in prioritize key interventions in the five foundational ele- digital infrastructure, finance, skills, and entrepreneurship, ments and advance the digital economy in Nigeria to among others. Nigeria’s international connectivity (‘First promote rapid growth, more and better jobs, and more mile”) is well developed with connectivity to high-speed accessible and higher quality public and private services. Shubham Chaudhuri Country Director, Nigeria World Bank Group Nigeria Digital Economy Diagnostic Report   vii ACRONYMS AND ABBREVIATIONS AI Artificial Intelligence FUTA Federal University of Technology–Akure ARPU Average Revenue Per User FUTM Federal University of Technology–Minna AT Assistive Technology FUTO Federal University of Technology–Owerri ATBU Abubakar Tafawa Balewa University GBB Galaxy Backbone Limited ATM Automated Teller Machine GDP Gross Domestic Product B2C Business-to-Customer GDPPC Gross Domestic Product per Capita BPO Business Process Outsourcing GDPR General Data Protection Regulation BPP Bureau of Public Procurement GER Gross Enrollment Rate BVN Bank Verification Number GFMIS Government FMIS CAM Companies and Allied Matters GIIN Global Impact Investing Network CAMA Companies and Allied Matters Act GIS Geographic Information Systems CBN Central Bank of Nigeria GNI Gross National Income CC Creative Commons GNIPC Gross National Income per Capita CDD Customer Due Diligence GPI Global Payments Initiative CNII Critical National Information Infrastructure GPRS General Packet Radio Service CPF Consumer Protection Framework GRID3 Geo-Referenced Infrastructure and CRC Community Resource Centers Demographic Data for Development CRF Consolidated Revenue Fund GSM Global System for Mobile Communications CSR Corporate Social Responsibility GSMA GSM Association DB Doing Business HNN Hubs Nigeria Network DE4A Digital Economy For Africa HQ Headquarters DFS Digital Financial Services HSPA High Speed Packet Access DNCR Department of National Civil Registration HUP Household Uplifting Program ECOWAS Economic Community of West African States i2i insight2impact EDMS Electronic Document Management System IBRD International Bank for Reconstruction and EFA Education for All Development ERGP Economic Recovery and Growth Plan ICT Information and Communication EVDO Evolution Data Optimized Technologies FATF Financial Action Task Force ICT4D ICT For Development FCT Federal Capital Territory IDA International Development Association FDI Foreign Direct Investment IDI ICT Development Index FGN Federal Government of Nigeria IFC International Finance Corporation FME Federal Ministry of Education ILO International Labor Organization FMF Federal Ministry of Finance IMF International Monetary Fund FMI Federal Ministry of Interior IP Intellectual Property FTTH/FTTB Fiber To The Home/Fiber To The Business IPO Initial Public Offering FTTx Fiber To The x ISA Investment and Securities Act Nigeria Digital Economy Diagnostic Report   ix ISP Internet Service Provider PENCOM National Pension Commission ITAS Integrated Tax Administration System POS Point of Sale ITC International Trade Centre PPP Public-Private Partnership ITU International Telecommunication Union PSB Payment Service Bank IXP Internet eXchange Point PSP Payment Service Provider IXPN Internet eXchange Point of Nigeria QoS Quality of Service JSS Job Success Score R&D Research & Development KYC Know Your Customer RAMP RIA’s African Mobile Pricing LTE Long Term Evolution RIA Research ICT Africa M&E Monitoring and Evaluation RTGS Real-Time Gross Settlement System MAUTECH Modibbo Adama University of Technology Yola RUBI Rural Broadband Initiative MDG Millennium Development Goal SANEF Shared Agent Network Expansion Facilities MMB Mavrodi Mundial Moneybox SDG Sustainable Development Goal MMO Mobile Money Operator SEB State Education Board MNO Mobile Network Operator SEZ Special Economic Zones MoC Ministry of Communications SKC School Knowledge Centers MVP Minimum Viable Product SME Small and Medium Enterprises NBC National Broadcasting Commission SOC Security Operations Centre NCC Nigeria Communications Commission SPV Special Purpose Vehicle NCE National Council on Education SSA Sub-Saharan Africa NCTO National Cash Transfers Office SSI SeedStars Index NDHS Nigeria Demographic Health Survey STEM Science, Technology, Engineering and Mathematics NEC National Economic Council SUBEB State Universal Basic Education Boards NEDS Nigeria Education Data Survey SWOT Strengths Weaknesses Opportunities and Threats NER Net Enrollment Rate TCAG Technology and Creativity Advisory Group NFIS National Financial Inclusion Strategy TVET Technical and Vocational Education and Training NGN Nigerian Naira UBEC Universal Basic Education Commission ngCERT national Computer Emergency Response Team UK United Kingdom NIBSS Nigeria Inter-Bank Settlement System UMTS Universal Mobile Telecommunications System NIMC National Identity Management Commission UNCDF United Nations Capital Development Fund NIN National Identification Number UNCTAD United Nations Conference on Trade and Devel- NINE Network of Incubators and Innovators in Nigeria opment NISI National Internet Safety Initiative UNDP United Nations Development Program NIP NIBSS Instant Payments UPU Universal Postal Union NIPEP Nigeria Partnership for Education Project US United States NITDA National Information Technology Development USD United States Dollar Agency USPF Universal Service Provision Fund NITEL Nigerian Telecommunications Limited VC Venture Capital NSE Nigeria Stock Exchange VSAT Very Small Aperture Terminal NUC National Universities Commission WAAW Working to Advance Science and Technology NY New York Education for African Women NYSE New York Stock Exchange WACS West African Cable System OBI Open Budget Index WASSCE West African Senior Secondary Certificate OECD Organisation for Economic Co-operation and Examination Development WB World Bank ONSA Office of the National Security Adviser WBG World Bank Group OOS Out Of School WEF World Economic Forum OTT Over the Top WiMAX Worldwide Interoperability for Microwave Access X PE Private Equity WIPO World Intellectual Property Organization x   Nigeria Digital Economy Diagnostic Report EXECUTIVE SUMMARY With a population of approximately 197 million, Nige- Nigeria is currently capturing only a fraction of this ria accounts for about 47% of West Africa’s popula- growth and needs to strategically invest in the founda- tion and has one of the largest populations of youth in tional elements of its digital economy to keep pace. The the world. Nigeria also has Africa’s biggest economy, is Digital Economy For Africa (DE4A) Initiative forms part of the biggest oil exporter, and has the largest natural gas the World Bank Group’s support for the African Union’s reserves on the continent. Nigeria emerged from a reces- Digital Transformation Initiative for Africa, which wants to sion in 2017, with a growth rate of 0.8%, driven mainly by see every African individual, business, and government the oil sector. Non-agricultural growth, which remained be digitally enabled by 2030. negative up to the third quarter of 2017, strengthened through 2018 with services (primarily Information and Broadband is a key enabler to harness the digital econ- Communication Technology, ICT) resuming as the key omy transformation. In spite of recent growth in fiber driver. Economic growth is expected to hover just above installations in Nigeria, national fixed-line infrastructure is 2% in 2019 and over the medium term. still poor, and mobile systems remain the primary means for carrying retail and enterprise data traffic in Nigeria. For countries like Nigeria, the Digital Economy offers Furthermore, fixed broadband penetration in Nigeria opportunities, but also brings risks of being left behind. is very low, with a household penetration rate of 0.04% Improved digital connectivity can only achieve the desir- at the end of 2018, below the African regional average ed transformational impact on economic opportunity (0.6%), and well below the world average (13.6%). This is and inclusive growth if combined with improvements in due to backbone investment in Nigeria having focused digital skills and literacy, the coverage of digital identity primarily on major urban areas and inter-city routes, and schemes, and access to digital payments and other finan- unlike its West African peers such as Ghana and Sene- cial services, as well as digital support to start-ups and gal, Nigeria does not have a national backbone network existing businesses. With such capabilities, the Nigerian through which high-speed Internet connectivity can be economy can harness digital data and new technologies, extended across the entire country. As a result, mobile generate new content, link individuals with markets and broadband has become the most common and popular government services, and roll out new and sustainable way through which people in Nigeria access the Internet. business models. Significant bottlenecks inhibit growth of high-speed In 2016, the global digital economy was worth about Internet in Nigeria. These include a complex institu- USD 11.5 trillion, equivalent to 15.5% of the world’s tional setup to govern and promote the development overall GDP. The digital economy is expected to reach of ICT infrastructure and sector development, and a 25% in less than a decade, quickly outpacing the growth legacy of operators investing in proprietary network of the overall economy. However, as described below, deployments, compounded by poor infrastructure qual- Nigeria Digital Economy Diagnostic Report   1 ity. Pushing market bounds further to underserved areas ket their products at scale. Because of the regional and is challenging, given high costs of infrastructure deploy- pan-African footprints of Nigerian financial institutions, ment and low revenues, and this has created market fail- the country has an opportunity to export its digital finan- ures. High price sensitivity of markets further contributed cial ventures beyond its borders, diversifying the econ- to lack of innovative service propositions. The affordabil- omy and fostering the regional integration within the ity of broadband-enabled devices for the bottom of the ECOWAS. Better DFS can also mean stronger links with pyramid is also a major barrier to access in Nigeria, while the Nigerian diaspora, boosting the inward remittance other demand-side barriers relate to digital illiteracy, lack streams, encouraging investments, and facilitating the of local content, and low electrification rates. Therefore, exchange of human capital. At the same time, there are in order for Nigeria to gain the critical number of Inter- also potential threats. Nigerian law enforcement agen- net subscribers needed to build its digital ecosystem cies have waged long-standing battles with online and and kickstart its digital transformation, innovative solu- financial fraud, and the country faces an ongoing struggle tions and strategic interventions and investments will be with terrorism and armed conflict in its northern states. In required. They will promote the deployment of networks the absence of adequate regulation and oversight, both in underserved areas, support the reduction of broad- issues can be exacerbated by the advent of DFS and the band costs, provide additional complementary public ease of obtaining instant credit and making real-time access, and stimulate demand by addressing the digital domestic and international money transfers. Brand new economy foundations with an ecosystem approach. dangers include data leakages and cybercrime, as well as emergence of new monopolies and systems of political Digital platforms are at the core of the digital econ- patronage. omy. The benefits of digital platforms stem from their ability to virtually connect people and things, facilitating Given its large, young, and entrepreneurial popula- digital transactions/interactions, including the exchange tion, digital entrepreneurship has the potential to of information, goods, and services. Despite some prog- become an engine of economic transformation in ress on the implementation of the goals of both the Nigeria and set the country on a new growth trajec- E-government Master Plan and ICT Road Map, much tory. Nigeria is home to several high-growth digital com- remains to be done in Nigeria, including institutional panies that provide hopeful examples of the country’s coordination, developing a Privacy and Data Protection digital potential. Lagos is a mature and active ecosystem Act, monitoring the quality of digital services, and fully with dynamic incubators, venture capital companies, and embracing the Open Government Partnership. The Gov- digital start-ups. Digital entrepreneurship ecosystems are ernment of Nigeria has recently launched the Central also growing in the cities of Abuja and Port Harcourt, with Portal for Government Services (www.services.gov.ng), a potential for expansion to other cities. Although urban created to provide a single point of entry to government Small and Medium Enterprises (SMEs) are increasingly information and services, enhancing accountability, and using digital platforms for trading, digitalization of firms improving the delivery and quality of public services. in traditional industries and rural locations remains lim- One of the biggest strengths is Nigeria’s e-commerce ited. Larger firms are more actively using digital technol- market, which UNCTAD’s business to customer (B2C) ogy for basic business purposes, such as communication report for 2018 ranked as the biggest B2C market, both with customers, but more advanced uses of technology in terms of revenue and shoppers in Africa. In 2018 the also remain limited. Despite these improvements in the e-commerce spending in Nigeria was estimated at USD entrepreneurship ecosystem, the growth of digital firms 12 billion and was projected to increase to USD 75 bil- in Nigeria is plagued by a difficult business environment, lion in revenues by 2025. In overall terms, Nigeria was lack of early-stage financing, limited market opportuni- ranked by UNCTAD as second in Africa below Mauritius ties outside of Lagos and Abuja, and as discussed in pillar in 2018. This digital commerce was provided, among number five, a lack of digital skills. others, by 87 Nigerian platforms, employing 2.9 million people in the country. Last, but critical, is the wide Digital Literacy gap that excludes the poorest from the benefits of the digi- The Nigerian economy still stands to benefit from the tal world. Digital skills are a prerequisite for benefiting growth in supply and usage of Digital Financial Services from any technology across all sectors of the economy, (DFS). DFS providers are better positioned to address and at all levels of the skills spectrum (from user literacy the needs of the poor. They also create the ‘rails’ that to producer technical skills). Nigeria’s general education enable digital entrepreneurs from other sectors to mar- standards are low, with the quality offered at all levels 2   Developing and Operationalizing a National Financial Inclusion Strategy continuously suffering from poor funding and deteri- Digital technologies are forecast to be a major driver orating teaching capabilities. According to the World of productivity, with successful economies depending Economic Forum Executive Opinion Survey, the quality on greater numbers of digitally skilled workers than of Nigeria’s education system ranks low in the continent has previously been the case. In order for Nigerian with 2.8 over 7, and below the world average, which youth to successfully perform digital work, they must stands at 3.8. Furthermore, Nigeria is reported to have develop digital skills, which exist on a continuum, rang- one of the lowest shares of government expenditure in ing from basic to intermediate to advanced. With 46% of education (7%). This rate goes up to more than double work activities in Nigeria susceptible to automation, dig- in the Sub-Saharan Africa region according to the World ital skills will qualify youth for jobs in traditional sectors, Bank. In addition, Nigeria stands out globally in its num- while also empowering them to thrive in emerging sec- ber of out-of-school children. In 2013, Nigeria had the tors and even launch their own businesses. Ensuring that largest number of out-of-school children of primary age every person has the appropriate skills for an ever-grow- (8.7 million), followed by Pakistan (5.6 million) and India ing digital and globalized world is essential to promote (2.9 million). inclusive labor markets and to engender innovation, pro- ductivity, and growth. Executive Summary   3 4   Nigeria Digital Economy Diagnostic Report 1 INTRODUCTION 1.1  COUNTRY AT A GLANCE: NIGERIA1 broad-based; however, it still fell below the population growth rate, government projections, and pre-recession A key regional player in West Africa, with a population levels. The oil and gas sector reverted to contraction and of approximately 197 million, Nigeria accounts for about the non-oil economy was thus the main driver of growth 47% of West Africa’s population and has one of the largest in 2018. While agriculture slowed down significantly due populations of youth in the world. A federation that con- to conflict and weather events, non-oil, nonagricultural sists of 36 autonomous states, Nigeria is a multiethnic and growth, which remained negative up to the third quar- culturally diverse society. With an abundance of resources, ter of 2017, strengthened through 2018—but remained it is Africa’s biggest oil exporter and also has the largest weak—with services (primarily ICT) resuming as the key natural gas reserves on the continent. Political Context The country recently held national elections in 2019, for the sixth consecutive time since its return to democracy in 1999. The incumbent president, Muhammadu Buhari, won the election and was sworn in for a second term on May 29, 2019. He has identified fighting corruption, increasing security, tackling unemployment, diversifying the economy, enhancing climate resilience, and boosting the living stan- dards of Nigerians as main policy priorities his government seeks to pursue in his second term which ends in 2023. Because Nigeria’s federated structure gives significant autonomy to states cooperation between the federal gov- ernment and states is necessary to address these policies. Economic Outlook Between 2006 and 2016, Nigeria’s Gross Domestic Prod- uct (GDP) grew at an average rate of 5.7% per year, as vol- atile oil prices drove growth to a high of 8% in 2006 and to a low of –1.5% in 2016. Nigeria emerged from a reces- sion in 2017, with a growth rate of 0.8%, driven mainly by the oil sector. Growth was higher in 2018 (at 1.9%) and Nigeria Digital Economy Diagnostic Report   5 driver. Economic growth is expected to hover just above 2. Transformative: Aiming at a very different scale of 2% in 2019 and over the medium term. ambition beyond incremental ‘islands’ of success. Development Challenges 3. Inclusive: Digital Economy for ‘everyone, in every place, and at all times,’ creating equal access to oppor- While Nigeria has made some progress in socioeco- tunities and dealing with risks of exclusions. nomic terms in recent years, its human capital devel- opment remains weak due to underinvestment; the 4. Homegrown: Based on Africa’s realities and unleash- country ranked 152 out of 157 countries in the World ing the African spirit of enterprise to have more home- Bank’s 2018 Human Capital Index. Furthermore, the grown digital content and solutions. country continues to face massive developmental chal- lenges, which include the need to reduce dependency 5. Collaborative: Dealing with the digital economy requir- on oil and diversify the economy, address insufficient es a different flexible ‘mindset’, collaborating among infrastructure, and build strong and effective institutions, countries, sectors, and public and private players. as well as governance issues and public financial manage- ment systems. Inequality in terms of income and opportu- For a successful and inclusive Digital Economy, Afri- nities has been growing rapidly and has adversely affected can countries would require building key foundational poverty reduction. The North-South divide has widened elements of a digital economy (see Figure 1). These in recent years due to the Boko Haram insurgency and a foundations, which are synergistic and require the use of lack of economic development in the northern part of the public and private sector solutions, are the following: country. Large pockets of Nigeria’s population still live in poverty, without adequate access to basic services, and 1. Digital Infrastructure: Digital infrastructure provides they could benefit from more inclusive development pol- the way for people, businesses, and governments icies. The lack of job opportunities is at the core of the to get online and link with local and global digital high poverty levels, regional inequality, and social and services, thus connecting them to the global digital political unrest in the country. economy. For a digital economy, good and affordable Internet connectivity is a critical foundation. BACKGROUND ON DIGITAL ECONOMY 1.2  2. Digital Platforms: Digital platforms offer products AND DE4A INITIATIVE and services, accessible through digital channels, such as mobile devices, computers, and Internet, Rapid digital transformation is reshaping our global for all aspects of life. Digital platforms enable pro- economy; permeating virtually every sector and aspect ducers and users to create value by interacting with of daily life; and changing the way we learn, work, each other. Governments operate digital platforms trade, socialize, and access public and private services to offer citizen-facing government services and share and information. In 2016, the global digital economy was information. Commercial firms also operate digital worth some USD 11.5 trillion, equivalent to 15.5% of the platforms to offer a growing array of products and world’s overall GDP.2 It is expected to reach 25% in less services. than a decade, quickly outpacing the growth of the over- all economy. However, countries like Nigeria are currently 3. Digital Financial Services: Digital financial services capturing only a fraction of this growth and need to strate- enable individuals and businesses to conduct transac- gically invest in the foundational elements of their digital tions electronically or online and open a pathway to a economy to keep pace. range of digital financial services in addition to digital payments, including credit, savings, and insurance. The DE4A Initiative forms part of the World Bank Access to affordable and appropriate digital financial Group’s support for the African Union’s Digital Trans- services is critical for the participation of individuals formation Initiative for Africa, which wants to see every and businesses in the digital economy. African individual, business, and government be dig- 4. Digital Entrepreneurship: Digital entrepreneurship itally enabled by 2030. The Digital Economy for Africa and innovation create an ecosystem to bring the dig- (DE4A) Transformation Initiative is underpinned by five ital economy to life with new, growth-oriented ven- principles: tures and the transformation of existing businesses, 1. Comprehensive: Taking an ecosystem approach that which contribute to net employment growth and looks at supply and demand and defies a narrow silo help enhance competitiveness and productivity of the approach in defining the digital economy elements economy. and foundations. 6   Nigeria Digital Economy Diagnostic Report 5. Digital Skills: Economies require a digitally savvy Corresponding digital transformation targets have workforce in order to build robust digital economies been established for all five foundations of the digi- and competitive markets. Digital skills constitute tech- tal economy articulated under DE4A framework (see nology skills, together with business skills for building Figure 2). or running a start-up or enterprise. Greater digital literacy further enhances adoption and use of digital products and services among the larger population. Nigeria Digital Economy Diagnostic Report   7 RATIONALE FOR DIGITAL ECONOMY 1.3  develop safeguards for job markets, developing countries DEVELOPMENT in Africa need to invest in systems and requisite skills early on, including in the digital domain, such that those skills Digital Economy is defined as the part of economic are tied to meaningful jobs. This can help strengthen the output derived solely or primarily from digital tech- country’s competitiveness in the global marketplace. nologies (ICT) with a business model based on digital goods or services. The digital economy is made up of Additionally, while digital economic development can various components, including a platform economy, a gig be critical, the process is neither linear nor a panacea. economy, an industry 4.0, a digital economy, data analyt- Effective prioritization and sequencing are required, espe- ics, robotics and Artificial Intelligence (AI), machine learn- cially as they deal with the public sector. For example, ing, 3-D printing, and e-commerce among others. (Ernst if public service delivery is a key priority to improve the & Young: Nigeria, 2018). targeting of the poor, the development of government platforms will need to be prioritized. Key investments For countries in Africa, the Digital Economy offers and reforms may also need to be prioritized as part of an opportunities, but also brings risks of being left behind. overall development strategy. Shifting cash into digital Improved digital connectivity can only achieve the desired accounts for government payments, remittances, Small transformational impact on economic opportunity and and Medium Enterprise (SME) payments, and agricultural inclusive growth if combined with improvements in dig- value-chain payments can enable broad-based participa- ital skills and literacy, the coverage of digital identity tion in the digital economy. Digital financial services can be schemes, and access to digital payments and other finan- more accessible for lower-income segments of the popula- cial services, as well as digital support to start-ups and tion, and for women and agricultural households—popu- existing businesses. With such capabilities, the African lation segments often underserved by traditional financial economy can harness digital data and new technologies, services. generate new content, link individuals with markets and government services, and roll out new and sustainable A digital economy has potential to enhance productiv- business models. ity and gains in multiple ways. A digital economy can change the way economies of scale are achieved, particu- Yet in much of the Africa region today, too few citi- larly with online service delivery, as the incremental cost of zens have digital IDs or transaction accounts—locking offering an additional product or service may become neg- them out of access to critical public services, financial ligible. The digital economy may provide better matching inclusion, and markets. Digital start-ups struggle to of buyers and sellers in a competitive marketplace. It may attract funding, and ‘traditional’ businesses are only slowly address certain concerns with asymmetric information, adopting digital technologies and platforms to boost pro- solving some principal-agent problems where buyers and ductivity and sales. There is a shortage of workers with sellers are separated by intermediaries, or even multiple the digital skills needed, and limited digital literacy holds levels of intermediaries. It may strengthen people’s trust back adoption and use of digital products and services. in firms or governments by enabling some decentralized Inadequate policy and regulatory frameworks, including forms of trust (such as with a blockchain) where central- for data protection, cyber security, and competition, also ized authorities are not trusted. It may allow products and constrain the development of a digital economy in Africa. services to be customized and targeted—enabling better inclusion but also easier ways to exclude some too. Digital economies also introduce new risks—to con- sumers, creditors, or firms, on personal data and Engagement with some global technology companies on cyber threads, in ways systemic or otherwise—and the Digital Transformation program highlights that while would require safeguards to mitigate these risks and there is a willingness for Silicon Valley firms to invest in Sub- ensure robust job markets. A key area of concern has Saharan Africa, there are barriers preventing potential been that widespread adoption of automation and other investments.3 The opportunity recognized by firms willing digital technologies can cause significant net job losses. to invest in Sub-Saharan Africa, therefore, puts Nigeria in However, in the aggregate, technological change has not a position to leverage private sector investment in all of led to a significant increase in joblessness, and global the DE4A foundational elements, or targeted investments employment continues to expand in line with the growth in specific pillars. However, existing bottlenecks must be in the labor force (ILO, 2018). Though it may displace jobs, addressed in order to create an enabling environment for automation using technology causes “creative destruc- such investments to benefit Nigeria’s Digital Economy. tion,” stripping some jobs while creating new ones. To Some of the investment barriers identified are: 8   Nigeria Digital Economy Diagnostic Report i. Lack of capacity by government policy makers to the impact of disruptive technologies on key devel- understand new technologies; opment outcomes (e.g., jobs); ii. Poor regulatory frameworks and government-sup- ii. Bring patient capital (e.g., concessional finance), par- ported monopolies; ticularly for new business models—capital markets are often inadequate to finance projects; iii. Bias by governments toward old, existing technolo- gies and hesitancy to adopt new technologies that iii. Ensure objectivity in technologies and be open to may dramatically reduce costs or improve impact; emerging disruptive technologies (e.g., low earth orbit satellite); iv. Data sovereignty and data localization policies that hamper investment in data infrastructure; iv. Bring clarity to the multitude of overlapping initiatives in this space in Africa; and v. Fragmentation within government agencies that also hampers the ability for technology to make an appro- v. Focus on large projects that cross companies/proj- priate impact (e.g., sharing data between health edu- ects/regions. cation ministries); finance ministry also not supportive; vi. Lack of regional integration that hampers ability to 1.4  DIAGNOSTIC METHODOLOGY get to scale for many business models (e.g., e-com- merce, fintech); and An assessment of Nigeria’s digital economy has been vii. Lack of digital skills in the population. launched as part of the World Bank Group’s DE4A Initiative, which leverages the integrated and foun- In addressing these barriers, it has been indicated that dation-based diagnostic framework to examine the the World Bank Group could establish support for firms present level of digital economy development across and governments in a coordinated effort through the fol- Africa. The assessment, which focuses on Nigeria, maps lowing: the current strengths and weaknesses that characterize i. Focus on a regulatory, policy, and appropriate view the national digital economy ecosystem, as well as iden- of taxation, and bring evidence to governments on tifies challenges and opportunities for future growth. The Nigeria Digital Economy Diagnostic Report   9 DE4A diagnostic findings ultimately provide practical NOTES and actionable recommendations that inform on priority areas for development, proposing a mix of possible policy 1. Source: https://www.worldbank.org/en/country/nigeria/ reforms and interventions that directly address the needs overview 2. Digital Spillover, Measuring the true impact of the digital and support for harnessing the economic and social ben- economy, Huawei and Oxford Economics 2016. efits digital economies bring and the hindrance of miti- 3. The World Bank Group has engaged in discussions with gating risks. the following global technology companies on the Digi- tal Transformation Initiative program: Google, CSquared, An in-country fact-finding mission was undertaken in SES, Intelsat, SAP, Rswitch, Amazon, Moringa Schools, Google X, Facebook, Microsoft, Ericsson, Nokia, Orange, December 2018, by members of the core team, which Bridge Academies, Inmarsat, Babylon AI, Gebeya, Hua- in addition to the desk research conducted, allowed wei, Ali Baba, Ant Financial, Paypal, Airbnb, and Uber. for broad stakeholder consultation with government, the private sector, and other key stakeholders. This report provides a comprehensive overview of the DE4A five foundational elements in Nigeria. 10   Nigeria Digital Economy Diagnostic Report 2 DE4A FOUNDATIONAL ELEMENTS This section provides diagnostic findings on the state More generally, broadband is a key enabler to harness of development of the Digital Economy in Nigeria. Fol- the digital economy transformation; therefore, the lowing the DE4A Framework, first the Digital Infrastructure need to develop broadband infrastructure in Nigeria pillar findings and recommendations are presented. Sec- runs high. Digital economies are creating unprecedented ond is the Digital Platforms assessment, which is then fol- opportunities for countries to unleash new opportunities, lowed by the third, the status of Digital Financial Services. create jobs, and transform people’s lives. Fast Internet pro- Then, the Digital Entrepreneurship analysis is described. vides a platform for innovation that is used as a key input Finally, the Digital Skills pillar findings and recommenda- across sectors and reverberates throughout the entire tions are discussed. economy. It potentiates entrepreneurship, with businesses and individuals using fast Internet to create new applica- tions and services in areas such as e-commerce and finan- 2.1  DIGITAL INFRASTRUCTURE PILLAR cial services. It also enables game-changing digital service delivery in sectors critical to inclusive growth, such as 2.1.1 Importance of Digital Infrastructure Pillar education, health, and agriculture. Likewise, it allows the public sector to deliver services to citizens and businesses High-speed Internet (or broadband) has the potential more effectively and more inclusively. On these accounts, to accelerate Nigeria’s socioeconomic development. broadband has the potential to transform Nigeria’s econ- An extensive body of research confirms the impact of omy and help the country leapfrog development stages, increased investment in broadband on economic growth. provided that all sectors of the Nigerian economy put in World Bank research estimates that a 10% increase in place effective policies that encourage its use as an essen- broadband penetration in developing countries is asso- tial input for growth. ciated with a 1.4% increase in Gross Domestic Product (GDP) (Kim, et al., 2010). Connectivity can shape countries’ For the Government of Nigeria, the digital economy development path through several interrelated channels: is a key priority. In 2015, the Nigeria Communications i. It can bridge the information gap, alleviating asym- Commission’s (NCC) 8-Point Agenda proposed the transi- metry problems, and improve communication; tion of Nigeria’s economy into a digital economy through investment in digital infrastructure, and more specifically ii. It is the most cost-effective and fastest means of con- broadband, which represents a key growth driver of the necting all citizens—especially those living in remote digital economy. The agenda’s goals were to facilitate areas, to markets and services; and broadband penetration, improve quality of service, opti- iii It increases productivity, lowers transaction costs, mize usage and benefits of spectrum, and promote Infor- and optimizes supply chains (Aker and Blumenstock, mation Communication Technologies (ICTs) innovation 2015). and investment opportunities across the country (Nigerian Communication Commission, 2015). Nigeria Digital Economy Diagnostic Report   11 Diagnostic Findings: Current State of Digital 2.1.2  Mobile broadband has become the most common and Infrastructure Pillar popular way through which people in Nigeria access This section provides diagnostic findings on the state the Internet. According to ITU, 3G coverage reaches 54% of development of high-speed Internet in Nigeria. First, of the population and LTE/WiMAX, 50.8%. These figures the scale of Internet services available in the country is are below the regional average for the former (62.7% in reviewed—in terms of access, affordability, and quality of Africa), and almost twice for the latter (28.4% in Africa) services. Second, sector and market structure are analyzed, (ITU, 2018). According to the report “The State of ICT through an integrated framework, by looking at all seg- in Nigeria 2018,” there is also an important digital gap ments of the value chain—first mile (international Internet regarding mobile broadband, with just over 20% of Nige- access), middle mile (national backbone and intercity net- rians owning a smartphone, 44.84% a feature phone, and work) and last mile (local access networks reaching the end 32.16% a basic phone. Furthermore, the gender gap in user), The analysis is complemented by an examination mobile phone ownership is also significant, with a higher of the enabling regulatory environment, or invisible mile. probability of mobile phone ownership among males Last, the report details the key hurdles currently inhibiting than females. In addition, the report reveals that males growth of high-speed Internet in Nigeria. are more likely to own a smartphone than females, while females are more likely to own a feature phone and basic Scale of Internet Services Available phone (Gillwald, et al., 2018). ACCESS AFFORDABILITY AND QUALITY OF SERVICES In spite of recent growth in fiber installations, national Internet data tariffs have significantly decreased due fixed-line infrastructure is still poor, and mobile sys- to Nigeria’s connection to undersea international links tems remain the primary means for carrying retail and and increased competition in the market. Since 2010, enterprise data traffic in Nigeria. According to the ITU, there has been a massive 2,705% increase in the whole- in 2018 19.9% of the population used their cell phones to sale submarine bandwidth capacity available to Nige- connect to the Internet. Overall Internet usage in Nige- rian telecommunications operators, due to the launch ria stands at 27.7%, above the average for Africa (22.1%) of four new undersea cable systems with landing points (ITU, 2018). Box 1 presents ITU’s ranking for Nigeria on a into Lagos. This additional capacity has the potential to composite index. change the landscape of Internet service provisioning and data connectivity in Nigeria through lowered wholesale Fixed broadband penetration in Nigeria is very low, international bandwidth prices and higher speeds (Gill- with a household penetration rate of 0.04% at the end wald, et al., 2018). According to ITU, the mobile-broad- of 2018, below the African regional average (0.6%) band prepaid handset-based price (500 MB) stood at and well below the world average (13.6%) (ITU, 2018). 1.89% of Gross National Income (GNI) per capita. This sit- Fixed broadband remains a “niche” service used by uation, i.e., a mobile-broadband price below 2% of GNI, public institutions and some businesses, as well as a few only occurs in five other countries in Africa: Mauritius, the privileged households. There are therefore important dig- Seychelles, Gabon, Cabo Verde and South Africa (ITU, ital divides in fixed broadband, both along gender and 2018). Finally, Nigeria ranks 6th out of 49 countries on urban-rural lines (Gillwald, et al., 2018). Research ICT Africa (RIA)’s African Mobile Pricing (RAMP) Index, and 10th on the 1GB pre-paid mobile data index. Even though Nigeria compares well in the affordability BOX 1 and price rankings, these rankings need to be weighed Benchmarking Nigeria’s Digital Economy against the accompanying broadband objectives of increased penetration and quality of service on which the Nigeria’s 2017 ranking at 143rd of 176 countries in the ICT country fares less favorably. Individual Internet penetra- Development Index (IDI) underlined its limited broadband sub- tion is relatively low in Nigeria, at around 30%. By com- scriptions. The International Telecommunication’s Union’s (ITU’s) parison, South Africa has the highest individual Internet IDI is a composite index combining 11 indicators to monitor and penetration in Sub-Saharan Africa at 53%, despite having compare developments in information and communication tech- nology (ICT). Measuring the country’s ICT readiness, intensity, considerably higher prices (Gillwald, et al., 2018). and impact, the model correlates directly to the enabling envi- ronment for a growing Digital Economy. Nigeria’s place of 143rd However, access to national fiber-optic networks is (15th regionally) highlighted its low number of broadband subscrip- still limited and relatively expensive where available. tions (fixed and mobile) and demonstrated the limited usage of the Therefore, while it is true that submarine cables have broadband infrastructure and Internet in Nigeria. expanded the capacity of overall international bandwidth, inland locations within the country are yet to experience 12   Nigeria Digital Economy Diagnostic Report any significant lowering of broadband prices. Based on have also been implemented to create a fair and compet- recent RIA surveys in the country, data rates are still high itive environment for market players over the last decade while browsing speeds are slow and unreliable, especially and a half. Overall, competition led to a spillover effect on to retail consumers. With very low-income levels among the incumbent operators, who had to lower retail costs, significant segments of the population, it is clear that, intensify their rollout of cellular services in rural areas, and even with competitively priced data products, significant upgrade their network capacity, leading to greater penetra- numbers of Nigerians cannot afford the devices to come tion and improved quality of services. However, the tough online or to use the Internet in a meaningful way and conditions in the market have put all operators, even large enhance their well-being (Gillwald, et al., 2018). ones, at risk of having to exit the market (Anon., 2018b). Issues with Quality of Service (QoS) persist in Nigeria. The demise of the incumbent NITEL means that there Despite the enormous growth and intensive competition is no dominant operator for fixed telephony. Four among operators, there is still poor quality of service and operators provide fixed telephony (MTN, Glo, ipNX and network congestion. Lack of coverage and quality of ser- 21st Century), while two provide fixed wireless telephony vices in terms of network quality and download speed (Visafone and Multilinks). Most fixed broadband access is often force subscribers to own multiple SIM cards. As a via fixed wireless using WiMAX, plus a growing number result, according to the report “The State of ICT in Nigeria of fixed Long-Term Evolution (LTE) operators. Fiber-op- 2018,” at least half of mobile subscribers own more than tic broadband is starting to be deployed in some urban one SIM card (Gillwald, et al., 2018). areas. In terms of market share, over 55% of the market is shared among more than 80 operators, with MTN and Sector Structure, Market Structure, and Regulatory Glo sharing the remainder. In 2016, MTN successfully bid Environment (the sole auction-goers) for six slots of 2.6 Ghz spectrum COMPETITIVE ENVIRONMENT bandwidth. The demand for FTTx services is forecast to Increased competition in the telecommunications and continue to grow and incentivize investments in metropol- broadband market, due to continued efforts by the gov- itan fiber-optic networks. ernment to liberalize it, has driven growth in the sector (Figure 4 shows the fixed line market share). The estab- On the other hand, the Nigerian mobile sector benefit- lishment of the sector’s independent regulator in 1999, ted from the arrival of a series of submarine fiber-optic the Nigerian Communications Commission (NCC), ended high bandwidth cables linking Nigeria to Europe. The the monopoly of M-Tel, the mobile subsidiary of fixed-line deployment of the high bandwidth cables has increased incumbent, NITEL. The liberalization process was kick- competition in the mobile industry as shown in Figure started with the awarding of three GSM spectrum licenses, 5, with operators now focusing on rolling out 4G/LTE via an auction, to MTN, CIL (now GLO), and Econet Wire- technologies. Currently there are four GSM operators: less Nigeria Ltd. The NCC has facilitated market entry AIRTEL (a subsidiary of the Indian mobile group); MTN over the years through the transparent licensing of various (a subsidiary of the South African MTN Group); 9mobile, communications services. Several regulatory mechanisms which was formerly EMTS (a subsidiary of ETISALAT of the Nigeria Digital Economy Diagnostic Report   13 United Arab Emirates); and GLOBACOM (owned by a pri- by rising FTTx and fixed wireless adoption. This growth is vately held Nigerian group). There are also two operators again based on anticipated investments, in particular, the using CDMA technology, Visafone, and Multilinks, but government’s plan to roll out 18,000 km of fiber-optic net- their market share is negligible. NATCOM acquired the works will support fixed broadband revenue growth. assets of the bankrupt incumbent operator NITEL in 2015, including its mobile licenses, and recently launched under DEPLOYMENT OF BROADBAND INFRASTRUCTURE the brand Ntel (ITU, 2018). This section assesses the digital infrastructure value chain in Nigeria, from the First Mile (international In 2015, the mobile subscriber market was heavily domi- connectivity), through the Middle Mile (the fiber-op- nated by MTN, with a market share of 44% (NCC, 2018). tic backbones and interurban networks), to the Last By 2017, MTN’s market share had declined from 46% at Mile (access by the end users) and the Invisible Mile the start of 2016 to 36%. The biggest gains were made by (invisible elements of the chain, such as access to fre- Globacom, which increased its market share from 20% at quencies, and the associated 4G+ services). Digital the beginning of 2015 to 27% in 2017, followed by Airtel, infrastructure, particularly middle-mile and last-mile, which increased its market share from 10% to 25% in the remains underdeveloped, which has limited the spread same period. The financial challenges faced by 9Mobile of broadband. led to the operator losing 4% of market share in the same period to become the smallest operator, with only 12% of First mile: Nigeria’s international connectivity is well the subscriber market. Despite this loss in market share, developed. Nigeria is connected to high-speed Internet MTN still dominates the market, accruing more than 40% via five undersea international links: Main One; Glo; West of total revenues. As the market continues to shift, with African Cable System (WACS); SAT-3/WASC; and ACE subscribers moving to cheaper data services, mobile voice submarine cable system (see Figure 6). The situation was revenues have been declining, from a little over USD 4.5 very different in 2010 when only one international link was billion at the start of 2016 down to USD 3.2 billion toward available, and Nigerian operators were therefore heavily the end of 2017 (Anon., 2018b). dependent on VSAT systems and nTEL’s notorious SAT3 (the de facto monopoly submarine cable system, gener- Nigeria’s market is highly price sensitive, but quality of ally expensive and unreliable) for international bandwidth. services has also become a differentiating factor. Inno- Since 2010, MainOne was installed, then Glo-1 in 2011, vations and technological changes in the mobile sector WACS in 2012, and finally ACE in 2014, with a combined continue to change the business environment. The evolu- overall capacity of over 9 terabytes. tion of data communications, more specifically the rise of Over the Top media service (OTT), is expected to have a negative impact on voice service revenue. OTTs, such as FIGURE 6: Submarine international links WhatsApp and Skype, are cheaper substitutes for voice communications. An exponential growth in demand for these services has significantly reduced voice and SMS revenue. These services have not only lead to a reduction in revenues, but they have also opened opportunities for small operators, especially those who embrace them to be competitive and to gain market shares. This has increased competition in the market, leading to episodic price wars. In the coming years, both voice and broadband Aver- age Revenue Per User (ARPU) are forecasted to de- crease. Voice ARPU will drop from USD 33.09 in 2017 to USD 19.47 by 2022 (the decline in Naira will be less notice- able, decreasing from Nigerian Naira (NGN) 4,516 to NGN 1,986). Broadband ARPU will also decrease, although less severely, from NGN 10,401 to NGN 9,468 over the same time period, with expected investments in international connectivity and fixed broadband network expansion diminishing its decline. By and large, the anticipated in- crease in fixed broadband revenue is significant (from USD 56 million in 2017 to USD 80 million by year-end 2022), led Source: https://www.submarinecablemap.com/ 14   Nigeria Digital Economy Diagnostic Report Multiple international links have significantly reduced intra-country and intra-regional traffic, reducing barriers to constraints in terms of international bandwidth usage mobile broadband access and usage (Anon., 2019a). and prices, and boosted network capacity. The five submarine cables provide adequate redundancy for pos- Middle mile: Backbone investment in Nigeria has focus- sible fiber/cable cuts, and total available international ed primarily on major urban areas and on inter-city bandwidth has been increasing rapidly, reaching a poten- routes. Unlike its West African peers, such as Ghana and tial capacity of 19.2 terabytes. While Nigeria benefits Senegal, Nigeria does not have a national backbone net- from the landing and interconnection of many subma- work through which high-speed Internet connectivity can rine cables, with estimates of over USD 1 billion (NGN be extended across the entire country. Presently, all the 306 billion) worth of investments, outside of Lagos this operators together contribute about 33,000 km of fiber, sizable international connectivity has had little impact on and 24,000 towers, significantly fewer than far smaller the domestic market. The industry consensus is that the countries and economies. Figure 7 shows existing fiber cost of moving traffic inland from any of the submarine deployments in Nigeria. The biggest infrastructure com- cable landing points in Lagos to any location within the panies with significant network assets are, in descending country is now higher than the cost of purchasing band- order, MTN, Glo, IHS, Airtel, 9Mobile, Phase 3, and nTEL width from anywhere outside the country. In this regard, (formerly NITEL). In addition, there is a strong imbalance via an arrangement with Cameroun Telecoms, MainOne among the main three telephony operators (MTN, Glo- has recently added a new landing station in Kiribi, Cam- Mobile, and Airtel) in the endowment of national connec- eroun, to its national network, and the carrier has plans tivity infrastructure. MTN has a much stronger fiber-optic to extend its submarine cable into Escravos (Delta State), network than any other operators (in part due to their Qua Iboe (Akwa Ibom State), Bonny Island (Rivers State), spectrum acquisition in the 2016 auction), and access to and eventually Port Harcourt (Rivers State) (Gillwald, et al., MTN’s network is not sufficiently regulated to ensure open 2018). Another alternative could be the usage of Inter- and nondiscriminatory access. This lack of open access is net EXchange Points (IXP), more specifically the Internet a major obstacle to stimulating competitive broadband eXchange Point of Nigeria (IXPN), which was established development and the sustainability of the business model in May 2007 as the first IXP in Nigeria. In 2016, IXPN of the Internet service providers (ISP) that have recently was upgraded to “regional IXP” for West Africa, a major entered the market (Gillwald, et al., 2018). achievement for both the IXP and Nigeria. In bypassing international transit and foreign operators, this infrastruc- In 2014, the Federal Government of Nigeria (FGN) ture will improve both the speed and cost efficiency of the launched a vast program to boost broadband cover- FIGURE 7: Fiber deployments in Nigeria Source: Song, 2017. Nigeria Digital Economy Diagnostic Report   15 age in all states, to incentivize the development of nies, IHS Towers (IHS) and American Towers. IHS manages fiber infrastructure across Nigeria—improving both about 15,000 towers and recently secured the Infraco intra-city and intercity networks. To achieve this, license for the North-Central, while American Towers the NCC divided the country into seven regions and owns about 5,000 towers. IHS and the MNOs are currently awarded seven new InfraCo licenses to different opera- aggressively connecting tower locations to fiber-optic tors between 2014 and 2018 to support an open-access cables to reduce the dependence on microwave back- and nondiscriminatory network in layers 1 and 2. The hauling. This should deepen the national communications seven InfraCo licenses include: BCN for the North-West; infrastructure and may result in improved speeds and a Zinox Technologies for the South-East; Brinks Integrated greater range of services (Gillwald, et al., 2018). Solutions for the North-East; MainOne for Lagos; Rae- anna Technologies Limited for South-South; and O’odua INVISIBLE MILE—THE ENABLING ENVIRONMENT Infraco Resource Limited. Due to initiatives like this one, Nigeria has a robust, though complicated, institutional it is expected that the number of fixed voice lines will setup to govern and promote development of ICT more than double, from 146,300 in 2017 to 341,700 infrastructure and sector development. Overall respon- by 2022, and led by increasing VoIP subscriptions and sibility for the ICT sector falls under the Federal Ministry of fixed broadband, lines will grow from 136,800 in 2017 Communication Technology. The ministry is comprised of to 377,500 by 2022 (reaching 0.19% of the population). three different agencies (Figure 8) (Gillwald, et al., 2018): Finally, fiber broadband accounted for 49.2% of total • The Nigerian Communications Commission (NCC), broadband lines in 2017 and will continue to lead the the sector regulator, with its mandate guided by the fixed broadband market to 2022 (Anon., 2018a). Nigerian Communications Act of 2003. NCC is a fully Last mile: In spite of recent growth in fiber installa- autonomous body with exclusive powers to license tions, national fixed-line infrastructure is still poor, and and regulate both private and government-owned mobile systems remain the primary means for carry- operators. ing retail and enterprise data traffic in Nigeria. Fixed • The National Broadcasting Commission (NBC), estab- broadband, which generates very high construction costs, lished in 1992, with comprehensive powers over all is in short supply, even within towns (except in Lagos and aspects of private broadcasting in Nigeria, including Abuja), through DSL, cable networks, and FTTH/FTTB. licensing, monitoring, policy formulation/implementa- Despite the current influx of fiber-optic operators into tion, ethics, and standards. However, unlike the NCC, the country, which correlates with the potential of the the NBC is subject to ministerial directives, and any new country’s communications market, last-mile infrastructure license can only be issued upon approval by the presi- deployment to end users remains minimal. Therefore, dent on the Minister of Information’s recommendation. the Internet sector is increasingly depending on wireless access technologies. • The National Information Technology Development Agency (NITDA), part of the Federal Ministry of Com- On the other hand, mobile operators, who have the munication Technology, is responsible for implement- advantage of scale and coverage, are the main pro- ing the ICT policy. viders of broadband connections in Nigeria, with networks based on GPRS, EDGE, UMTS, and LTE tech- While the regulatory regime has improved, Nigeria’s nologies. Internet solutions and services are also pro- regulatory rankings remain relatively weak when bench- vided by fixed wireless operators, which offer EVDO and marking with select peer markets. Nigeria ranks 86th in HSPA products, and ISPs, which mainly utilize WiMAX and the ICT Regulatory Tracker out of 190 countries, with the fiber-optic solutions. At the core of access networks is 2G, lowest score under Cluster 1: Regulatory Authority (ITU, which covers 87% of the entire Nigerian population. In 2017a). The regulator currently faces the difficult task contrast, according to ITU, 3G is presently only available of creating an environment conducive to the significant to 54% of the population. The reliance on older access investments required for the imperative broadband exten- technologies is at the heart of poor mobile data reliability, sion presented in the National Development and Broad- which at the moment is quite pronounced throughout the band Plans under challenging domestic conditions. Until country (GSMA Intelligence, 2014). now, broadband rollout has primarily been undertaken by dominant market players, while the regulation of access Due to regulatory promotion of infrastructure sharing, to broadband networks for service-based competition has coupled with the global trend of outsourcing, the majority not been pursued (Gillwald, et al., 2018). In April 2019, of base station sites are now under the management or the NCC announced plans to re-farm existing spectrum outright ownership of two major tower sharing compa- (repurpose frequency bands that previously allocated for 16   Nigeria Digital Economy Diagnostic Report BOX 2 Government Initiatives Intending to Expand ICT Infrastructure • The 2012 National Information and Communi- The centers are fully equipped with desktop com- cation Technology (ICT) Policy lays out the sector puters, furniture, telephones, power generators, direction with the main goals of creating a condu- and bandwidth to provide access to telephone, cive environment for the rapid expansion of ICT Internet, ICT, and e-initiatives at semi-urban and networks and providing services that are accessible rural unserved and underserved areas (Universal to all at reasonable costs, and that contribute to the Service Provision Fund, 2015a). development of the various socioeconomic sectors. • The Rural Broadband Initiative (RUBI), also funded Key objectives include (a) to facilitate and support by the Universal Service Provision Fund (USPF), development of a nationwide ICT infrastructure provides subsidies to operators for the deploy- that will support national broadband connectivity ment of a network to support the establishment of and accelerate socioeconomic development; (b) to core delivery mechanisms for broadband services connect all federal and state networks to a national in the rural/semi-urban areas of Nigeria. Currently, fiber backbone; and (c) to provide a reliable, acces- the pilot wireless mobile broadband hot spots are sible, secure, and reasonably priced ICT connectiv- being constructed across the country. This project ity to national and international ICT infrastructure provides both wired and wireless Internet at high (Ministry of Communications Technology, 2012). speeds in the rural areas at wholesale, and at the • The National Broadband Policy (2013–2018) rec- same time serves as a catalyst for the uptake of ognizes the positive linkages between increased other broadband-dependent projects in those broadband penetration and GDP growth. The locations, such as e-library, e-health, e-government plan envisages more than a fivefold increase in (Universal Service Provision Fund, 2015b). Internet and broadband penetration, from 6% • The Smart Nigeria Digital Economy Project is a in 2013 to 30% in 2018. In addition, metro fiber digital-led strategy initiative of the government to infrastructure is to be installed in all state capitals center around the establishment of an ICT ecosys- and urban cities, while other estates and business tem in Nigeria. This is enabled through significantly districts within major cities would have fiber to the expanding broadband coverage, increasing e-gov- home or premises. At a national level, the inten- ernment, and establishing ICT clusters, starting in tion of government is to facilitate full rollout of the Special Economic Zones (SEZs). Government wireless 3G networks by operators and transition will also drive a program to build the skills in this to 4G/LTE as spectrum becomes available (Minis- sector, focusing on training ICT engineers in soft- try of Communications Technology, 2013) ware development, programming, network devel- • Community Resource Centers (CRC), funded by opment, and cybersecurity. The Project’s objective the Universal Service Provision Fund (USPF), aim is to increase the contribution of ICT and ICT-en- to extend voice, and ICT training and other e-ser- abled activities to GDP by an estimated 10% and vices to unserved communities on a shared basis create 2.5 million new jobs between 2017 and 2020 and bridge the digital divide in the communities. (Ernst & Young: Nigeria, 2018). 2G mobile services, for new generation mobile technol- Constraints to High-Speed Internet Development ogy). Having previously sold six slots of 2.6 Ghz spectrum MARKET FAILURES IN RURAL AREAS band to MTN in 2016, there are currently eight remaining Nigeria is still a long way from achieving widespread slots of spectrum in the 700 MHz band—each valued at use of broadband because of major infrastructure chal- USD 16 million—which can be used to expand 4G LTE lenges and market failures, particularly in rural areas. coverage and increase broadband penetration across the High costs of right-of-way, damage to existing fiber infra- country. There is skepticism, however, whether more spec- structure as a result of cable theft, road works, and other trum will have a positive impact on the broadband mar- operations, and the lack of reliable grid electricity supply, ket, mainly due to established operators in Nigeria having coupled with low commercial returns, render services not limited resources to both bid for spectrum and roll out the commercially viable on their own. These costs induce a ensuing broadband services, as demonstrated in the 2016 lack of interest from operators and ISPs in deploying spectrum auction where MTN was the only MNO to bid infrastructure in rural areas. Accordingly, network oper- on the spectrum (Anon., 2018a). Nigeria Digital Economy Diagnostic Report   17 BOX 3 Vision 2020 Nigeria’s Vision 2020 is a strategic document that • Establishing a national digital library with access identifies the long-term developmental objectives points strategically located in both rural and urban with the aim of achieving accelerated and sustained areas; economic development. Furthermore, Vision 2020 • Promoting e-learning, e-governance, e-business, recognizes the importance of ICT skills development e-commerce, e-banking, e-management, etc. and greater diffusion of ICT across subsectors within the economy, including education, finance, farming, • Providing regular and affordable access to Internet trade, manufacturing, services, oil and gas, and the resources in all educational and research institu- public sector. The strategic initiatives envisioned to tions, with particular focus on basic and post-basic drive implementation of policy within the ICT sector education; include (Government of Nigeria, 2010): • Establishing appropriate legal and regulatory • Providing the appropriate incentives to drive the frameworks to support e-business and ICTenabled development of ICT infrastructure and telecom- activity—the legal framework will address law munications services to rural and underserved enforcement, electronics contracts, consumer pro- urban areas; tection, intellectual property rights, dispute resolu- tion, privacy, cybercrime and data protection, and • Mainstreaming ICT into the education curriculum; other aspects of information security; • Encouraging local production of ICT components • Providing appropriate incentives, including tax and subsystems by providing incentives for manu- benefits and improved infrastructure, with a view facturers for major ICT projects; to creating an enabling environment that encour- • Facilitating the development of a national multi- ages investment, innovation, and exploitation of media superhighway; ICT-enabled services; and • Establishing a national (spatial) ICT backbone • Mainstreaming ICT policies into the broader Connectivity and Bandwidth Aggregation Solu- development of a knowledge society and ensuring tion; coordination and consistency between ICT policy strategies and national development policies. • Implementing the Nigerian National ICT for Development (ICT4D) strategic action plan to fos- ter a competitive environment with ample oppor- tunities and choices; 18   Nigeria Digital Economy Diagnostic Report BOX 4 Universal Service Provision Fund The Universal Service Provision Fund (USPF) was • E-Accessibility Project: The project provides ICT established in 2006 to support the rollout of telecom- tools and Assistive Technologies (ATs) to the blind, munications infrastructure into rural and underserved deaf, dumb, crippled, cognitively impaired, and areas in Nigeria. The Fund aims to “facilitate the wid- other categories of people living with disabilities. est possible access to affordable telecommunications The project is designed to assist in improving the services for greater social equity and inclusion for the quality of life of people living with disabilities by: people of Nigeria” (USPF, 2015c). The USPF con- – Providing support to identified groups in access- sists of several projects aimed at achieving universal ing information and communication technolo- access. The programs consist of two broad catego- gies; ries: access and connectivity. The current programs include (Universal Service Provision Fund, 2006): – Improving the overall learning experience of persons living with disabilities by equipping • School Knowledge Centres (SKC): Under this educators with the right hardware and software; project, 396 public secondary schools have been and provided with connectivity, computers, and power backup. Teachers and students are taught how to – Providing ICT and assistive solutions to cover as use ICT as part of the project, as well as one-year many areas of disability as possible, including technical support, warranty, and remote ICT man- but not limited to sight, hearing, mobility, etc. agement. The USPF is also supporting the devel- (USPF, 2015d) opment and deployment of local content under To date the project covers 14 institutions across the this program. country. ators have focused on the most profitable geographical On the other hand, commercial infrastructure sharing, areas, primarily major urban areas, capital cities, and inter- which is currently being practiced in Nigeria, should be city routes, to the disadvantage of the majority who live encouraged more in order to reduce the high costs of outside those areas. Moreover, decline in revenues for duplicating networks. However, where this is uncompet- the operators, attributed to pricing pressure induced by itive or the exclusion of other market players, the NCC competition, while they have not transitioned to gener- should investigate the need for mandatory infrastructure ating significant revenues from data as they have in more sharing (both passive and active) at regulated cost-plus mature markets, translated into reduced investment and prices. This will lead to the rationalization of unnecessary in rollout of infrastructure. These effects have been com- duplication of infrastructure. pounded by the macroeconomic situation that forced operators to slow down or postpone their investment SUBOPTIMAL SPECTRUM MANAGEMENT plans for network expansion. Spectrum management appears suboptimal in a num- ber of areas. The regulator needs to review spectrum pol- LACK OF NATIONAL BACKBONE INFRASTRUCTURE AND icy to ensure more optimal coexistence of licensed and LIMITED INFRASTRUCTURE SHARING unlicensed spectrum. Licensed spectrum is required for Nigeria’s lack of a national backbone network for the the evolution of existing services and needs to be assigned transmission of high-speed data is at the heart of prev- at a competitively determined price to ensure the effi- alent poor quality of voice and data services. While cient build-out of capital-intensive networks. Nationally the InfraCo model sought to address this through the allocated spectrum not in use in remote areas should be licensing of new players to provide regional backbone available for free or at low-cost use by community-based infrastructure, the response of industry has been limited. or not-for-profit micro-networks. Innovative use of unli- Therefore, in order to fulfill the National Broadband Policy censed spectrum can also spur investment and innovation objectives, the regulator needs to develop policies that in technologies that can complement licensed networks can lead to a new open access common carrier network, to expand low-cost, last-mile broadband access. Private with guaranteed national rights-of-way by attracting new sector actors are also concerned by a lack of transparency investments. on spectrum allocation that can create uncertainty around long-term investment horizons for the mobile market. Nigeria Digital Economy Diagnostic Report   19 RIGHTS-OF-WAY trification rates are major barriers to access broad- Nigerian fiber operators also spoke about the chal- band in Nigeria. An ICT use survey reveals that, of lenges of obtaining right-of-way and environmental those unconnected, 50% stated that they cannot use clearances to extend their networks. Various states have Internet because they cannot afford devices to access different rules, many of them arbitrary and uncertain, and the Internet, over 25% of them gave ‘no electricity’ operators have experienced the rules being amended as the reason, while over 20% said ‘there is no signal’ mid-build. They have called for national standardized (mobile coverage) (Gillwald, et al., 2018). There is an right-of-ways to be made a federal jurisdictional issue to urgent need to develop policies and regulations that overcome what is seen as arguably the greatest stumbling increase the affordability of smart devices and develop block to extension of the national backbone and backhaul awareness of the Internet, as well as the skills to access networks in Nigeria. and use it, which is critical to reducing digital inequal- ity. Finally, according to USAID’s Power Africa program ADDITIONAL BARRIERS TO ACCESS there are 20 million households in Nigeria without any The costs to acquire a broadband-enabled device, access to power, and 55% of rural areas without electric- digital illiteracy, lack of local content, and low elec- ity (Anon., 2019b). BOX 5 Edo State Government Initiative Aiming to Expand Broadband Access Edo Broadband Network (EBN) is a state-wide inte- PHASE 1: BENIN METRO CITY. grated vendor independent Edo State Government Implemented by MainOne in partnership with Face- ICT Agency–designed Fibre-Optic HDPE Duct plat- book. EBN Benin Metro is a 450 kilometer four-duct form infrastructure for various telecom investors will- international standard OPEN platform for any service ing to invest in running fiber-optic links across the provider to deploy fiber or buy capacity. MainOne has EBN Duct platforms. implemented the deployment of street-by-street fiber and now offers E1 (2 mbps/2 mbps) service at under Objective $90/month. This phase has also connected three The EBN platform is intended to open the digital Benin City–based LGA HQs. potential of Edo residents and provide investment PHASE 2 opportunities for tech savvy and local businesses to transform the economy of the state to a digitalized Artery road beginning with Benin City to Ekpoma to ecosystem for prosperity. We expect to create job Auchi and terminating at Okpella town. This phase growth in economic sectors supported by Innovation would connect and execute (replicate the Benin Metro Hubs and Edo Skills Development Programs. The template) in the town of Ekpoma and Auchi. This proj- Edo ICT Agency projects a 10% growth impact on the ect would connect 6 LGA HQs. state’s GDP from fiscal year 2020. EBN will expand PHASE 3: LGA (CONNECTING SUB HUBS SUCH AS broadband services across the state, LGA headquar- LOCAL GOVERNMENT HEADQUARTERS) ters, schools, SMEs, and private and government offices. This would provide the following: Phases 1 and 2 would connect 9 LGA HQs with 3 LGA already connected and 6 more by Qtr3 2020. The • Internet service to streets, schools, and residences; other 9 LGA are expected to be achieved by end of • Broadband connectivity investment; 2021 as we target the final implementation of phases • Shared duct among telecom companies; and 1 and 2. All these investments would be driven by the • Many more digital opportunities. private sector at various levels. Workplan PHASE 4: CONNECTING COMMUNITY/PUBLIC SERVICES EBN implementation would be done in four phases Targets LGA would manage services such as schools, as depicted below: hospitals, and community centers. As an LGA HQ is connected, connectivity to critical services, busi- nesses, and residence via Wi-Fi, fiber, or Point2Point medium is designed. 20   Nigeria Digital Economy Diagnostic Report Digital Infrastructure Recommendations and 2.1.3  to underserved communities. Legal grounds have been Next Steps established. However, more needs to be done to cre- The findings from the assessment of the current state ate the conditions for a dynamic wholesale market, for of Digital Infrastructure in Nigeria aim to identify the instance by: factors in the macro and microenvironment that influ- • Consistently monitoring Quality of Service (QoS) met- ence the behavior of companies and individuals. Each rics and enforcing infrastructure quality standards to factor in the macro and microenvironment and its impact solve QoS issues that prevent some operators from help in the identification of the factors in the generic using their competitors’ networks; external environment, i.e., Opportunities and Threats; and the factors in the generic internal environment, i.e., • Enforcing harmonized rights-of-way policies for access- the Strengths and Weaknesses, both of which are needed ing public infrastructure and taking advantage of future to construct the final SWOT Matrix. civil works projects for cross-sector infrastructure shar- ing; and As observed in the SWOT Matrix, despite the chal- • Establishing a coordinating agency to mediate between lenges and bottlenecks related to digital infrastructure the regulator, operators, ISPs, and infrastructure pro- in Nigeria, there are clear strengths and opportunities viders and implement a “dig once” approach to infra- that indicate the country can achieve much greater dig- structure development and consolidation. The agency ital inclusion in the future. This section details recom- could facilitate consultations to help align interests and mendations and next steps based on the SWOT Matrix, achieve buy-in and give guidance on network rational- which would support Nigeria toward developing digital ization and infrastructure sharing enforcement. infrastructure in the country. R2. Support the reform and operationalization of USPF IMPROVING INTERNET SERVICE AVAILABILITY AND to accelerate infrastructure development in underserved CONNECTIVITY areas, along the following lines: R1. Accompany regulatory efforts to encourage infra- • Building USPF’s staff capacity on mechanisms and pro- structure sharing and open access to critical infra- cesses to deliver projects, including monitoring and structure to allow faster deployment and greater rural evaluation (M&E), and on new technologies that could push in middle and last mile connectivity. Effective be used for infrastructure deployment; infrastructure sharing and open access wholesale would bring broadband to rural areas more quickly by limiting • Raising visibility on the fund, and promoting transpar- duplication of infrastructure and redirecting resources ency and accountability through annual reporting on accounts and performance; and SWOT Matrix Strengths Weaknesses Largest mobile market in SSA Fixed broadband infrastructure and penetration Mobile broadband infrastructure (2G in the entire country, 3G 3G mobile broadband coverage in rural areas only in urban areas, capitals, and main corridors) 4G coverage nationwide International connectivity Lack of a national backbone Broadband prices as % of GNI per capita Only one landing station Market competition Quality of service Cost of devices ARPU reductions Spectrum allocation Opportunities Threats NCC 8-Point Agenda Digital literacy InfraCo licenses Use of Internet Infrastructure sharing regulation Electricity access and coverage National ICT Policy Gender and economic digital gap National Broadband Policy Poverty and economic disparities USPF Multiple regulator and supervising agencies Vision 2020 Right-of-way costs Very low usage of existing Internet capacity Nigeria Digital Economy Diagnostic Report   21 • Establishing a ‘Pay or Play’ mechanism, whereby oper- STIMULATING DEMAND AND CLOSING THE DIGITAL DIVIDE ators can choose if they want to contribute financially R6. Promote affordability of broadband-enabled de- to the fund or invest directly in projects themselves vices and widen opportunities for individual access. and guarantee specific universal access targets in The government could consider: exchange for relief from USPF levies. • Reducing or eliminating excise duties and other taxes R3. Use innovative solutions to mobilize substantial on feature and entry-level smartphones, tablets, or lap- private sector investment and expedite development tops; of broadband infrastructure in underserved areas. • Introducing grants or offering low- or zero-interest Options to do so include: loans for their purchase, with a targeted approach • Promoting innovative Public-Private Partnerships to prioritize women and marginalized populations to (PPP), with competitive awards of subsidies to private reduce digital gaps; and operators to support infrastructure development in • Providing broadband equipment to educational insti- areas where market forces alone are insufficient to pro- tutions at cost or via subsidies. vide adequate broadband coverage. PPPs could be implemented through a joint program, in which WBG’s R7. Expand communal broadband access to connect resources are leveraged alongside USPF’s funds; the unconnected. Citizens in underserved communities • Activating government pre-purchase of international mostly do not use broadband because they have no bandwidth, which, if well-advertised, would reduce access, cannot afford it, or are not aware of its benefits. investment risks for private operators; and Current government initiatives could be further lever- aged by: • Considering preferential taxation for providers who agree on specific universal access targets (e.g., reduc- • Constructing more Community Resource Centers tion of annual telecommunications fees, income tax (CRCs). Sustainability should be aimed for, so that holidays, lower fees for deployments, tax exemptions facilities and equipment can be maintained, and oper- on data value added tax, devices, and equipment). ational costs covered. The government should explore This must be done on the basis of a stringent cost ben- partnership opportunities with private sector actors efit analysis. that could use these centers to market their activities and enroll customers (e.g., for mobile money); R4. Optimize spectrum. Market mechanisms to promote • Leveraging a Rural Broadband Initiative (RUBI) net- more efficient spectrum use include: work, to provide connectivity to underserved commu- • Ensuring liberal spectrum re-farming and/or trading nities; and regime for greater flexibility and reduced need for new • Establishing a coordinated policy approach to provide spectrum auctions. NCC could benefit from technical public access. A number of programs providing access assistance on this; and points (CRC, RUBI, incubators, etc.) are being imple- • Promoting greater transparency on spectrum alloca- mented by different agencies with different resources tion processes to encourage private investment. and priorities. The government should try to build on synergies to improve program efficiency and generate R5. Strengthen coordination between the different economies of scale. agencies that govern ICT policy, regulation, and imple- mentation, and consider streamlining the institutional R8. Right-of-Way Regulation. The difficulties in obtain- and regulatory framework, by: ing ‘right-of-way’ restrict coverage and are a key factor in service delivery. Regulation must be put in place to com- • Establishing a technical working group to bring all minis- pensate landowners for use of property to build digital tries/agencies involved in the ICT sector together, avoid infrastructure in an environmentally safe manner, reducing overlaps, and better coordinate future interventions; equipment vandalism and theft. The state must also enforce • Providing more clarity on who is regulating the last the fixed national rates for laying fiber network (NGN 145 mile segment of the fixed broadband market and what per meter) and monitor and penalize states choosing to fix regulations should govern ISPs’ operations; and their own pricing in order to roll out the required 120,000 km of fiber network to adequately cover Nigeria (to date • Considering merging some agencies/regulators (NCC only 38,000 km of fiber have been rolled out). and NBC) to adapt to increasing technological conver- gence. 22   Nigeria Digital Economy Diagnostic Report Spurring the adoption and use of broadband networks into underutilized assets and new markets. Efficient and services by users will also require government pol- public digital platforms can reduce their cost of doing icy and private sector investment to focus on driving business, as well as facilitate trade and innovation. demand for broadband services. Specific interventions should be designed to carry out demand-side strategies  iagnostic Findings: Current State of Digital 2.2.2 D to stimulate broadband use, e.g., by promoting the use of Platforms Pillar services that are attractive to potential consumers, such as WhatsApp or social media. Similarly, it is important to Digital Government Platforms educate users about the benefits of broadband and help Implementing GovTech in Nigeria is central to the fight them develop the user skills needed to use broadband against corruption and for improving the effective- services effectively, especially targeting women and vul- ness of services to citizens. There is a strong co-relation nerable households. This will be further elaborated upon between automation and ease of government online ser- in the rest of this paper (see 2.2. Digital Platforms and 2.5 vices and the reduction of corruption. The link between Digital Skills). government effectiveness and provision of eGovernment services is also well established, as demonstrated in Fig- ure 9 and Figure 10. 2.2  DIGITAL PLATFORMS PILLAR At the federal and state levels, a number of new initia- 2.2.1 Importance of Digital Platforms Pillar tives have been taken to provide digital services. The Digital platforms can be defined as “multisided mar- Government of Nigeria has recently launched the Cen- ketplaces with business models that enable producers tral Portal for Government Services (www.services.gov. and users to create value together by interacting with ng), created to reflect ease of doing business initiatives each other.”4 They enable users to replicate traditional of government ministries, agencies, and departments in market activities with the help of digital technologies, big line with the federal government executive order. The data storage, and access to information. The benefits of objectives of the Central Portal for Government Services digital platforms stem from their ability to virtually connect include creating a single point of entry to government people and things, facilitating digital transactions/interac- information and services, enhancing accountability to tions, including the exchange of information, goods, and improve the delivery and quality of public services through services. Digital platforms leverage economies of scale technology-enabled civic engagement, and transforming and network effects to generate efficiency gains, where public administration efficiency through use of the por- each additional user creates exponential growth in the tal. The Central Portal for Government Services currently benefits offered by the platform in question. offers the following categories of services (Government of Nigeria, 2019): (i) Government to Citizen Services, (ii) Digital platforms offer products and services accessible Government to Foreigners Services; (iii) Government to through digital media, such as mobile devices, comput- Business Services; and (iv) Other e-Government Services. ers, and the Internet for consumers. Digital platforms The GovTech agenda in Nigeria can be broadly grouped enable participants to create value by interacting with each into five categories: other. They can serve people, businesses, and government 1. Government core operations. These applications are agencies in all aspects of life, including health care, educa- increasing as automation enters government offices. tion, commerce, transportation, and public benefits. Some of the main back office operations being used • Governments around the world are implementing the are the following: GovTech agenda. This focuses on digital platforms – Financial management systems: Almost 70% of that increase the efficiency and effectiveness of core states in Nigeria have introduced Integrated Finan- functions and services; reduces unnecessary duplica- cial Management Information Systems. These tion of IT systems and registries; combats fraud and systems are intended for budget preparation and corruption by increasing the security and traceabil- expenditure management through digital pay- ity of transactions; improves civic engagement and ments. States are using Oracle (Edo and Bayelsa), accountability; and provides improved service delivery SAP (Delta and Rivers), MS Dynamics (Kaduna), and to citizens that increases user convenience, provides a large number of other systems. There is a huge savings, and greatly improves efficiency. variability at the state levels. This variability is now • For businesses, commercial platforms are an efficient starting to be introduced at local government lev- mechanism to exchange goods and services and tap els. These systems have enabled improved cash management and reporting. The federal govern- Nigeria Digital Economy Diagnostic Report   23 24   Nigeria Digital Economy Diagnostic Report ment uses the Government FMIS (GFMIS). The Enugu, the justice department has ensured that the Federal Government and 17 States operate the time taken to enforce contracts has been cut in half. Treasury Single Account (TSA) system that has – Land management: Land is the source of a large helped improve cash management and reduce the number of conflicts and corruption in Nigeria and quantum if idle cash in bank accounts. GIFMIS has across the world. There are multiple examples been deployed across over 90% of federal gov- across Nigeria how reforms are underway. For ernment agencies, but commitment controls, cash example, Kaduna restructured its land registry and forecasating, debt, and procurement management created the Kaduna Geographic Information Ser- modules are not fully utilized. According to a sys- vice where all land records were GIS mapped. All tem audit conducted by the OAuGF, weaknesses land titles and property maps have been scanned in IT security make GFMIS vulnerable to tampering. and all records are digital. It also modernized – Tax: The Federal Internal Revenue Service intro- approval processes, which resulted in the most duced the Integrated Tax Administration System significant improvement recorded in the Doing (ITAS) that is intended to automate its processes Business rankings since 2008. Other states such as and allow tax returns to be filed online. While ITAS Nassarawa, Edo, and Lagos have established simi- has been deployed, it is not yet used to support lar modern land management systems. collection and audit functions, and it is also not fully – e-Education: Several states have introduced eMIS utilizing tax debt management functions according systems across the country. The results are mixed. to the 2018 IMF report. Many other states have fol- There are also ongoing initiatives in states upgrad- lowed the lead taken by the federal government in ing the digital skills of their teachers. River’s State automating tax systems. Edo State has just intro- uses the Innovation Hub in Port Harcourt to provide duced a modern tax management system that uses systematic teacher training for skill upgrading in the mobile phone technology in order to expand the digital area for teachers on an ongoing basis. tax base. A large number of other states have paid private developers to develop stand-alone systems – e-Health: There are numerous initiatives in the for them, and the results are mixed. Some of them health sector regarding use of technology for have required outright payment of fees for system delivery of services. The nationwide polio eradica- developers, while some states are using a revenue tion campaign using household-level satellite data sharing arrangement for a specified period of time. across the country (including in Borno) is the best example. – Payroll: The federal government was the first to introduce an Integrated Pay and Personnel Man- – Digital ID: Nigeria has had a long history of deal- agement system with an aim to eliminate ghost ing with the challenge of developing a robust ID workers and improve efficiency. This system was ini- system. In 1978, the Department of National Civil tiated in 2007, but until 2018 only covered around Registration (DNCR) was set up within the Federal one third of federal employees. Human resources Ministry of Interior (FMI). DNCR was tasked with (HR) and payroll systems have also been introduced issuing national identity cards. The program lasted in several states based upon customized develop- 18 months and was not successful. In 2001, DNCR ments. Rivers State has introduced this at the state- contracted a private company to issue national wide level using a bespoke system, while Edo has identity cards at a cost of USD 236.8 million. The introduced the HR system in all 28 local govern- program ran for five years, issued national identity ments using an open-source software (Odoo). cards to 37.3 million people, and was shelved. In 2007, the government passed the National Identity 2. Government services. These include government ser- Management Commission (NIMC) Act and set up vices to individuals and to businesses. NIMC as the government agency responsible for identification in Nigeria. To date, NIMC has gener- – Registering a business: The average time to reg- ated approximately 31.5 million National Identifica- ister a business has been reduced by 25% at the tion Numbers (NINs). federal level. The Corporate Affairs Commission Nigeria currently has a highly fragmented ID transitioned its processes from manual systems to landscape—over thirteen federal government online. Many other states have followed suit. agencies and at least three state agencies offer – Justice sector: Reforms in this sector are under- ID services in Nigeria. Many of these capture bio- way in several states. Bauchi, Enugu, Katsina, and metrics and issue ID cards independently without Sokoto have made the biggest improvements. In establishing links with other systems, resulting in Nigeria Digital Economy Diagnostic Report   25 duplication and a waste of resources. In 2015 4. Public data platform. Nigeria is a leader on the conti- Nigeria registered 70 million voters at a cost of nent in making available high-quality satellite data. USD 627 million for a one-off biometric, voter – The GRID3 project (Geo-Referenced Infrastructure registration exercise. Based on an illustrative anal- and Demographic Data for Development) started ysis done in 2015, the FGN is on track to spend in the North–East of Nigeria as part of the polio USD 4.3 billion on IDs across all such programs in campaign funded by the Gates Foundation around Nigeria, of which USD 1.2 billion has already been four years ago. (http://grid-nigeria.org) The entire spent and USD 3.1 billion is in the pipeline toward country has been mapped. High resolution satellite the current fragmented approach. data have been cross verified with field data collec- FGN has indicated a strong desire to harmo- tion. 500,000 points of interest have been identi- nize existing identification ecosystems. The gov- fied, including 45,332 schools, 44,109 public water ernment has prepared a Strategic Road Map to points, 18,539 health facilities, etc. The federal develop a foundational identification platform, government has made these data available in the which can be leveraged to improve service deliv- public domain (grid-nigeria.org). A number of state ery. This has been endorsed by the Harmonization governments have started using the data (primarily Committee at a second Vice Presidential–Level through their State Bureaus of Statistics) for plan- Workshop held on January 31, 2018. The road ning purposes. The leaders in this area are Lagos map was submitted to the Federal Executive and Kaduna. The potential use cases are numerous, Council for final government endorsement in Sep- including in the health, education, agriculture, trans- tember 2018. The proposed project will support port, electricity, urban planning, and other sectors. NIMC and other ecosystem partners to imple- ment the vision of the Strategic Road Map. The – The World Bank has created a Data Visualization proposed ecosystem approach will leverage exist- Portal (http://appsolutelydigital.com/Nigeria/) that ing capabilities and enrollment facilities of govern- contains a wealth of information on Nigeria. ment agencies, partners, and the private sector in 5.  Other key issues. Nigeria is a leader on the continent Nigeria to rapidly increase coverage of the NIN. in making available high-quality satellite data. 3. Citizen’s engagement. Over the last five years, there – Trained workforce: The capacity and capability of has been enormous interest in this area. Several the civil service workforce is fundamental to the states are investing in this area since digital technol- success of all public policy and reform.5 In Nigeria, ogy provides the vehicle for obtaining citizen feed- public service initiatives experience poor imple- back directly, without intermediation. mentation due to weak digital literacy and ICT – The best example of this is the “Eyes and Ears” skills.6 The Nigerian Civil Service is considerably Program in Kaduna State. This is an app that uses challenged in ICT adoption and skillsets.7 The citizen feedback to track the implementation of ICT skill base in the country is generally limited over 3,000 government programs. A Data Cen- in scope and lacks depth because of the absence ter in the Ministry of Budget and Planning also of a national standard. There have been initiatives houses a call center, and modern technology is since 2003 to shore up the skillsets in the public used for transcribing voice into text and produc- service sector. The first was by NITDA between ing a one-page dashboard (besides other reports) 2003 and 2005 when ICDL and ECDL standards that is in the public domain and that reports to were introduced for the training of permanent the governor on the performance of contractors secretaries as the accounting officers in govern- and projects. ment ministries. The program was not sustained. Other programs have since come from several – Other pograms such as BudgIT perform a some- agencies, including the Office of the Head of the what similar function and obtain citizen feedback Civil Service of the Federation. The main problem on other public sector projects across the country. has been that there is no scoping, tracking, and – The World Bank is using KoboToolbox to digi- central coordination of the efforts. For instance, tize Bank-funded operations across the country each agency independently decides what ICT and then use this information for soliciting citizen training to put its officers through because there feedback on performance. Implementation has is no national ICT skills requirement analysis and been underway for some time. Refresher train- clearly defined digital strategy. There have been ing is currently underway in Edo, Delta, Rivers, discussions at the level of the National Council on Bayelsa, and Borno states. Communications Technology (the highest policy 26   Nigeria Digital Economy Diagnostic Report making body for ICT in Nigeria) on adopting IC3 ment the Nigerian e-Government Programme as a national standard. under a Public-Private Partnership (PPP) model. The introduction of an ICT cadre in the civil ser- The PPP model is a tripartite agreement between vice sector and creation of an ICT department in the federal government, represented by NITDA, most ministries were initiatives to mainstream ICT strategic and technology partners, and private into the service and scale up the ICT skill database. investors. This fragmentation leads to issues of With the creation of ICT departments came the for- overlap of responsibilities and effective coordina- mation of the Council of Heads of ICT in MDAs. The tion that has been and remains a challenge. This council is a platform for members’ capacity build- overlap of responsibilities is partly responsible for ing. It meets bimonthly. However, not all the council the lack of a clear strategy for the way forward. members, about 200 in number, are ICT profession- This issue is now starting to be addressed. The als. Trainings do not follow a graduated approach government announced in September 2019 its along predetermined areas of need. Moreover, the plans to prepare a National Digital Strategy and departments they head, except in the case of the an Implementation Plan. This effort is to be led Ministry of Communications with over 160 staff, are by the Ministry of Communication Technology. sparsely staffed and mostly undertake maintenance NITDA will be working closely with the ministry on of low-level ICT infrastructure. There is a need for this task. This provides an excellent opportunity to government to consider the creation of a special chart a way forward in this critical sector. scheme of service for IT professionals if the Gov- At the state level practices on institutional Tech agenda is to have a major impact in the public arrangements vary. One of the most effective sector. This could really boost morale and commit- models is the one that is being used in Edo State. ment and provide an attractive career opportunity A stand-alone EDO ICT Agency has been created for highly skilled IT professionals to join and stay in that reports directly to the office of the governor. the public sector. It has responsibility for overseeing the implemen- The Ministry of Communications identifies tation of the digital road map and for establishing change management and digital literacy as require- standards. It also has responsibility for negotiating ments for the implementation of the new e-gov- broadband rollout contracts, which has been done ernment initiative and embarked on the capacity successfully over the last few years. This type of ini- building of public servants in collaboration with the tiative made ICT a core component of the devel- South Korean Government. While this is a good opment plan of the state, including its job creation initiative, such capacity building would benefit tre- agenda. Staff are working on public sector sala- mendously from a national strategy, or if it followed ries but are rewarded through skills enhancement an international standard such as the OECD frame- training options. work on skills for high performing civil service in – Open data: The Nigeria Open Data Policy pres- member countries.8 ents a great opportunity to increase access and – Institutional arrangements: As described in the improve accountability. Although the policy is still chapter on Digital Infrastructure, institutional in the process of being adopted, the draft already responsibility for digital government in Nigeria at contains elements of Open Data principles, includ- the federal level is dispersed between the Minis- ing data completeness, timeliness, data propri- try of Communication Technology and regulatory ety, and licensing. It states that government data agencies such as NCC, NBC, and NITDA. There are should be presented in a complete and original also a large number of other government agencies or provenance format, “with the highest form of such as Galaxy Backbone Limited (GBB) responsible granularity, not in aggregate or modified forms.”9 for provision of government infrastructure), Nige- It also states that government open data must be ria Satellite Limited, Nigeria Identity Management nonproprietary and should not require registra- Commission, and others who have responsibility tion, which means that it should not be within the for digital transformation and e-government imple- exclusive control of any entity. The draft policy, as mentation. Another important actor is National a framework, indicates further that for data to be e-Government Strategies, NeGSt, a Special Pur- open it should be license free. In other words, it pose Vehicle (SPV) created in March 2004 by the should not be “subject to any copyright, patent, gederal government through the National Infor- trademark, or trade secret regulation.”10 mation Technology Development Agency (NITDA) The policy, when adopted, will not be applica- with the mandate to facilitate, drive, and imple- ble to corporations at the state government levels, Nigeria Digital Economy Diagnostic Report   27 but would be subject to their adoption because of with overlapping responsibilities and the multi- the structure of the federal system of government. tude of policies and regulations, there is need for However, the oil and gas sector, being a critical sec- a clear vision on how to move the sector forward. tor and part of the global Extractive Industry Trans- The development of the National Digital Strategy parency Initiative (EITI), has developed an Open provides a good opportunity for articulating the Data policy for the extractive industry. The NEITI policy framework for use of big data. Open Data Policy 2016 is therefore part of the – Interoperability: Interoperability is a relatively new EITI initiative.11 A key feature of the policy is that it concept in the public sector in Nigeria, given the encourages Nigeria, as an EITI implementing coun- independence each agency has regarding ICT try, to publish EITI data “under an open license, and procurement and development of its own path for to make users aware that information can be reused automation. The government’s attempt at creating without prior consent.”12 The pace had been slow a shared services platform under the 1gov.net ini- but seemed to accelerate in 2019 in a heightened tiative has not been very successful. This is due to understanding of its economic and data sharing the lack of a regulatory requirement and individual value. The policy is being socialized now as part of and institutional incentive structures. Since no stan- the Open Government Partnership initiative, which dards have been prescribed regarding ICT procure- is under the Ministry of Justice. But the open data ment, there is no uniformity of systems. GBB, which component is being implemented by MCT. has responsibility for introducing transversal appli- The Freedom of Information Act (FOIA) has only cations and provision of government infrastructure, been adopted in two states despite a subsisting does not have regulatory muscle for enforcement 2018 Court of Appeal Judgement on its applica- and has also been criticized for delivering poor bility. Also, only Anambra, Kaduna, and Kano have services. Since GBB has to charge for its services signed up to the Open Government Initiative, at commercial rates, many MDAs are not able to which the Open Data policy is a component of.13 sustain connection to its services beyond basic fea- States need to do a lot more to implement the tures. Its data center, which ought to serve as a gov- FOIA and open data. ernment cloud, is under-patronized in spite of the – Big data: There is still a lot of opportunity for data localization policy. Such features like EDMS growth in data analytics in Nigeria. This is even have also hardly been deployed. It has therefore more so given the existence of a National Strat- been impossible to achieve electronic archival of egy for Development of Statistics.14 Data ana- data and data interchange among MDAs. lytics is not yet mainstreamed into policy and – Privacy and data protection: Nigeria does not have decision making in the public sector of Nigeria. a Privacy and Data Protection Act. This has limited In fact, a seminal attempt by government in that the growth of e-commerce and a data economy. regard was the inauguration, on May 8, 2019, of However, a stopgap measure is a Data Protection a National Technical Working Group on Mobile Regulatory Guidelines by NITDA, which came into Big Data, whose main terms of reference are to: effect in 2019. But a Data Protection Bill, modeled (i) identify and recommend areas for the appli- after the GDPR and Convention 108 principles has cation of mobile big data analytics in the public been passed by parliament and is awaiting pres- sector; (ii) identify policy and regulation require- idential assent to become law. The bill includes ments and recommend appropriate solutions for data protection obligations applicable to public the exploration of mobile big data analytics for and private sector entities that collect and process national economic diversification; (iii) provide a personal data, individual privacy rights, and a man- plan to develop the commercial, infrastructure, datory breach notification framework. and human capital required to position Nige- ria as the data science capital of Africa by 2023, – Cybersecurity: The security and integrity of dig- (iv) recommend funding options for developing ital data and systems are a significant challenge a National Mobile Big Data Analytics Platform; in Nigeria, where gaps in cybersecurity capacity and (v) identify a process for opening new data create significant risks across sectors. Cybercrime science–related job opportunities for Nigerian threats, such as malware, impersonation, mali- youths.15 The terms of reference for the Working cious codes, misuse of data, and hacking via easily Group indicate a positive vision for data analytics available tools, are some of the major issues that in government. The challenge will be in its imple- require protection. The Government of Nigeria mentation. Given the multiplicity of institutions estimated the annual cost of cybercrime to be 28   Nigeria Digital Economy Diagnostic Report 0.08% of the country’s GDP in 2015, costing about The government does not have a system for moni- NGN 75 billion that year. Organizations have pro- toring the use and quality of digital services. A 2018 gressively migrated to cloud-based environments survey showed that only 2% of citizens use e-govern- for higher level security, and an increasing amount ment services. Some of the reasons for this include the of information has been transferred to cloud plat- following: (i) mobile technology (which is a predominant forms. In 2014, the federal government of Nigeria channel for access in Nigeria) is still short on data ser- developed the National Cybersecurity Strategy vices, especially in the rural areas, and so many citizens and Policy to lay out the roles of Nigeria’s current are caught up in the digital divide, as described in the and future institutions and governance for cyber- Digital Infrastructure pillar; (ii) awareness of the platforms security assurance of national critical information and range of services is still very low. A large percentage infrastructure assets. They describe a process of of the population below the poverty line are seemingly phased institution building that is comprehen- oblivious to the potential of the digital economy and par- sive yet fragmented, with overlapping roles and ticipate in it minimally, if at all; (iii) most Nigerians do not responsibilities. For instance, the de jure mandate have confidence in online services, especially in cases for the government’s root CA is with the National of financial transactions because of cyber-security and IT Agency, NITDA; however, the de facto role is weak data and privacy protection policies, as described being played by the National Identification Man- in the Digital Financial Services pillar; (iv) bandwidth and agement Commission, NIMC. Several new agen- last mile services to homes have remained a problem cies, initiatives, departments, units, and working for regular and sustained access, as further depicted in groups are proposed, without clear definition the Digital Infrastructure pillar; and (v) quality of service, about delineation of mandates; there appear to which has been a vexed issue, discourages serious online be overlaps on capacity building (mandated to presence and access. several MDAs), liaising with the private sector or creating a National Internet Safety Initiative (NISI). PRIVATE SECTOR PLATFORMS Nigeria has a Cybercrimes and Cybersecurity Act The power of digital technologies is not just in the roll- (2015). The Act provides a framework for the pre- ing out of broadband capacity or in the distribution of vention, detection and punishment of cybercrimes millions of handsets, but also in the rise of digital plat- and the protection of critical national information forms. The two key ones are the Android system run by infrastructure. A legislative review conducted in Google and the iOS system operated by Apple. Through 2018 with the support of the World Bank found their app stores they distribute thousands of new appli- that the combined legislation for cybercrimes and cations which provide services to consumers and also Cybersecurity does not provide for sufficient treat- collect data in ways that were unimaginable until recent ment of cybersecurity and recommended that times. Digital platforms offer services that consumers Nigeria consider maintaining separate laws for each value, and they drive economic growth. of these areas. It provided additional specific rec- ommendations: for one, that an amended cyber- As per a recent assessment, there are currently around security legislation clearly state the penalties for 277 private sector platforms operating in Sub-Saharan breaches of obligations by Critical National Infor- Africa (Figure 11).16 The second largest number in Nige- mation Infrastructure (CNII) holders, rather than ria (87), which also accounted for the largest share (60%) empowering the respective sectorial regulators— of the 4.8 million platform workers. Of the 87 platforms not all of which are yet in place—to define the pen- in Nigeria, 66 were homegrown (76%), and the remaining alties for cybersecurity breaches in their sector and were from the U.S. (10%), Europe (6%), the rest of Africa potentially cause misalignment of penalties across (3%) and other (5%). Figure 11 shows Nigeria’s 87 digital sectors. Second, an amended law should also platforms recognized as part of the emerging digital plat- define the timeline for the reporting of cybersecu- forms in Africa. rity incidents; third, it should contain provisions for requiring cybersecurity service providers and prod- Figure 12 gives some statistics regarding the sectors ucts to be licensed. Fourth, it was recommended within which these platforms are active in Nigeria as per that a revised law establish clear powers of ngCERT the latest assessment of 2019.17 to prevent and investigate cybersecurity breaches. Lastly, an amended cybersecurity legal framework Lagos is the heart of the development of digital should set standards for IT security of government developments in Nigeria—especially the develop- information systems and databases. Key agencies ment of new digital platforms. Lagos is the only city in are ONSA and Justice. Africa that figures in the 2019 Global Start-up Ecosystem Nigeria Digital Economy Diagnostic Report   29 FIGURE 11 Report as a start-up ecosystem that could challenge the jobs it provides will be determined by proactive action on 30 leading global ecosystems led by Silicon Valley.18 This these two fronts. is extremely creditable considering the fact that Lagos is the youngest of the three thriving digital hubs in Africa. Apart from Lagos, there is a thriving digital commu- The others are Nairobi and Johannesburg/Cape Town. nity in multiple locations across Nigeria. This includes locations such as Abuja, Port Harcourt, Kaduna, Kano, and Some of the reasons that propel digital growth in others. A detailed assessment of opportunities and chal- Lagos are the following: It has a population of 21 million lenges for developing ICT-led Innovation Hubs was con- compressed in the smallest state in Nigeria, the bulk of ducted in 2017. This covered the following states: Federal the working population is below the age of 30, it is the Capital Territory (FCT), Kaduna, Plateau, Adamawa, Cross entry point from where Nigeria connects to seven subma- Rivers, Anambra, Edo, and Lagos.20 rine Internet cables that have huge available capacity, it is the commercial capital not just for Nigeria but also for Private sector platforms can be classified into either fin- large parts of West Africa, and it accounts for over 25% tech, e-payment channels, social media, or e-commerce, of the country’s GDP. The Lagos ICT Services Cluster has all of which are accessed through digital channels such as been valued at over $2 billion with around 400 to 700 smartphones and laptops. Others are platforms for educa- active start-ups.19 Andela, a technology start-up based tion, agriculture, health, and legal. in Lagos, attracted $24 million in funding from the Chan • Fintech: Out of the 99 million financially eligible adult Zuckerberg Initiative. Other start-ups have also raised sig- population in Nigeria, about 36.8% are excluded from nificant amounts of overseas and local capital. the financial system.21 The digitization of financial ser- vices spearheaded by financial technology companies The Lagos Ecosystem has scale due to availability of (fintechs) has the potential to serve a large part of this skilled manpower through the various technology population. Fintechs have been at the forefront of institutes in the country, availability of bandwidth, applying digital tools to provide new and innovative infrastructure and venture capital as well as sectors services to customers. Although they appear to be in and markets that can sustain innovation. Lagos needs competition with traditional financial institutions, they to be nurtured and developed as an ICT hub if it is provide more of a complementary solution that helps to fulfill its potential as a leading global ecosystem address some of the gaps in financial services in the player. There is a need to improve training in the digital country. The fintech ecosystem has been growing skills (as covered in the chapter on digital skills) availabil- steadily and has contributed immensely to the devel- ity of start-up capital, and a need for an enabling policy opment of the Nigerian digital economy. An important environment to facilitate this growth. The basics are in contribution has been in the attraction of investments. place, but the pace that the business grows at and the 30   Nigeria Digital Economy Diagnostic Report Source: Bola Adetunji et al. “Microeconomics of Competitiveness Final Paper—Lagos ICT Services Cluster,” Harvard Business School (2017) Investment funding for Nigerian start-ups, including overall rankings, Nigeria was ranked second in Africa fintechs, was more than $100 million in 2016,22 and below Mauritius by UNCTAD in 2018 (Table 1). increased to $117 million in 2018.23 Recent deals have included $9 million for Flutterwave, $8 million for Pay- e-Commerce companies are doing well in this market. stack, and $13 million for Mines. The major e-Commerce retailers have over 1 million cus- tomers and receive an average of 300,000 unique visits • e-Payment platforms: Nigeria’s steady transition into per day. The market for online payments in Nigeria was the new realities of the digital economy is also valued at NGN 167 billion in 2016. Nigeria’s e-commerce reflected in the increasing adoption of e-payment sector has attracted foreign investments, with leading channels. There has been a sustained growth in players having received multi–million-dollar investments transactions carried out across e-payment channels in recent years. This subsector shows tremendous poten- as more people are included in the financial systems tial for growth and for contributing jobs and tax revenues and have access to mobile phones and the Internet. that would remain in Nigeria. A Nigerian start-up, Jumia, Also, the government’s willingness to implement dig- is now part of the NY Stock Exchange and has expanded ital and cashless policies and guidelines, such as the to 22 countries in Africa. Konga and Yakata are other 2012 cashless policy and the National Payment Sys- start-ups that are operating successfully through adopt- tems Vision 2020 (PSV 2020), has been a catalyst for ing the standard e-commerce model to be adapted to the growth in e-payment transactions. Data shows that suit the Nigerian situation. As described in the Digital overall, e-payment channels (ATM, POS, Mobile, Web, Financial Services pillar, most shoppers (67%) opt for cash NIP, and E-Bills) have continued recording a positive on delivery, and only 23% use credit cards, with another trend in the value and volume of transactions. In 2018, 10% using mobile payments. This is reflective of the low these channels recorded transactions worth NGN 92 level of trust the population has in making digital pay- trillion from 1.9 trillion transactions, a 40% increase ments and the preference for cash transactions. from the previous year. • e-Commerce: UNCTAD’s B2C report for 2018 noted Nigeria’s high ranking is due to the size of its population that Nigeria is Africa’s biggest B2C market, both in (191 million), of which 40% have access to accounts, terms of revenue and shoppers.24 In 2018 the e-com- 42% use the Internet, there are 52 secure servers per merce spending in Nigeria was estimated at $12 billion 1 million people, and its postal reliability score is one and was projected to increase to $75 billion in reve- of the highest in Africa.26 Another reason could be the nues by 2025 by McKinsey.25 Not in market size, but in current tax regime in the country. A 2017 Federal Execu- Nigeria Digital Economy Diagnostic Report   31 TABLE 1: UNCTAD e-commerce ranking Share of Share of individuals individuals Secure using the with an internet UPU postal Index value internet account servers reliability change (2017 or (15+, 2017 (normalized) score (2017 Index value (2016– World Economy latest) or latest) (2017) or latest) (2017 data) 2017 data) Rank 1 Mauritius 55 90 56 66 66.9 –7.2 55 2 Nigeria 42 40 52 85 54.7 5.5 75 3 SouthAfrica 59 69 83 0 52.9 –1.9 77 4 Tunisia 56 37 51 63 51.7 2.1 79 5 Morocco 62 29 54 59 50.9 NA 81 6 Ghana 39 58 45 53 48.8 7.6 85 7 Kenya 39 82 37 27 46.2 3.7 89 8 Uganda 17 59 31 58 41.5 –3.2 99 9 Botswana 47 51 41 26 41.4 0.1 100 10 Cameroon 23 35 25 78 40.3 3.6 101 Source: UNCTAD’s B2C Report 2018. tive Council approval of new sectors in the pioneer status across 30 African countries, charging merchants a small list included technology and e-commerce companies.27 service commission, which it shares with its over 45 bank- The approval, which listed new sectors for pioneer status ing partners in Africa. It will be almost impossible for the incentive, included technology companies in software and Federal Inland Revenue Services (FIRS) to trace and track e-commerce, which are areas in which platforms fall. The the percentage of its income due to its operations in pioneer status is essentially a tax holiday for a maximum Nigeria. Additionally, the country has yet to take a posi- of five years. The approval has been widely celebrated in tion on the European Commission’s interim proposal on Nigeria as incentive for the growth of the digital economy tax on digital services. in general and for e-commerce platforms in particular. This pioneer status represents the import duty waivers granted Taxation of digital platforms therefore is still very much to companies as incentives, which enables them to make a grey area in Nigeria. The income tax law assumes a profits within their formative years.  The incentives extend physical presence of the taxpayer but this is extremely to tax credits, capital allowances, investment allowances, de-emphasized in digital platforms whose businesses are and tax exemptions.28 The Nigerian Investment Promo- more tech-driven than location-driven.30 Digital platforms, tions Council has followed with a publication of the proce- like e-commerce companies, are indeed emerging mar- dures for applying for the pioneer status. kets which, not being adequately captured in the tax laws, provide an explorable opportunity for the government. However, a major issue is emerging regarding the There is, however, a current debate in Nigeria about application of the Nigerian tax regime on digital plat- whether these platforms should be taxed. Obviously, this forms. Digital platforms were not originally contemplated emerging market of digital platforms has “succeeded in by Nigerian tax laws. Although most of the private sec- compounding the existing or traditional tax structure in tor platforms, including e-commerce platforms are tax- terms of source of income and residence principle.”31 able, the Nigerian tax regime, which is driven by payer presence and residence, does not provide any guidance However, a 2018 Tax Regulation requires Multinational or clarity on how they should be taxed. This is largely Enterprises (MNEs) with a total group consolidated rev- because most of these platforms have little physical pres- enue of not less than NGN 160 billion, who have either ence to aid tax enforcement. These platforms, such as fin- their ultimate parent entity or a constituent entity res- techs, like Paystack and Flutterwave, also operate across ident in Nigeria for tax purposes, will now be required continents and in several jurisdictions, making income tax to file a country by country report to the Federal Inland assessment extremely difficult. For instance, Flutterwave Revenue Service.32 The meaning of this is that Nigeria enables the processing of any form of payment anywhere may soon start implementing the taxation of digital trans- in Africa. It has processed over $2.3 billion in payments actions33 and platforms which have hitherto escaped the across 60 million transactions.29 It accepts 350 currencies tax net because of their inherent multi-country presence. 32   Nigeria Digital Economy Diagnostic Report However, this will continue to be an arduous task. Linked DIGITAL GOVERNMENT PLATFORMS to this is the issue of possible taxation of OTT services. R1. Improve the legal framework and streamline over- OTT applications such as WhatsApp and Messenger have lapping responsibilities between the different entities adversely impacted the revenues of mobile providers, and responsible for development and regulation of the ICT the tax regime governing OTT still needs to be clarified. sector in Nigeria. The section on government digital platforms outlined the NIGERIA’S DATA LOCALIZATION REQUIREMENTS major gaps that exist in the legal framework regarding dig- The Government of Nigeria requires businesses to ital services. There is a need to improve the legal frame- store all data concerning Nigerian citizens in Nigeria. work and also to streamline the overlapping institutional Nigeria also requires businesses to host all government arrangements. It is good that the Ministry of Communi- data locally unless officially exempted. These require- cation has been charged with the responsibility for pre- ments discriminate against foreign businesses that distrib- paring the National Digital Strategy and Implementation ute their data storage and processing globally, as well as Plan. That should provide the impetus for clarifying institu- local businesses looking to benefit from hosting opportu- tional arrangements at the federal level. At the state level, nities outside Nigeria (Office of the United States, 2018). there is a need to look at the Edo State ICT Agency model, where a single entity is responsible and accountable for ICT policy, infrastructure, and public sector applications. Digital Platforms Recommendations and 2.2.3  Next Steps R2. Fundamentally reform the incentive structures in The findings from the assessment of the current state place that support the proliferation of multiple govern- of digital platforms in Nigeria aimed to identify the fac- ment applications that provide limited value for money. tors in the macro and microenvironment that influence The current institutional arrangements support the the behavior of companies and individuals. Each factor development of fragmented solutions in all 36 states and in the macro and microenvironment and its impact help the federal government. There is a need for putting in in the identification of the factors in the generic external place a totally different incentive structure that will iden- environment, i.e., Opportunities and Threats; and the fac- tify appropriate ICT solutions for the Nigerian context tors in the generic internal environment, i.e., the Strengths and provide adequate financial incentives to adopt and and Weaknesses, both which are needed to construct the reward their successful deployment. The SFTAS model is final SWOT Matrix. a good one to consider, given the financial incentives put on the table to encourage reforms in the areas of public As observed in the SWOT Matrix, despite the chal- financial management. lenges and bottlenecks related to Digital Platforms in Nigeria, there are clear strengths and opportunities R3. Upgrade the skills of public sector employees to that indicate the country can achieve much greater deliver on the GovTech agenda. digital inclusion in the future. This section details recom- Apart from training, there is a need to consider creating mendations and next steps based on the SWOT Matrix, a special scheme of service for attracting and retaining which would support Nigeria toward developing Digital highly skilled IT professionals. Platforms in the country. SWOT Matrix Strengths Weaknesses −  Core government (back-end) systems −  Digital ID −  Digital services −  Government lacks system to monitor quality of service −  e-Commerce size in terms of customers and value −  Data localization requirements −  Commitment of government to support the ICT agend −  Lack of infrastructure −  Quality and cost of mobile service Opportunities Threats −  National Digital Strategy (under development) −  Institutional structure − e-Government represents huge growth opportunity for −  Privacy and Data Protection Act start-ups − Interoperability − Open Data Policy and Action Plan: increased attention to −  Tax system for start-ups transparency −  Constraints affecting ICT hubs in Lagos, Abuja, etc. −  Central portal for government services −  OTT impact on revenues of telecom companies Nigeria Digital Economy Diagnostic Report   33 PRIVATE SECTOR PLATFORMS To date, the Nigerian financial sector has not success- R4. Provide special support to Lagos and other ICT fully addressed the needs of the country’s poor. The hubs across the country that enables them to deliver World Bank estimates that in 2018 about 50% of Nigerians solutions and create jobs. lived in extreme poverty—on less than $1.90 a day—with Lagos has the potential for development of a major only 25% of the poorest 40% of adults having an account global ICT hub. There is a need to constitute a fully with a bank or a mobile money provider. At the same time, empowered group to address the bottlenecks that are the need for access to financial services can be even more constraining the growth of the “Yabacon Valley,” such pressing when living on the poverty line. The opportu- as the data localization requirements, etc. A number nity to receive a small remittance in real time or obtain an of other locations are also emerging. Nurturing their affordable loan can make the difference between buying growth and providing them with the right incentives to enough food or staying hungry, or between keeping kids grow is necessary. These incentives could involve the at school or having them drop out. requirement (as in Kenya) that 50 percent of government software procurement is sourced from local software Traditional (non-digital) financial products are not well developers. positioned to cater to the marginalized segments of the population. Those most affected by financial exclu- R5. Clarify the tax regime regarding its applicability to sion (unbanked Nigerians) tend to live predominantly in digital platforms. rural areas, to be female, and to be younger. The median The tax regime governing ICT is very much a grey area in monthly income of the financially excluded is NGN 15,000 Nigeria. There are several incentives in place for support- (USD 41.61).34 It is extremely difficult to build a sustain- ing ICT companies. However, there is a need for clarity, able business model for such a population using conven- especially regarding start-ups and more mature digital tional banking channels with their high fixed costs. Various platforms. studies worldwide suggest that the financial sector is an industry with relatively high consumer acquisition costs (from USD 30–50 in India to even USD 1,500 for some 2.3  DIGITAL FINANCIAL SERVICES PILLAR high-income economies).35 Bank branches and ATMs are expensive to set up, especially in rural areas where most 2.3.1 Importance of Digital Financial Services Pillar unbanked Nigerans live. The Nigerian economy stands to benefit from the DFS create the opportunity to upend that cost struc- growth in the supply and usage of digital finan- ture through leveraging economies of scale and dra- cial services. DFS providers are better positioned to matically reducing the marginal costs of providing address the needs of the poor. They also create the services. In this way, serving the poor becomes profit- ‘rails’ enabling digital entrepreneurs from other sectors able, and financial institutions have incentives to cater to to market their products at scale. Because of the regional their needs. Replacement of paper banknotes with digi- and pan-African footprints of Nigerian financial institu- tal float eliminates much of transport and security costs. tions, the country has an opportunity to export its digi- Leveraging existing businesses or community institutions tal finance ventures beyond its borders, diversifying the as agents reduces setup costs. Relying on digital identifi- economy and fostering the regional integration within cation and remote Customer Due Diligence (CDD) means the ECOWAS. Better DFS can also mean stronger links that those processes take up only a fraction of the pro- with the Nigerian diaspora, boosting the inward remit- vider’s staff time. In that way, customers earning USD 40 tance streams, encouraging investments, and facilitating a month can be served in a way that is affordable to them the exchange of human capital. At the same time, there and profitable to the financial institution. are also potential threats. Nigerian law enforcement agencies have waged long-standing battles with online Without a sustainable DFS ecosystem, other digital and financial fraud, and the country faces an ongoing businesses in Nigeria will not be able to grow. Ben- struggle with terrorism and armed conflict in its northern efits of digital channels are not fully captured if finan- states. In the absence of adequate regulation and over- cial transactions on online platforms happen offline. For sight, both issues can be exacerbated by the advent of instance, the prevalence of “cash on delivery” payments DFS and the ease of obtaining instant credit and making in African e-commerce has negatively affected bottom real-time domestic and international money transfers. lines of online marketplaces.36 Conversely, nonfinan- Brand new dangers include data leakages and cyber- cial businesses can boost their sales by bundling credit, crime, as well as emergence of new monopolies and sys- lease, or insurance products in a model made popular by tems of political patronage. the automobile industry. Digital entrepreneurs that can 34   Nigeria Digital Economy Diagnostic Report seamlessly integrate their checkout processes with the Ponzi schemes are regularly uncovered in Nigeria: “Mav- purchase of financial services can benefit from the syn- rodi Mundial Moneybox” (MMB) in 2017 defrauded over ergies—but only if the DFS sector is mature enough to 3 million Nigerians out of 18 billion naira.43 MMB and deliver on such partnerships. subsequent fraud attempts, such as “Loom” or “Growing Circle,” highly depend on new technologies. For exam- The expansion of alternative delivery channels is imper- ple, social media such as Whatsapp group chats reached ative for large Nigerian banks if they are to remain potential victims and instant payment channels collected internationally competitive. Out of the largest commer- funds from them and moved the money beyond the cial banking conglomerates headquartered in Nigeria, at reach of law enforcement.44 Growth in DFS not accompa- least four (Zenith Bank, Access Bank, UBA, and GTBank) nied by higher awareness among consumers and higher have large retail banking operations elsewhere in Africa. capacity of financial intelligence units may therefore ulti- In many of their foreign markets—from Ghana to Kenya to mately lead to more losses and diminished trust in the Zambia—they face increasing competition from local and financial system. international DFS providers. Retaining their market shares and their role in pan-African commerce will be increasingly Digital finance may play a role in achieving the goals difficult if they do not strengthen their digital portfolios. of Nigeria’s strategic plans. The Economic and Recov- ery Growth Plan for 2017–2020 envisioned, as one of its Nigerian diaspora abroad can play a part in stimulat- “broad objectives,” promoting “digital-led growth.”45 To ing the economy—and DFS at home can make it easier. that end, it included a commitment to expand access to At least 1.2 million Nigerian-born people live abroad, not finance and strengthen financial inclusion. Sector-specific including migrants’ children and grandchildren born in the plans and strategies have been developed under the aus- destination country.37 In 2018, they remitted home USD pices of the Central Bank of Nigeria (CBN), including the 24.3 billion, amounting to over 6% of the GDP.38 Nigeri- National Financial Inclusion Strategy46 and the Payment ans are one of the best-educated diasporas in the United Systems Vision 202047—soon to be followed by a “Vision States; they make up about three-fourths of African-origin 2030.”48 founders and venture capitalists there.39 But the scarcity of digital money transfer and investment products, as well  iagnostic Findings: Current State of Digital 2.3.2 D as limited usage of those already on the market, mean Financial Services Pillar that the full potential of this contribution is not realized. Availability of Digital Financial Services For example, sending money from the UK to Nigeria with the median non-digital remittance service provider costs A. MARKET PARTICIPANTS twice as much as sending it with the median provider Traditional financial institutions in Nigeria—commer- where the process is end-to-end digital.40 cial, microfinance banks, and nonbank finance com- panies—have been slow to embrace digital financial Leveraging DFS may be needed to improve quality of products. On the one hand, in 2019 each of the 10 larg- public services and to dramatically reduce the costs est commercial banks in Nigeria offers online banking and of public administration, as well as potential corrup- a smartphone app, with some of the smaller institutions tion. Paying state and local employees directly into their following their footsteps. The medium-sized Wema Bank accounts and with minimal manual intervention may also recently launched ALAT, a digital-only bank-with- eliminate middlemen and weaken patronage networks. in-a-bank. On the other hand, online and mobile apps Integrating digital payments with the government pro- developed by banks are, in most cases, very basic in their curement and invoicing systems will make audits easier. functionality. They allow users to check their balances, This is badly needed in Nigeria: the country scores 144th download transaction history, pay bills, and make on-us out of 180 economies in the 2018 Corruption Perception credit transfers; sometimes they also include domestic Index of Transparency International; the organization’s sur- interbank credit transfer functionality. In summary, these vey found that 43% of Nigerians reported paying a bribe are basic features considered standard for digital banking to access public services at least once in the preceding throughout the 2000s. However, none of the apps offer twelve months41 budgeting tools, transaction analytics, or integration with social media profiles or messaging apps. Similarly, they However, the importance of DFS for Nigeria also lies in do not build on possibilities offered by card tokenization. potential dangers associated with their use and abuse. Online banking in Ecobank, the sixth largest bank in the The Financial Action Task Force (FATF) has noted several country, is limited to bill payment services. Islamic banking studies of attempted use of formal financial services to (or noninterest banking, as it is known in Nigeria) has not finance terrorist activity in the Lake Chad basin.42 New developed widely used digital channels. Nigeria Digital Economy Diagnostic Report   35 Commercial banks in Nigeria are mostly of domestic ing, and lending. Few create new value by innovative origin; just three out of twenty (Stanbic, Citibank, and uses of data and integrating financial services with other Standard Chartered) are subsidiaries of foreign banking digital products (social media, ridesharing, “sharing econ- groups. At the same time, several Nigerian-headquartered omy”), although the space is fast evolving and more com- banks, such as UBA, are active on other African mar- plex use cases are being gradually introduced. In addition kets through foreign branches or subsidiary companies. to that, hardly any start-ups have expanded beyond the The banking sector is highly profitable (return on equity, Lagos metropolitan area. according to the Economist Intelligence Unit, averaged 23.5% in Q4 2017). All banks issue cards, and most offer Payment services and lending have so far been the acquiring services. However, the payments acceptance most successful fintech use cases, measured both by market, including merchant and bill payment services, is the number of ventures and by their uptake among gradually becoming dominated by third-party aggregators consumers. At the same time, the relative lack of granu- and other nonbanks, ranging from switch operators such lar demand-side data makes a deepened market analysis as Interswitch to fintechs such as Flutterwave. more challenging. In his “Guide to the Payments and Fin- tech Landscape in Nigeria,” Segun Adeyemi identifies 14 In contrast with other countries of the region Mobile categories of ventures operating in the fintech and DFS Network Operators (MNOs) were absent from the ecosystems, comprising of over 40 payments businesses mobile money market, as the regulations of the Cen- and 25 lenders, and trailed by 12 savings and investment tral Bank of Nigeria (CBN) prohibit telecommunication platforms. Figure 14 shows key fintech categories and lists companies from applying for such a license. Instead, some of the major players in these markets. On the other mobile money services can be provided by banks or bank- hand, full-service digital banking, digital stockbroking led consortia, as well as non-banks that are not MNOs or platforms, crypto-asset platforms, and digital remittance their subsidiaries. While the central bank issued over thirty services are markets with no more than three entrants. licenses, a single provider, Paga, in 2017 accounted for There are no purely digital insurers; at most, Nigerians over half of all mobile money transactions by volume and can use online comparators to shop for offers of different by value. However, MNOs are likely to enter and disrupt brick-and-mortar insurance providers.49 the financial services market following the enactment of the Payment Service Banks (PSB) Guidelines, which will B. ACCOUNT OWNERSHIP permit the launch of PSBs by MNO subsidiaries. Financial inclusion in the country has effectively stalled, with repercussions for the development of digital While being the largest economy in Africa by itself financial services. According to EFInA, in 2018 only makes Nigeria well positioned to create a vibrant fin- 39.7% of adults had a bank account, compared to 38.3% tech sector, most companies branding themselves as in 2016; the growth did not exceed the margin of error.50 fintech offer only e-commerce payments, digital sav- Only 15.5% reported making at least one digital payment in the past year. Additionally, the gender gap is very high: account ownership among men (51%) is almost twice as high as among women (27%). Account penetration rates among formal businesses are relatively high—but most small businesses have not been formalized. According to the 2014 World Bank Enterprise Surveys, 70.4% of surveyed firms had a check- ing or savings account with a bank. However, 98.5% of surveyed enterprises (all of them employing at least five people) were formally registered and licensed. On the other hand, according to a 2016 household survey, only 1.8% of nonfarm enterprises operating in the whole of Nigeria were registered. Most informal enterprises can- not open bank or mobile money accounts, and thus most Nigerian businesses remain without access to formal financial services. Whereas in other African markets inclusion of the unbanked would mostly be driven by mobile money 36   Nigeria Digital Economy Diagnostic Report providers or other nonbanks, this has not been the case Reaching excluded populations in the northern states for Nigeria, where—according to the same research— could be more challenging without reliance on DFS, only 1.7% of respondents had a registered mobile which is still at a nascent stage, both related to needed wallet. Out of the 10 largest economies of Sub-Saharan infrastructure and services. As discussed before, finan- Africa, only Ethiopia—where e-money issuance or mobile cial services are provided predominantly by commercial money was effectively not permitted51—scores worse on banks, which lack substantial field presence outside the mobile money account ownership (see Table 2). While urban centers of Kano and Kaduna. Literacy levels in the elsewhere in Africa mobile money drove gains in financial North are lower by about 30 percentage points than in inclusion, Nigerian mobile money providers have so far the South, residents are less likely to own a mobile phone reached only customers that are already banked (EFInA or have access to the Internet, and there are fewer non- reports that 90% of mobile money customers already had agricultural enterprises; religious considerations may an account with a commercial bank). require noninterest banking—the supply of which is cur- rently limited. Fewer people own accounts in Nigeria than in other African economies with similar or lower income C. PAYMENT SERVICES levels. This trend becomes even more salient after Usage of digital payments is relatively low. Just about excluding higher income outliers, such as Botswana or 30% of adult Nigerians have made or received a digital South Africa. On the other hand, it remains close to the payment in the past year according to the 2017 Global pan-African trendline with respect to the relationship Findex data. More worryingly, Nigeria is the only large between financial access and the access to mobile tele- economy of Sub-Saharan Africa where the proportion of phony or the Internet. Nonetheless, there are a number the population making or receiving digital payments fell of outliers, such as Tanzania or Uganda, where account between 2014 and 2017. It also scores second worst in ownership is high, even though mobile subscriptions or the share of adults using mobile phones or the Internet Internet access remained at average or low levels (see to access an account, as well as in the share of adults Figures 15–17). that have sent or received domestic remittances using a mobile phone (Table 3). This is confirmed by available There are significant regional differences in account supply-side data: an average adult in Nigeria made 0.4 ownership between northern and southern states mobile payments per year—more than a hundred times of Nigeria. If only the 17 states belonging to southern fewer than in Ghana, Kenya, or Uganda (Table 4). geopolitical zones (South-West, South-South, and South- East) were considered, financial inclusion indicators would Data on the use of different payment instruments reach or surpass the levels recorded by many leading demonstrate the success of the national faster economies of Eastern and Southern Africa—with account payment scheme (NIBSS Instant Payments—NIP). ownership exceeding 60%. On the other hand, the rates Launched in 2011, NIP was one of the first retail instant of formal financial inclusion in the North-West and North- payment systems worldwide, and in 2018 accounted for East hover around 30%. 31.8% of electronic payments by volume—and 58% by TABLE 2: Account ownership in Nigeria and eight largest economies of Sub-Saharan Africa based on the 2017 Global Findex data Account ownership (2017) Mobile money account (2017) Gender gap in account ownership Nigeria 40%  (–4 p.p.) 6% (+4 p.p.) 24 p.p. (+4 p.p.) Kenya 82% (+7) 73 (+15) 8  (0) South Africa 69% (–1) 19 (+4) –2 (–2) Uganda 59% (+15) 51 (+16) 13 (–3) Ghana 58% (+17) 39 (+26) 8  (0) Tanzania 47% (+7) 39 (+7) 9  (–2) Côte d’Ivoire 41% (+7) 34 (+10) 11 (1) Ethiopia 35% (+13) 0  (+4) 12 (2) Cameroon 35% (+23) 15 (+13) 9  (5) Note: Numbers in parentheses indicate change since 2014. Data unavailable for Sudan and Angola. Nigeria Digital Economy Diagnostic Report   37 FIGURE 15: Relationship between GDP per capita and financial inclusion Source. Global Findex and World Development Indicators database. Note. Each point represents a Sub-Saharan Africa economy; Nigeria is marked with a dark red point. FIGURE 16: Relationship between mobile subscriptions and financial inclusion Source. Global Findex and World Development Indicators database. Note. Each point represents a Sub-Saharan Africa economy; Nigeria is marked with a dark red point. 38   Nigeria Digital Economy Diagnostic Report FIGURE 17: Relationship between internet access and financial inclusion Source. Global Findex and World Development Indicators database. Note. Each point represents a Sub-Saharan Africa economy; Nigeria is marked with a dark red point. TABLE 3: Usage of digital financial services in Nigeria and the eight largest economies of Sub-Saharan Africa based on the 2017 Global Findex Data. Made or received digital Used a mobile phone or the Sent or received domestic payments in the past year Internet to access an account remittances through a (2017) (2017) mobile phone (2015) Nigeria 30% (–7 p.p.) 8% 7% (+4) Kenya 79% (+10) 72% 63% (–1) South Africa 60% (+1) 21% 19% (+7) Uganda 55% (+15) 47% 47% (+3) Ghana 49% (+24) 35% 43% (+26) Tanzania 43% (+8) 37% 41% (+5) Côte d’Ivoire 38% (+8) 33% 38% (+11) Ethiopia 12% (+7) 0% 0% (0) Cameroon 29% (+21) 16% 20% (+19) Note: The percentage refers to the share of all adults (aged 15 and higher) who have used the service. Numbers in parenthe- ses indicate change since 2014. Data unavailable for Sudan and Angola. Nigeria Digital Economy Diagnostic Report   39 TABLE 4: Number of mobile payments per adult per reported to be financed by bank loans. Over 30% of newly year in Nigeria and the five largest economies of originated credit is captured by the oil and gas industry, Sub-Saharan Africa. while only 3.6% supports the ICT sector. Mobile money payments per adult E. INSURANCE (2017) Insurance in Nigeria is rarely offered through digi- Nigeria 0.4 tal channels. A limited number of comparator websites Sudan 0.4 aggregate offers from various traditional insurance provid- Kenya 52.2 ers, but their usage is most likely limited. Fewer than 1% Ghana 55.4 of all households in Nigeria have signed up for any form Côte d’Ivoire 29.6 of insurance products, of which auto insurance is the most Uganda 48.5 common. Source: IMF Financial Access Survey. Data unavailable for South F. FINANCIAL ACCESS POINTS Africa, Tanzania, Ethiopia, Cameroon, and Angola. Nigeria remains at par with other large African econ- omies with respect to the number of traditional finan- value—in Nigeria. Its usage continues to grow rapidly: cial access points, such as bank branches, ATMs, and between 2017 and 2018, the volume and value of pay- POS terminals—but lags in agent banking and mobile ments grew, respectively, by 79% and 43%. On the other money agents which will be more effective in facilitat- hand, the significance of paper-based instruments, such ing financial inclusion in remote areas. As measured by as checks, is steadily decreasing. the number of agents per 100,000 adults, the saturation on the Nigerian market is almost 50 times lower than in While the introduction of NIP and its adoption by all Kenya and over 100 times lower than in Ghana (Table 5). commercial banks has led to digitization of higher It is also concerning that the number of agents per capita value payments, small payments are still made actually decreased between 2016 and 2017. in cash, which drives the frequent use of ATMs. Although the share of bank account and debit card Access points, however, are not spread evenly across holders has remained virtually at a constant level, the the country. The north-south split, described earlier in number of ATM withdrawals rose slightly between 2017 relation to account ownership, is even more salient with and 2018, with the average withdrawal value decreas- respect to the location of bank branches, ATMs, or mobile ing to NGN 7,400 (USD 20.50). Alternative channels for money agents. As seen in the map (Figure 18), financial small-value payments have failed so far. For example, institutions are widely present across the southern states. the number of transactions with M-CASH—an interop- In the north, however, only the Federal Capital Territory erable scheme facilitating the use of mobile money (FCT) of Abuja and the cities of Kaduna and Kano have wallets for point-of-sale (POS) transactions—has not managed to sustain a sizeable presence of banks and exceeded 0.08% of the POS transaction volume with ATMs. Beyond the questions of economics and culture credit and debit cards. (e.g., the need for interest-free banking among some Muslim Nigerians), the scarcity of access points can also D. CREDIT AND SAVINGS be explained by the fragile situation in the North-East— Access to and usage of credit and saving products the same map shows that financial institutions are unlikely remains lower than access to and usage of accounts to open branches and agents in areas that have to cope and payment services. According to the 2017 Global with an increased threat of terrorism and violence. While Findex data, only 5% of Nigerians borrowed from a finan- the map in Figure 18 did not capture the more recent cial institution or used a credit card, and 28% borrowed data, the recent increase in ransom kidnappings recorded from family and friends; only 21% saved at a financial in the North-West zone discourages business and provid- institution. While fintech start-ups have pioneered digi- ers from operating in those areas. tal origination, disbursement, and repayment of personal consumer loans, other types of lending depend on brick- Enabling Environment for Digital Financial Services and-mortar access points. Lending for microenterprises There are several strengths that Nigeria can build on and SMEs is particularly underdeveloped: only 0.6% of to advance its DFS market. It can capitalize on the size households managing a nonfarm enterprise reported of its economy, or leverage Lagos as a fintech hub and using bank loans for start-up financing; 33% of firms the network effects it generates. Nigeria’s financial sec- identified access to finance as a major constraint. Only tor also benefits from the earlier investments in payment 3.4% of investments and 3.9% of working capital were systems and the financial markets infrastructures, as well 40   Nigeria Digital Economy Diagnostic Report TABLE 5: Number of access points per 100,000 adults in the largest Sub-Saharan African economies where data are available. The numbers in parentheses indicate change relative to the previous year. ATMs per 100,000 adults POS terminals per 100,000 Country Agents per 100,000 adults (2017) (2017) adults (2017) Nigeria 11 (–21%) 16 198 (+36%) Ghana 1098 (+39%) 12 — Uganda 713 (+16%) 4 — Kenya 576 (–1%) 10 147 (+27%) Sudan 35 (+42%) 5 — South Africa — 68 — Angola — — 589 (+25%) Tanzania — — 13 (+11%) Source: IMF Financial Access Survey and central banks’ data. as the electronic Know-Your-Customer (e-KYC) systems FIGURE 18: Map of financial access points (2014) and based on the Bank Verification Number (BVN). terrorist incidents (2014–2017) in the country Nigeria is the largest economy in Sub-Saharan Africa, largely owing to its fast-growing population. This has several implications for the DFS market. First, it creates the necessary economies of scale that can sustain many low-margin DFS business models (e.g., low-value pay- ment services). Second, it makes it more viable to design and market financial products addressing niche markets, as reaching even 1–2% of Nigerians will effectively mean capturing millions of users. Demographic growth has cre- ated a very young society, with millions of young adults entering the economy as “digital natives” and expecting digital delivery of various services, including DHS. The large size of the existing fintech hub in Lagos can create beneficial network effects. Abundance of fintech companies and jobs can attract new talent and create new synergies across the ecosystem. It is also beneficial that Lagos—aside from its DFS role—is one of the main ●  Bank branch or stand-alone ATM ●  Mobile money agent commercial centers of Africa. Thanks to that, the grow- ●  Incident of terrorism/violence ing fintech sector can attract alumni of large corporations Source: Bill & Melinda Gates Foundation’s Financial Services for the from other sectors, who contribute their experience, Poor Maps (access points); University of Maryland (terrorism incidents). knowledge, and contact networks. Geographic proxim- ity facilitates exchange of information between different Commission (SEC), but the law clearly delineates respon- industries and formation of joint ventures. At the same sibilities of each of the institutions. In the past, issues time, even Lagos faces a deficit of digital skills that may related to the regulation of mobile money providers were put constraints on the growth of the sector. There is a seen as an area of a regulatory overlap between the CBN shortage of software engineers with mobile development and the Nigeria Communications Commission. However, experience, data analysts, and a wide range of retail a memorandum of understanding between the CBN and finance talent. the NCC has significantly improved coordination between the two and removed ambiguities as to the chief role of With the CBN as the main regulator of the financial mar- the central bank as a regulatory and licensing authority ket in Nigeria, there is generally no ambiguity about the for mobile money operators. Notwithstanding that, coor- remit of each regulatory institution. Capital markets and dination between different departments within the central exchanges are regulated by the Securities and Exchange bank may pose a greater challenge. Nigeria Digital Economy Diagnostic Report   41 Nigeria has managed to develop a comprehensive and unbanked—their lack of BVN has resulted in most fin- interoperable infrastructure for processing of high- techs and other DFS providers avoiding targeting them as value and retail payments, which are accessible to potential customers. In addition to that, the BVN structure banks and nonbanks. After challenges with exclusiv- itself may be creating adverse incentives: banks may not ity agreements among switching providers in the 2000s be willing to make significant investment in registrations, and the early 2010s, the CBN enforced interoperability knowing that the newly registered users may use their between financial providers through a connection to a KYC profile to move business to competitors. single central infrastructure. Consequently, as of 2019, practically all ATMs, POS terminals, and mobile money Mobile phone ownership is sufficient to support rapid agents are interoperable. The Nigerian Inter-Bank Set- expansion of financial access through digital technol- tlement System (NIBSS), owned by a consortium of the ogies. Mobile phones are owned by 67% of unbanked CBN and commercial banks, is the operator of most of men in Nigeria and 53% of unbanked women. Nearly 1 in the retail systems, which include the automated clearing- 10 unbanked adults work in the private sector and receive house for credit transfers and direct debits, a domestic wages in cash, and 77% of them own a mobile phone. card and mobile money switch, and an instant payment service. In addition to that, the country is home to sev- Decentralization of the government may also contrib- eral private switches and a domestic card scheme (Verve), ute to an enabling environment for DFS. The complex managed by a subsidiary of Interswitch. In general, relationship between the federal government and states membership in systems is available to both banks and at times creates coordination challenges and makes it nonbanks, although only commercial banks can hold set- more difficult to implement nationwide policies. But the tlement accounts with the CBN and directly participate in high degree of decentralization can also be an opportu- its Real-Time Gross Settlement System (RTGS). nity, as it allows more capable states to introduce relevant reforms without the need to wait for worse performers. Extensive homegrown payments infrastructures allow- Streamlining of public financial management in Kaduna ed the vast majority of payments to be processed state can be an example—decisions of the state gov- in domestic currency and decoupled the issue of ernment led to digitization of the majority of govern- payment digitization from discussions on exchange ment-to-person and person-to-government payments, management and capital controls. Recently, Master- creating an impulse for further development of digital card Nigeria followed the domestic scheme of Verve in financial services in the region. deciding to invoice its participant banks for transaction Constraints to Digital Financial Services Development fees and other charges in domestic currency (NGN). As a result, smaller banks can be more confident that the A. MARKET DEVELOPMENT boost in electronic payments will not result in depletion Provision of digital financial services in Nigeria is dom- of their forex reserves. inated by commercial banks, which limits their acces- sibility to a broader range of consumers. Commercial The Bank Verification Number (BVN) system, com- banks’ traditional customer base is salaried personnel of prising a biometric-enabled ID database and the large enterprises, civil servants, or owners of formal busi- e-KYC infrastructure, has lowered onboarding costs nesses. While there are no regulatory constraints prevent- for fintech companies and thus contributes to more ing others from accessing banks, various factors ranging robust competition in the financial services market. from branch locations to the lack of appropriate banking Each Nigerian with a bank account is registered in the products result in persistence of financial exclusion. BVN database and can use the BVN number to open a new account with another bank, open an online wallet, Nonbank DFS providers so far have not successfully or apply for a loan. Verification with the BVN is instan- targeted unbanked customers. Fintechs position them- taneous and can happen remotely—online or through selves as complementary to commercial banks rather mobile devices. Application Programming Interfaces than as their substitutes. For most digital savings, lend- (APIs) allowing for BVN integration have been provided ing, and payment products, a bank account is a require- by NIBSS, the organization managing the system, to ment. As described before, this is mainly caused by the fintechs and banks across the country. As a result, it is fact that only bank account owners have the BVN, which used for onboarding by virtually all fintech start-ups and can be used by DFS providers for e-KYC. This demon- other nontraditional DFS providers. Unfortunately, the strates the adverse effect of the lack of a robust identity database effectively includes only banked Nigerians who management system in Nigeria on financial inclusion; have completed their initial BVN registration at com- existence of a reliable National ID framework would have mercial bank branches. It is of no help, however, to the prevented the emergence of the BVN in the first place, 42   Nigeria Digital Economy Diagnostic Report and thus limited the exclusionary consequences of its However, it still lacks adequate prioritization, retaining the limited coverage. old strategy’s “two overall targets, 15 product/channel/ enabler targets, 22 key performance indicators, and 70 DFS products for businesses—particularly SMEs— strategic recommendations.” It is also too prescriptive, as remain an untapped niche. While multiple providers it requires specific shares of each type of access points, offer digital financial services for larger corporations, rather than leaving the decisions on specific products and Nigerian markets lack digital SME lending, investment, or channels to market participants. Even though the docu- payment products. M-CASH—a scheme and an initiative ment itself acknowledges that stakeholder consultations to boost acceptance of mobile payments among small indicated that “regulations and policies, such as fixed merchants—has not yet been successful, despite growth fees for certain transactions, limit the range and variation in the number of transactions. One of the most promi- of business models that can be deployed,” the strategy nent reasons for this is the high rate of informality among itself does not commit to changes in regulations fostering microenterprises and the self-employed. In the absence a more market-driven approach. of formal registration and licensing, such companies are not eligible to open an account with a bank or a mobile While the strategy assumed a collaborative approach money provider and thus lack the gateway for accessing and devised roles for various stakeholders, the lack other financial services. of coordination between stakeholders hampered the implementation efforts. For example, only in late 2018 B. POLICY AND REGULATION did the CBN sign key memoranda of understanding To review policy reform toward financial inclusion, the with the Nigerian Communications Commission and the National Financial Inclusion Strategy (NFIS) adopted in NIBSS. The coordination issues directly stem from the 2012 has recently been refreshed, but issues related absence of a coordinating mechanism. CBN’s Financial to insufficient focus, lack of coordination, and unreal- Inclusion Secretariat lacks sufficient convening power and istic targets remain. The first NFIS was finalized by the support from high-level political champions that could central bank in 2012, but the fact that a large number of prevent fragmentation of efforts across different stake- its targets were missed necessitated updating the doc- holders. The document envisions that regular reporting ument and publishing its new version in 2018. The new to the National Economic Council (NEC)—chaired by the strategy builds around five priority areas: vice president—will ensure high levels of political sup- port, but acknowledges that so far, the issue had not been • Create a conducive environment for the expansion of prominently present on the NEC agenda. It also consid- DFS; ers that the strategy’s expectation of a financial inclusion • Enable the rapid growth of agent networks with breakthrough before 2020 may be unrealistic. nationwide reach; • Harmonize KYC requirements to increase access to The legal framework for DFS providers is very complex financial services; and still lacks several important elements. As various • Create an environment conducive to serving the most incarnations of the Payment Systems Management Bill excluded; and have since 2009 been awaiting their adoption by the par- liament, the legal basis for digital payments in the country • Drive adoption of cashless payments. has been the Central Bank of Nigeria Act, accompanied TABLE 6: NFIS targets and their status as of 2018, or the most recent year for which data is available Status as of 2018 NFIS 2020 target Share of adult Nigerians using digital payments 16% 70% Share of adult Nigerians owning a savings account 38% 60% Share of adult Nigerians using a credit product 8.3% 40% Share of adult Nigerians with an insurance product 3% (2016) 40% Deposit money bank branches per 100,000 adults 5.5 (2016) 7.6 ATMs per 100,000 adults 16.32 (2017) 203 POS terminals per 100,000 adults 198 850 Agents per 100,000 adults 10.50 (2017) 476 Source: EFInA, CBN. Nigeria Digital Economy Diagnostic Report   43 by various elements of secondary legislation.52 Confusion companies. Overall this is a good start, but consideration abounds with respect to different types of licenses that should be given to review of the guidelines—once CBN providers of digital financial services could adopt: has started to implement them—to ensure they create an enabling environment as the PSB license may remain • Some register as mobile money operators or payment restrictive in the following ways: service providers; • Others leverage state or national microfinance bank • Mobile network operators are not permitted to use licenses; and their own branding when operating PSBs; • Online lenders can render their services based on a • CBN will require a network of physical agents/branches CBN finance company license or a state-regulated to be operated, making it impossible to run a digi- money lender license. tal-only business; and More recently, an exposure draft by the central bank • It is also required that PSBs have field presence in proposed streamlining the fragmented landscape of “underserved” areas to be defined by the regulator; payment service providers’ licenses, consolidating them the opaqueness of the term may make it more chal- into three general license types, each corresponding lenging to develop feasible business plans. to the provider size. However, the proposed structure would also significantly increase the capital require- The only other license type—in addition to the PSB ments for Payment Service Providers (PSP), which has license—that permits nonbanks to issue electronic been resisted by the market. Separately, the regulator money is the mobile money operator license. Other has hinted that issuance of general “fintech licenses” forms of e-money, such as prepaid cards, can only be may be contemplated, but this has not yet been devel- issued by banks. The CBN guidelines require that the oped into any formal regulations. Notwithstanding e-money float be stored in a nominee account with a com- those developments, the basic problem remains: new mercial bank and opened in the name of the customers of license types keep getting introduced on top of old the provider, thus making it bankruptcy-remote. The funds ones with little coordination and alignment across dif- in the nominee account must not be used for purposes ferent departments of the CBN and other regulators. other than redeeming e-money and executing fund trans- As a result, the licensing framework for DFS providers fers. E-money issuers are not allowed to earn interest on is opaque, creates possibilities for limiting competition that account, nor are they allowed to pay interest on the and regulatory arbitrage, and makes effective oversight balances of their wallet holders. more difficult. The CBN and NIBSS (operators of interbank payment The small size of the DFS market indicates that the and settlement systems) announced in 2018 the launch capacity of the CBN to effectively supervise it has not of a regulatory sandbox, but the project has not been yet been under strain. However, if the growth acceler- yet effective. More recently, a similar initiative has been ates, relevant departments may lack sufficient numbers considered by the SEC. The aims of the project, its legal of highly qualified staff that understand the technology and regulatory framework, and other modalities have not and business models behind new entrants to the mar- been clarified. However, launching a sandbox without ket. At this point, neither the central bank nor market streamlining the rest of the regulatory framework may participants have implemented any technical solutions merely increase the market opaqueness and add to par- (regtech, suptech) to streamline regulatory compliance, ticipants’ confusion. supervision, and oversight. D. DELIVERY CHANNEL AND PRODUCT INNOVATION C. MARKET ENTRY Agent-based models have so far not succeeded in Mobile network operators were, until recently, not eli- increasing the number of access points. This is directly gible at all to provide financial services. This changed related to mobile money’s failure to gain popularity among with the adoption of CBN Guidelines for Licensing and the unbanked. Uniquely for Sub-Saharan Africa, the num- Regulation of Payment Service Banks in Nigeria which, if ber of agents per 100,000 adults in 2016 (20) only barely implemented, can be a game changer for financial inclu- exceeded the number of ATMs (17.5). Because of that, sion. A Payment Service Bank (PSB) license is the new the CBN, NIBSS, and financial industry have launched the type of license, permitting the operation of a “narrow Shared Agent Network Expansion Facilities (SANEF) pro- bank”—an institution that can accept deposits but can- gram, aiming at developing a network of 500,000 white-la- not lend. Unlike Mobile Money Operators (MMOs), PSBs bel banking or mobile money agents by 2020. However, could be operated as subsidiaries of telecommunication achieving this will not be likely without leveraging the 44   Nigeria Digital Economy Diagnostic Report retail networks of MNOs and strengthening business vices, businesses must be formally registered. However, models for agents. The CBN has been very prescriptive the economy of Nigeria is still largely informal, with formal in imposing caps on the pricing of agent services, which business accounting for barely over 30% of the GDP and in some instances may effectively require agents to offer heavily concentrated in Lagos. Even in the case of for- them below cost. At the same time, regulations forbid mally registered businesses, e-KYC and digital onboard- exclusivity arrangements and make the principal entity ing is rarely practiced. liable for actions and omissions of its agents. Digitization of government payment efforts have to “Tiered” Consumer Due Diligence (CDD)/Know-Your- date not succeeded in boosting the digital finance Customer (KYC) regulations have not succeeded in ecosystem, and they need to be intensified. The gov- boosting inclusion. Most Nigerians—and nearly all ernment payments landscape in Nigeria is complex, unbanked citizens—have not been enrolled in any of the involving disbursements and collections by various two biometric ID databases: the NIBSS’s Bank Verification agencies at the federal, state, and local levels. Nonethe- Number (BVN) or the National ID database managed by less, several digitization projects have been completed. the National Identity Management Commission (NIMC). For example, nearly all salaries of the employees of the Tiered KYC regulations allowed financial institutions to federal government and federal parastatals are paid open accounts for customers who are not enrolled in into bank accounts. All federal taxes can also be paid either database and present only rudimentary ID doc- electronically. Migration to electronic payments has also umentations; however, most DFS providers have not been attempted with respect to social protection pro- effectively relaxed their internal requirements. In the view grams. For example, the Household Uplifting Program of the providers, the presence of digital ID among their (HUP) managed by the National Cash Transfers Office prospective customers is necessary to keep enrollment (NCTO) assumes that all recipients of the program’s costs low and shield them from money laundering and allowances are provided with a mobile money wallet, terrorism financing risks. to which the benefit amount is transferred. However, because of very low rates of electronic payment accep- Upcoming changes in the national ID infrastructure tance by shops, schools, landlords, or other service pro- can result in long-term significant improvements but viders—and because of the scarcity of reliable cash-out may result in short-term challenges for DFS provid- points—program beneficiaries very rarely make use of ers. The government has initiated the data migration those wallets and normally withdraw the entire allow- from NIBSS’s BVN to NIMC’s database and permitted ance in cash at the first possible opportunity. There are the use of third-party providers to conduct National ID also still many other government payments that have not enrollment. In addition to that, the National ID registra- yet been digitalized, including cash transfer programs, tion will be decoupled from the issuance of the plastic such as the National Social Safety Nets Project (NASSP), ID card, with citizens instead provided with an electron- which have great potential to advance financial inclusion. ic-only credential. Those measures are expected to dra- matically increase the National ID coverage rates, which Strict regulations on pricing may render providing will in turn allow DFS providers to easily onboard the agent services unprofitable and ultimately lead to unbanked population. Using the National Identification financial exclusion of remote areas. CBN has been Number (NIN) for e-KYC is one good practice architec- imposing strict and highly granular limits on prices of var- ture that could be implemented in Nigeria. It could also ious banking services, which limits discretion of individual be possible to build an e-KYC service around a sectoral institutions.53 It is not clear whether the ceilings imposed ID such as BVN, if that sectoral ID was suitably linked to by the central bank have been justified by demonstrated the NIN. If the government decides to switch from KYC market failures, nor has the methodology for calculat- based on the BVN to the one based on the National ing such limits been publicly disclosed. However, in the ID, changes in the IT systems used by banks and other specific case of agent banking, the imposition of free- financial institutions will be necessary. This will require of-charge cash-outs and the NGN 100 limit on cash-in clear communication by NIMC with respect to technical charges seem to make agent banking in remote areas specifications of relevant APIs, conditions of database unprofitable, given the cost of liquidity and security chal- access, and arrangements for data exchange and inte- lenges. The media have been reporting that a number gration testing. of shops and other businesses—instead of entering into agent banking agreements—have been involved in pro- While digital onboarding of individual customers has viding unregulated debit/credit card cash back (providing received plenty of attention, this has not been the cash to customers while registering the withdrawal as a case for businesses. To access any formal financial ser- POS purchase).54 Nigeria Digital Economy Diagnostic Report   45 E. MANAGING RISKS OF DIGITAL FINANCE they tend to involve the endpoints (acquired and issuer Nigerians are aware of the criticality of cybersecu- banks) rather than the networks themselves. Regardless, rity, but efforts of different stakeholders need bet- they diminish confidence in electronic payments, espe- ter coordination and communication. A cybersecurity cially when transaction errors lead to incorrect debiting framework and guidelines for bank and payment service of funds, forcing card users to start cumbersome dispute providers have been issued by the CBN and became procedures. Temporary measures, such as the increase of effective January 1, 2019. It mandates compliance with the transaction timeout threshold from 15 seconds to 45 local and international standards, audit requirements, seconds, have been recently undertaken by NIBSS—but regular penetration testing, and reporting of cybersecu- better networking infrastructure and better policing of rity incidents to the regulator. The Cybercrime (prohibi- switch participants will be needed to regain users’ trust. tion, prevention, etc.) Act has been in effect since 2015, giving law enforcement necessary legal tools and inves- The infrastructure for cross-border payments is much tigative powers to prevent and prosecute digital crimes. less developed. In many cases, obtaining or converting However, the coordination across different stakeholders foreign currency at one of the official rates requires the is still limited: for instance, there is no financial sector-spe- completion of multiple paper forms. The Swift Global Pay- cific CERT, while the national CERT (ngCERT) does not ments Initiative (GPI) has not been widely implemented have a single financial sector focal point. by Nigerian banks, even though some of their parent companies were at the forefront of global adoption. As The Consumer Protection Framework (CPF) has been a result, digital disruption has not significantly affected put in place, but it lacks accompanying legal acts and the international remittance market, which remains domi- regulations. The document includes chapters on the nated by informality. overall legal and supervisory framework, disclosure and transparency, fair treatment and business conduct, data G. FINANCIAL INFRASTRUCTURE: CREDIT INFRASTRUCTURE   protection and privacy, and alternative dispute resolution While the country has been developing its credit infra- mechanisms, as well as the commitment to strengthen- structure, expansion in alternative scoring methods ing consumer education and boosting financial literacy. may be needed to reach excluded populations. The However, this has not been accompanied by enactment country has three credit bureaus, together working under of specific and legally binding regulations covering issues the umbrella of the Credit Bureau Association of Nige- such as disclosure, dispute resolution, or fair treatment. ria. The bureaus process positive and negative reporting Moreover, the CBN’s Financial Consumer Protection and offer scoring services. Microfinance banks and other Department, responsible for supervising all CBN-regu- finance companies (mortgage banks, finance companies, lated financial institutions with respect to financial protec- and development finance institutions) are presently their tion, lacks sufficient capacity, resources, and enforcement largest users, with 594 of them submitting data to and powers to effectively uphold the standards committed using the services of credit bureaus as of December 2018. to in the framework. Even though the CPF includes data They also account for 7.9 million of the 15.0 million cus- protection as a “key principle” and the right to privacy is tomers reported in the credit bureau database at the time, explicitly stated in the country’s constitution, to date there with the numbers growing. Many of the digital lenders has been no comprehensive data protection legislation, use alternative data to supplement information received and no uniform approach has been adopted for consent from credit bureaus, but further work will be needed to requirements for collection and processing of digital data. develop reliable stand-alone scoring models for finan- cially excluded Nigerians. FINANCIAL INFRASTRUCTURE: RETAIL PAYMENTS F.  INFRASTRUCTURE Despite the launch of a collateral registry, movable col- While an interoperable retail payments infrastruc- lateral loans still represent a small share of enterprise ture has been put in place, some doubts persist with lending. The online searchable registry was established respect to its robustness and reliability. For example, through the cooperation of the CBN and IFC in 2016. Over NIBSS estimates that on any given day, 10–15% of POS 2018, movable collateral was used to support SME loans card transactions fail. Although the majority of such with the total value of NGN 1.2 trillion. While it attests cases seem to be happening because of fund unavail- to a remarkable growth, more than doubling in compar- ability, at least a third of them occur due to network ison with the previous year, movable collateral loans still errors and other system issues. Failures may be more represent a small share of total enterprise lending in the frequent during peak times—for example, on Christmas country. Though 611 financial institutions—commercial Eve in 2018, 25% of all card transactions were reported and microfinance banks, finance companies, and Devel- to fail. Reasons for this lack of reliability vary, although opment Finance Institutions—were registered, only 75 46   Nigeria Digital Economy Diagnostic Report registered transactions collateralized with movable assets Building the Infrastructure for Digital Financial Services totaling NGN 1,579 billion. Moreover, a large part of those R1. NIBSS and NIMC should expediently complete registrations comprises legacy transactions and wholesale the integration between the NIN system and the BVN lending done by the Development Bank of Nigeria. database. Until the NIN/BVN coverage of the country is complete, e-KYC processes for lower KYC tiers could 2.3.3  Digital Financial Services Recommendations leverage alternative ways of establishing and confirming and Next Steps identity, which could range from low-cost biometrics (e.g., voice analysis) to social network analysis and certification The findings from the assessment of the current state by trusted third parties. If the government decides to use of Digital Financial Services in Nigeria aimed to iden- the NIN for e-KYC services, NIMC should start providing tify the factors in the macro and microenvironment technical information to banks and other DFS provid- that influence the behavior of companies and individ- ers on the technical aspects of using NIN for consumer uals. Each factor in the macro and microenvironment and onboarding, so that the industry is ready for the eventual its impact help in the identification of the factors in the migration from systems relying on the BVN. generic external environment, i.e., Opportunities and Threats; and the factors in the generic internal environ- R2. NIBSS and CBN should strengthen enforcement ment, i.e., the Strengths and Weaknesses, both of which of service standards to reduce the incidence of trans- are needed to construct the final SWOT Matrix. action failures. Performance indicators with respect to the share of failed transactions, time required for dispute Many of the main barriers to the development of digi- resolution, and system availability should be developed tal financial services lie beyond the scope of the finan- and communicated to financial institutions and the pub- cial sector and the remit of financial regulators. Issues lic. Failure to observe them should result in sanctions, dealt with elsewhere in this paper—the low quality and beginning with public censure and, if necessary, including accessibility of broadband and 3G/4G connections, gaps suspension of the switch membership. The CBN, NIBSS, in the national ID coverage or the missing IT talent—are and industry associations should also cooperate in build- all affecting the potential of financial services providers. ing capacity of commercial banks in the area of IT and However, the government and the CBN still have the network infrastructure and encourage outsourcing if the opportunity to boost the growth of the industry by com- in-house resources of financial institutions are insufficient mitting to specific actions. to meet the operational reliability and security standards. SWOT Matrix Strengths Weaknesses − No ambiguity about the remit of each −  Account ownership regulatory institution −  DFS usage − Comprehensive and interoperable −  Credit and savings infrastructure for processing of high-value − Insurance and retail payments −  e-Bill payments −  South DFS coverage −  North and rural DFS coverage − NIP −  Robustness and reliability of payments infrastructure −  Credit Bureau − Unduly restrictive requirements with respect to payment service banks −  Consumer protection − Lack of coordination and communication in the area of cybersecurity −  Low DFS supervisory capacity −  Low levels of digital financial literacy Opportunities Threats − CDD/KYC − Lack of high-level NFIS champion and prioritization of few high-impact − SANEF actions −  Growing fintech sector −  Complex DFS licensing regime −  Government payments −  Strict regulations on pricing of agent services −  Cross border payments −  Slow integration between NIN system and BVN database −  Collateral registry Nigeria Digital Economy Diagnostic Report   47 R3. Credit bureaus should continue developing prod- that all market participants could approach for licensing ucts and services addressing the needs of digital lend- queries and for receiving timely answers. ers. Integrating fintechs and other nonbank financial institutions that still do not participate in credit reporting R7. Regulations on agent networks should be revised by will further boost the credit bureau coverage numbers and removing barriers related to pricing structure in order contribute to delivery of affordable credit. Exploring the to incentivize investments in access points in financially use of alternative scoring methods should specifically tar- excluded communities. To that end, the CBN may want get the largest excluded populations, such as the self-em- to consider liberalizing the pricing of agent services and ployed in the service sector and subsistence farmers. other banking charges. While pricing caps may provide an important financial consumer protection measure, they R4. The adoption of the new regime for movable asset have not worked in Nigeria—according to a 2017 EFInA lending55 should be enhanced through capacity and survey, over 40% of agents charged customers extra fees awareness building. CBN should require that financial beyond those prescribed by the regulation. The regulator institutions take part in specialized training, equipping should also examine whether the prohibition of engaging them with the skills for developing asset-based lending, in agent business imposed on nongovernmental organi- collateral valuation, and realization. Development of sec- zations (NGOs), religious organizations, and bureau de ondary market and deployment of online platforms that change could be reconsidered. Finally, further research support effective factoring and value chain financing for is needed on the impacts of the forced cash-in/cash-out SMEs should be also be promoted. interoperability between mobile money agents. While as a principle interoperability is to be welcomed, it is possi- R5. CBN should encourage development of infrastruc- ble that the current interchange structure creates adverse ture for streamlined processing of foreign currency incentives limiting access points expansion. transactions and international payments. This should focus on the two basic pillars: R8. The CBN should implement the guidelines for licensing and regulation of Payment Service Banks • First, Nigeria should actively participate in efforts to (PSBs) by expediting the review of applications for PSB develop international payment systems for high-value licenses and making the final decision on this process and retail payments, both at the Pan-African level by the end of 2019. As the implementation progresses, and within the West African Monetary Institute and consideration should be given to amending the guide- ECOWAS member countries. lines to revise restrictive provisions, such as the prohibi- • Second, consistent and risk-based policies should be tion of MNOs using their brand for their subsidiary PSBs developed with respect to granting remittance service and other restrictions on mobile operators leveraging providers access to domestic payment and clearing synergies between their core business and their financial systems, particularly to NIP. services. Without the opportunity to leverage the MNO brand and distribution network, it is unlikely that PSBs will Reforming the Policy and Regulatory Environment be able to create sustainable business models that would R6. The CBN and state licensing authorities should bring financial services to excluded populations. reduce the number of different license types for DFS providers and the overlap between them. The regulator R9. The CBN should ensure that its DFS supervisory should identify license types that cover similar activity types capacity is commensurable with the growth of the mar- (such as the PSB and mobile money operator licenses) ket. It should therefore regularly review and update its and consider removing such duplications. The CBN may oversight frameworks and secure funding and staff time reconsider the requirement for banks and other financial for training of its officers, as well as collaborate with peer institutions to operate brick-and-mortar branches and be institutions and international standard setting bodies on open to businesses that operate in a fully digital mode. On conducting study visits, staff exchanges, and information the other hand, if the central bank does insist that com- sharing programs. It should also strengthen collaboration mercial banks, payment service banks, and microfinance within the institution, so that the knowledge and experi- banks must maintain physical branches, it could consider ence of departments such as Information Technology or a separate license for digital-only establishments, akin to International Operations could be shared with supervisors Hong Kong’s “digital banking licenses.” Given that DFS’ and overseers. business models would often span the remit of multiple departments of the central bank, it could also be benefi- R10. The CBN should conduct further research to mon- cial to create a “single window”—a single point of contact itor and evaluate the implementation of tiered KYC by 48   Nigeria Digital Economy Diagnostic Report market participants. Anecdotal evidence from the field limited number of high-impact actions. At the same time, suggests that many institutions, despite the existence of reporting of financial inclusion indicators should be more appropriate regulations, do not serve customers without frequent (at least quarterly or, ideally, monthly). the BVN and proper documentation. A field study could help estimate the scale of the problem and the reasons R15. Financial institutions, the CBN, government behind the low take-up of low-tier accounts. At the same agencies, and civil society should collaborate on time, the CBN should ensure that the threshold amounts fostering financial literacy and capability. Financial for each tier are periodically revised and, at the minimum, literacy activities should focus on groups that are dispro- adjusted for inflation. portionally affected by financial exclusion, as well as on recipients of government transfers, young people, and R11. Account opening for merchants and other small families sending or receiving international remittances. businesses should be made easier. Low-risk small busi- Targeted digital financial literacy campaigns can help nesses should have the opportunity to accept digital pay- people in better understanding, selecting, and making ments and open digital accounts without the need for a use of DFS that fit their needs, and help increase trust in burdensome check and collection of extensive documen- these services. tation. The federal government and state governments could consider the possibility of outsourcing registration R16. Academia, government agencies, civil soci- of informal businesses to banks, finance companies, or ety, and development partners should collaborate mobile money agents. If opportune, the government to advance digital skills in the economy. Most of the may consider additional fiscal incentives for boosting financial service providers have limited in-house skills, digital payments acceptance. particularly in data analytics. Secondment programs, training bootcamps, or conversion courses, developed R12. The Financial Consumer Protection Framework in partnership with or with support from development should be accompanied by relevant binding regula- partners and/or global universities, would help bridge tions. These should cover all issues covered by the frame- the skills gap and make the labor market less dependent work, such as transparency in pricing and advertising or on expertise brought in from abroad. Nigerian univer- dispute resolution. In addition to that, relevant data pro- sities may support tech entrepreneurs through building tection legislation should be introduced. incubators or organizing innovation hackathons, which may have spillover potential for growing local entrepre- Engaging Key Stakeholders neurship in Nigeria. R13. Once the FGN makes the critical decision to dig- itize all government payments, CBN should use its 2.4 DIGITAL ENTREPRENEURSHIP PILLAR convening powers to facilitate digitizing government payments at state and local levels. As a first step, the 2.4.1 Importance of Digital Entrepreneurship Pillar CBN should consider developing a toolkit for state and local treasuries, outlining the steps that need to be taken Digital entrepreneurship can be defined as the creation to successfully develop electronic payments and col- of new ventures and the transformation of existing lection systems, based on the examples of states such business through digital technologies. Digital entrepre- as Lagos or Kaduna. Further, the CBN should develop neurs include: (i) new (digital start-ups) and mature (dig- a streamlined offer of treasury services to state govern- ital scale-ups) firms that have digital technologies at the ments and advise on model agreement with private sec- core of their business model, i.e., they develop/ transform tor gateways for government collections the digital technology to deliver new/ improved prod- ucts/ services to their customers; and (ii) digitally enabled R14. Establish an effective NFIS refresh coordination businesses which utilize digital technologies (e.g., social, and implementation structure led by a high-level mobile, analytics, and cloud solutions) to improve busi- political champion and prioritize high-impact actions. ness operations, sharpen business intelligence, and Support of high-level political champions may be neces- engage with customers and stakeholders through new sary to give requisite convening power to CBN’s finan- (digital) channels. cial inclusion secretariat to ensure coordination across relevant agencies and all layers of the government—it Given its large, young, and entrepreneurial popula- is therefore important that the NEC commits to placing tion, digital entrepreneurship has the potential to financial inclusion on its regular agenda. If possible, the become an engine of economic transformation in strategy itself could be further revised to prioritize a more Nigeria and set the country on a new growth trajec- Nigeria Digital Economy Diagnostic Report   49 tory. Digital entrepreneurship represents an important measured in terms of new registrations per 1,000 people. opportunity for the large number of youths entering the While South Africa tops the charts, Nigeria is comparable labor force. According to the Nigerian Communications to other regional leaders like Ghana and Kenya, and out- Commission, both mobile penetration (49% unique sub- paces global peers such as India, Indonesia, Mexico, and scribers) and Internet penetrations (32%) are increasing Pakistan (Figure 19). Additionally, more people in Nige- rapidly, which could propel the creation of technolo- ria state that they are either a nascent entrepreneur or gy-based start-ups and improve productivity and com- an owner-manager of a new business than in comparator petitiveness of existing firms. countries. Digital entrepreneurship is a government priority, as Despite its entrepreneurial potential, Nigeria remains a outlined in the Economic Recovery and Growth Plan minor player in the global digital economy in terms of 2017–2020 (ERGP). The plan recognizes the need for a exports of digital goods and services. The Information digital-led strategy to make the Nigerian economy more and Communication Technology (ICT)56 sector expanded competitive in the 21st century global economy. To sup- in the last decade: its contribution to Gross Domestic port the development of the digital economy as high- Products (GDP) doubled in 2010–2017 (Figure 20) and lighted in the ERGP, the government also adopted the accounted for 12.2% of the GDP in 2018. In 2018, the Nigeria ICT Road Map 2017–2020 and the Nigeria ICT sector contributed 9.65% to GDP growth. However, in Innovation and Entrepreneurship Vision (NIIEV) released in 2017, only 5% of Nigeria’s exports were in the ICT sector 2018. NIIEV sets up three ambitious goals to be achieved (Figure 21). by 2025: (i) 95% of the population to access broadband Internet; (ii) reach 75% digital literacy rates; and (iii) ICT to Nigeria is home to several high-growing digital compa- contribute 25% of GDP. nies that provide hopeful examples of its digital poten- tial. The Nigerian digital entrepreneurship ecosystem has blossomed after the domestic company MainOne Diagnostic Findings: Current State of Digital 2.4.2  installed a 7,000 km fiberoptic cable from Portugal to Entrepreneurship Pillar Nigeria in 2010. Affordable access to high-speed Internet The digital entrepreneurship ecosystem, as part of boosted creation of successful digital businesses, espe- the overall entrepreneurship ecosystem in Nigeria, cially in marketplace applications and e-commerce. Other is characterized by a vibrant population of entrepre- industries like software development, online outsourcing, neurs. Nigeria scores high in the entry rate of new firms and business processing outsourcing are still latent, pri- FIGURE 19: Scale of entrepreneurial activity (2012–2017) Note: South African data were excluded from the chart due to its high new firm entry rate of 10.22 per 1,000, which was an outlier, combined with its relatively low entrepreneurial activity rate of 10.96% of the population. 50   Nigeria Digital Economy Diagnostic Report marily due to the lack of reliable connectivity and power, of software developers. It has recently completed its USD and advanced ICT labor skills. However, there is no Nige- 100 million Series D funding round, reaching the total rian company on the 2018 Forbes Top 100 Digital Com- funding of USD 180 million. Hitch is a company that sup- panies list, compared with fourteen in China, four in India, plies free digital educational material matched to state and one in South Africa. curricula and can be used offline. Digital health start-ups in Nigeria include online health insurance subscription The digital industry is concentrated in Lagos and Abuja, plans (Avon HMO), telemedicine (Kangpe and Mobi- marking an important geographic and sectoral divide doc), medical devices (MDaaS), blood center services in the use of digital technologies. Lagos is a mature (Lifebank), clinical reference information and e-learning and active ecosystem with dynamic incubators, venture (Medenhanz), medication supply (Medsaf and Drugstoc), capital companies, and digital start-ups. Digital entrepre- and aviation emergency ambulances such as Flying Doc- neurship ecosystems are also growing in Abuja and Port tors Nigeria (Dr. Hempel Digital Health Network, 2018). Harcourt, with a potential for expansion to other cities. Digital start-ups also operate job matching platforms in Nigeria, such as Jobberman. Virtual freelancing, or e-lanc- Nigerian digital firms are in the lower value-added seg- ing, is less common in Nigeria than other regional com- ments of the digital value chain. According to the Ernst petitors like South Africa and Kenya. & Young analysis of the digital value chains in Nigeria, the top ten largest Nigerian software developers in the Use of digital technologies by traditional firms, how- software development industry are responsible for only ever, remains limited. Although urban SMEs are increas- 0.32% of the local market (Ernst & Young: Nigeria, 2018). ingly using digital platforms for trading, digitalization of In the ICT infrastructure and tech support outsourcing firms in traditional industries and rural locations is low. industry, the top 10 players are multinational subsidiaries, For example, a recent survey of smallholder farmers in including Microsoft and Huawei. Nigeria found that 77% of mobile phone users use basic phones without Internet capability, 88% of them have The profit margins in the digital industry are compa- never used the Internet as source of professional informa- rable to the average profit margins of other sectors in tion, and 49% never use cell phones and SMS services for Nigeria but are significantly lower than global indus- business purposes (Anderson, et al., 2017). Reasons for try trends. The profit margins of 7–10% are healthy, but the low digital usage include low levels of digital literacy, low compared to global digital leaders: the software sec- limited Internet access, and high costs. Larger firms are tor gross profit margins in 2018 were 74.36% on aver- more actively using digital technology for basic business age with a return on investment of 30.6% (CSI_Markets, purposes, like communication with customers, but more 2019). The lower profit margins are due to the difficult advanced uses of technology remain limited. Fewer Nige- business environment, lower productivity, and skills and rian firms (13.8%) spend on Research & Development higher input costs (e.g., price of equipment, energy, and (R&D) compared to firms from Ghana and Kenya, the cost of capital) (Ernst & Young: Nigeria, 2018). Sub-Saharan African average (17.4%), and all countries (15.6%) that participated in the enterprise survey (Figure There are examples of successful digital companies in 22). Among digital industries, only software developers service industries. An increasing number of digital start- have significant expenditure in R&D amounting to 23.4% ups operate in services, including health and education. (Ernst & Young: Nigeria, 2018). For example, Andela is a digital start-up that builds skills Nigeria Digital Economy Diagnostic Report   51 Low penetration of digital technologies is symptom- Policies for stimulating investment in the digital indus- atic of the overall lack of innovation capacity among try are outdated and ineffective. The lack of data on Nigerian firms. Nigeria’s innovation capacity scores lower digital industries poses challenges for the formulation than most comparable economies according to the 2018 and implementation of targeted policies. Improvements Global Innovation Index (Figure 23). Barriers to digital in credit infrastructure, including a recent law on secured innovation include shortage of qualified developers and transactions, a new collateral registry, and active credit engineers, limited access to modern technology and bureaus have not translated into better access to finance equipment (e.g., most VR equipment retailers do not ship for digital entrepreneurs. Like tax incentives, it is not to Nigeria), and limited collaboration with public research widely utilized (e.g., credit info reporting and sharing) and and education institutions. therefore does not translate into better access to finance. Additionally, the assets of digital start-ups are often intan- Constraints and Opportunities for Digital Entrepre- gible and cannot be used as collateral as is required by neurship and Innovation most commercial credit institutions. Investors, including Notwithstanding its current shortcomings, the dyna- Venture Capital firms (VCs), cite the lack of transparency mism of the Nigerian digital entrepreneurship ecosys- and stability in the legal framework in Nigeria as a barrier tem presents opportunities for development. Digital to operations. The country lacks legislation establishing entrepreneurs and investors are attracted by market clear dispute resolution mechanisms and an effective opportunities in Nigeria, the vibrant entrepreneurial insolvency regime that would limit exposure of investors scene and talent, improvements in telecommunications, to significant liabilities. and government-led reforms. However, growth of digital firms is plagued by a difficult business environment, lack Existing policy incentives are underutilized by digital of early-stage financing, limited market opportunities entrepreneurs because of complex and burdensome outside of Lagos and Abuja, and a lack of digital skills. requirements, confusing application processes, and The infrastructure and support system are rapidly a lack of transparency. Even in cases where there have expanding, but they are concentrated in the big cities, been legislative reforms, there is a lag in utilization, such are driven by donors and diaspora efforts, and lack coor- as the case for credit reporting and secured transactions. dination mechanisms that would allow firms to build a Available incentives such as the Venture Capital Incen- pipeline of digital ventures across all growth stages. tives Act, the Pioneer Status for tax holidays to eligible companies, and other SME support programs offered to A. REGULATIONS, POLICIES, AND INSTITUTIONS entrepreneurs across all sectors by MDAs are all underuti- The cost and complexity of doing business in Nigeria is lized. The Venture Capital Incentives Act of 2004 is not a significant impediment for the development of dig- considered relevant by the targeted Venture Capitalists ital entrepreneurship. The latest Doing Business report as it is structured quite contrary to the fund structure ranks Nigeria 146 out of 190 economies, the worst com- that VC’s operate under. The Pioneer Status Incentives parator in the group of countries with similar endowments issued by the Nigerian Investment Promotion Commis- and levels of economic development. Digital entrepre- sion (NIPC), which grants three to five years of tax holidays neurs are particularly constrained by the infrastructure to eligible companies, remains underutilized by digital challenges (e.g., lack of electricity), the multilayered and entrepreneurs due to the high capital requirements and cumbersome tax system, and complexity of the public burdensome application process, and a lack of transpar- procurement processes. 52   Nigeria Digital Economy Diagnostic Report ency in the selection process. There are several other established the National Information Technology Devel- SME support programs offered to entrepreneurs by the opment Agency (NITDA) to create a framework for IT government, most notably Central Bank of Nigeria’s NGN practices, activities, and systems. To improve growth of 220 billion (about USD 721 million using the official rate) tech start-ups and the environment for digital innovation Micro, Small and Medium Enterprises Development Fund and entrepreneurship, NIDTA created the Office for ICT (MSMEDF), which was launched on August 15, 2013.57 In Innovation and Entrepreneurship (OIIE). The Ministry of addition to the lack of transparency in implementation, Industry, Trade and Investment is also an important player the MSMEDF’s artificial interest rate, which is significantly as it oversees the development of SMEs, promotion of below market rates, is distortive, unsustainable, and of exports and foreign direct investment, and the expansion questionable effectiveness. of trade. To address the lack of inter-ministerial coordi- nation and policy coherence, the presidency created the The legislative framework does not match the needs Technology and Creativity Advisory Group (TCAG) under of digital industries, but recent legal reforms demon- the Industrial Policy and Competitiveness Advisory Coun- strate a government commitment to improve the sit- cil. The TCAG brings together 28 digital entrepreneurs, uation. Absence of effective regulations for prevention, 13 leaders in the creative industry (music and film), and detection, and punishment of cybercrimes is a deterrent 14 government agencies to promote public-private dia- for digital start-ups and investors. The recent Nigerian logue and facilitate the resolution of regulatory and sys- Data Protection Regulation, passed in January 2019, is a temic barriers to the digital and entertainment sectors of step toward improving data compliance. However, imple- Nigeria. However, for the moment the TCAG has limited mentation is constrained by several factors: this subsidi- administrative capacity and resources to be effective. ary regulation is secondary to any acts of parliament; the function of the supervisory authority for data protection B. ECOSYSTEM SUPPORT AND INFRASTRUCTURE is unassigned; and the enforcement of fines in case of The infrastructure and support ecosystem for digital noncompliance is problematic (Salami, 2019). The Intel- entrepreneurs is growing across the country; how- lectual Property (IP) protection policy is outdated, and ever, they face significant constraints that hinder their the Cybercrimes Prevention Act is not effectively imple- effectiveness. There are over 100 digital hubs (incuba- mented. The Companies and Allied Matters (Repeal and tors, co-working spaces, and accelerators) across the Re-enactment) Bill 2018 (CAM Bill) which was passed by country, and the numbers are on the rise. Nigeria has also the National Assembly in 2019 was a step in the right attracted several multinational companies including Goo- direction but unfortunately was not assented to by the gle, Microsoft, and Facebook, which have set up their own presidency. The CAM Bill introduced new forms of enti- incubators/accelerator programs. ties including Limited Liability Partnerships, which will create structures for private equity and venture capital Most existing digital hubs are operated by the pri- funds and includes company rescue provisions to create vate sector and provide valuable co-working spaces to an effective insolvency regime. start-ups, but they operate in isolation, have limited funding, and fail to establish market linkages. Most There is a lack of clarity regarding the legitimacy of hubs lack sustainable business models, have difficul- new investment vehicles such as crowdfunding in Nige- ties recruiting qualified staff and experienced mentors, ria. Current legislation prohibits private limited liability have no M&E systems, and consequently no evidence of companies, which is the most common form for digital results of their activities. Digital entrepreneurs need sev- start-ups, from: (i) “inviting the public to subscribe for any eral rounds of support to qualify for private investments, shares or debentures of the company or deposit money to which is an additional burden on hubs and accelerators, it”; and (ii) having more than 50 shareholders (CAM Act). most of which do not have their own sources of funding. In addition, the Investment and Securities Act (ISA) bars all The lack of coordination between the various ecosystem invitations to the public to acquire or dispose of any actors limits their effectiveness, and few digital entrepre- securities of a corporate entity or to deposit money with neurs are satisfied with the level and quality of services. any corporate entity for a fixed period or payable at call, Linkages to academia are limited, with only a handful of whether bearing interest or not, unless the body corpo- university-based hubs. rate concerned is a public company. Therefore, only public companies in Nigeria may offer their shares to the public. Several gender-focused networks and support struc- tures have emerged to help women navigate the The institutional structure for implementing the digi- world of digital entrepreneurship in Nigeria. In-coun- tal economy agenda faces capacity and coordination try consultations confirmed the findings in a recent report challenges. In 2001, the Ministry of Communications on women entrepreneurship that highlighted the impor- Nigeria Digital Economy Diagnostic Report   53 tance of social, cultural, and legal constraints (World However, international investors are increasingly inter- Bank, 2019c). Notable new initiatives that help to tackle ested in Nigerian digital entrepreneurs. Due to the lack those challenges include innovation hubs (e.g., She of early stage investors in Nigeria, the most promising Leads Africa), women-focused acceleration programs by start-ups apply for funding from international programs mainstream hubs (e.g., Venture Garden Group’s Green- like YCombinator, 500 Startups, and Techstars. Thirteen house Lab and Impact Hub), and networking events out of the 28 African start-ups admitted to YCombina- (e.g., African Women in Technology Conference and tor have been Nigerian, and the majority raised USD Tech Women Lagos). 150,000–USD 1.2 million in funding. Large domestic corporations and multinationals are Growth-stage digital start-ups have increased financ- increasingly supporting digital entrepreneurship ing opportunities. Once a start-up is able to develop developments in Nigeria. Financial institutions are the and execute a scalable business model (reach the predominant customer base for leading digital start-ups, growth stage) its financing options increase. Due to the and they offer increasing support to digital ecosystems constraints at the early stage very few firms in Nigeria alongside the telecoms and multinationals. For example, reach the growth stage. However, the few companies Union Bank works closely with local incubators and part- that reach the growth stage have access to financing nered with Co-Creation Hub (CC Hub) to establish the opportunities from Venture Capital and Private Equity Campus Innovation Challenge. Access bank has set up its firms. In 2018, Nigeria attracted the highest number and own incubator. Google and Facebook have established amount of Africa’s digital investment deals. The African accelerator programs. Tech Start-ups Funding Report shows Nigeria emerged as the premier investment destination on the continent However, the linkages that emerge in the ecosystem in 2018; with 58 start-ups raising a total of USD 95 million need to be further strengthened. The two recent play- (Disrupt Africa, 2018). ers, Network of Incubators and Innovators in Nigeria (NINE) and Hubs Nigeria Network (HNN), connect over Venture Capital and Private Equity (VC/PE) firms in 75 hubs, and support knowledge sharing and standard Nigeria are mainly internationally financed. According setting. Afrilabs, an Africa-wide network, is based in to the most recent Global Competitiveness Index, it is Nigeria, engages extensively with the Nigerian ecosys- more difficult to access Venture Capital in Nigeria than in tem, and is a member of the TCAG. Nevertheless, the other countries. Venture capital and private equity firms in ecosystem is still not well connected and has several Nigeria receive minimal investment from domestic institu- communications and coordination gaps. tional investors such as pension funds and insurance com- panies. Even though the National Pension Commission C. ACCESS TO FINANCE (PENCOM) has issued regulations to allow investments Access to finance remains one of the key challenges in private equity funds,58 the pension funds in Nigeria for entrepreneurs, and it is even more acute for dig- remain extremely conservative with only an estimated ital entrepreneurs. There is a lack of understanding of 0.36% invested in VC/PE. Most VC/PE funds are financed the digital sector among local financial institutions and by foreign investors, including IFC, which has a pipeline private investors, adding to the general gap of financial of about 900 digital start-ups across SSA with Nigerian products for local entrepreneurs. Given the intangible start-ups making up 27% (245 companies) of these. The nature of digital entrepreneurship, most businesses do lack of domestic investment in VC/PE has resulted in most not qualify for lines of credit. growth stage digital entrepreneurs being registered out- side Nigeria, which limits the extent to which Nigeria ben- There is a dearth of early-stage investors in Nigeria. efits from these companies. According to IFC, the aggregate nominal amount of start- up investments as a percentage of GDP remains lowest in There are limited options for private equity inves- Sub-Saharan Africa at 0.06% compared to 0.93% in India, tors in Nigeria to exit their investments. The value of 0.32% in China, and 2.53% in the U.S. Angel networks Nigeria’s traded stock is just 1% of GDP compared to the and venture capital funds are in the nascent stages: they global average of 69% and the Sub-Saharan Africa aver- finance only 3% of start-ups in Nigeria. The main player age of 28%. On the supply side there is a dearth of IPOs is the Lagos Angel Network (LAN), incorporated in 2014, due to a combination of weak governance of pipeline which is composed of 40 active investors. There are also companies and regulatory bottlenecks. On the demand other angel networks, including the Abuja Angel Network side, there is low participation of domestic institutional and the South-South Angel Network. investors. 54   Nigeria Digital Economy Diagnostic Report D. MARKETS agriculture, mobile technology allows farmers to link to Nigeria is Africa’s largest market for digital products a wider pool of customers and obtain information about and services, but its growth is constrained. Despite its prices in distant markets. Digital technology can also facil- protracted economic recession, Nigeria remains Africa’s itate low-income farmers’ integration into value chains for largest ICT market with 82% of the continent’s telecoms high-quality products for advanced country markets. subscribers and 29% of Internet usage. However, overall digital literacy rates remain low, especially among women, Another growth opportunity is created by the expan- and low-income and rural populations. Micro-entrepre- sion of e-government. The Nigerian government is neurs and local SMEs are also missing out on digital div- increasingly using the Internet to provide better informa- idends. tion and services to its citizens. For example, there have been extensive efforts to automate business registration, Nigeria’s e-commerce market is the largest in Africa, and most of it can now be done online. Digitalization but the sector struggled in recent years. The e-com- of public services is also creating new opportunities for merce market in Nigeria is estimated at USD 13 billion entrepreneurs. For example, the e-voucher system has (Jumia, 2019) with big homegrown players like Jumia been introduced in Nigeria for distributing subsidies for and Konga. For further growth, e-commerce firms will seeds, fertilizer, and other farm inputs and may eliminate need to overcome severe challenges, most importantly intermediaries, reduce corruption and leakages, and the lack of infrastructure across the country that hinders enhance efficiency. This may open the market for digital logistics and the lack of trust by Nigerians in e-commerce platforms and other ventures that integrate digital tech- that will require significant efforts at consumer awareness nology in their service and delivery systems. The increas- building. ing pressure on public authorities to extend the reach of basic services to the marginal communities and regions, The Nigerian software market is estimated at USD and to be more responsive, accountable, and transpar- 10 billion annually due to broadband expansion. It is ent, creates more demand for public agencies to hire dig- currently dominated by products from Asia and Europe, itally skilled employees and partner with digitally enabled with some imports from the United States, but the market businesses for delivering services. However, e-services segment for high-quality products remains largely unsat- are inaccessible for many communities that have limited urated. Nigerian software producers are mostly small and access to the Internet. young companies that lack products and expertise to capture market opportunities. However, fintech compa- In the long term, the future of Nigerian digital busi- nies are increasingly gaining ground. There are examples nesses will rely on their ability to conquer international across all firm growth stages: start-ups Paga, Flutterwave, markets. The Pan-African market is the most plausible and Paystack along with older firms like Interswitch and internationalization strategy for Nigerian digital entre- SystemSpecs. Some Nigerian software developers have preneurs to attain a sizable scale and diversified risk that expanded outside the country. For example, Flutterwave would entice both domestic and international investors. has offices in Kenya, Ghana, and Uganda. Workers and online outsourcing firms in Nigeria report that very little of their work is driven by local or regional The largest current demand is from large corporates demand. In most cases, outsourcing firms, such as Andela based in Nigeria, but they source globally. In Nigeria, and software development industries in Nigeria, are driven financial institutions and telecoms have a high rate of by clients in the developed world (Kuek, et al., 2015). technology utilization, growing needs for digital products and services, and the capacity to pay. However, there is With the right mix of strategies and supporting framework significant competitive pressure and high entry costs for in place, Nigeria’s digital entrepreneurship ecosystems digital entrepreneurs to acquire and scale up a corporate can rapidly accelerate overall opportunities within the dig- customer base in Nigeria, especially for younger start-ups. ital ecosystem. This is exemplified by the case of Kaduna State, in Northern Nigeria (Box 6). Digitization of services offers the opportunity for ex- panding the local business-to-business (B2B) and busi- 2.4.3 Digital Entrepreneurship Recommendations ness-to-customer (B2C) markets. Increased penetration and Next Steps of digital payments can expand the opportunity for dig- ital solutions for local SMEs, including traditional indus- The findings from the assessment of the current state tries and individual customers. Mobile Internet platforms of Digital Entrepreneurship in Nigeria aimed to iden- helped SMEs and micro-entrepreneurs expand their tify the factors in the macro and microenvironment that customer base with no need of a storefront presence. In influence the behavior of companies and individuals. Nigeria Digital Economy Diagnostic Report   55 Each factor in the macro and microenvironment and its recommendations require a more detailed review of the impact helps in the identification of the factors in the existing policy instruments and additional evidence-based generic external environment, i.e., Opportunities and analysis. Threats; and the factors in the generic internal environ- ment, i.e., the Strengths and Weaknesses, both of which Improve the policy environment for Digital are needed to construct the final SWOT Matrix. Entrepreneurship R1. Reform the Policy Environment to Encourage Digi- Based on the analytic findings of this report, several tal Entrepreneurship priority policy issues are proposed to address key con- Nigeria’s legal and regulatory framework must be assessed straints to digital entrepreneurship in the short and and structured to create the business-enabling envi- medium terms. These recommendations are grouped ronment that can support the development of a digital around the key ecosystem constraints and opportunities economy. Enactment of the CAM bill will be an important described above. Because digital entrepreneurship is a step to improve the business environment for entrepre- relatively new agenda in Nigeria and consistent data on neurs and to provide greater clarity for investment funds. various aspects of the ecosystem is not available, several Once enacted, it will be important to develop regula- BOX 6 Kaduna State Government Initiative Aiming to Support Digital Entrepreneurship and Digital Skills The Kaduna State Government launched the The Kaduna State Development Plan (KSDP) 2016– ‘Click-On Kaduna’ program in partnership with the 2020 considers ICT-related industries as areas with World Bank Group and the Rockefeller Foundation. significant potential for driving regional economic ‘Click-On Kaduna’ is empowering disadvantaged growth and job creation. The ICT sector offers new youth and women between the ages of 18 and 40 in opportunities for youth in Nigeria as Nigerian youth fragile and conflict zones by training them to lever- enter the virtual economy and earn an income by per- age employment opportunities in the digital econ- forming paid tasks in a growing global marketplace. omy. The program is using digital technologies to Connecting Nigeria’s unemployed and underem- drive innovation, digital skills, and job creation, and ployed youth to the digital economy is especially crit- break the cycle of unemployment, and fragility and ical in Kaduna State, where many young people have violent conflict in Kaduna State. limited access to gainful employment opportunities in the local market. FIGURE 24 56   Nigeria Digital Economy Diagnostic Report tions to support the CAM Bill and other relevant recently government and long-term strategy setting for digital passed legislation, such as the Secured Transactions entrepreneurship. Good practice experiences (such as Act, to ensure effective implementation. Additionally, the Science and Technology Policy Council of Finland there should be a review of legislation impacting digital or the Irish Council on Science, Technology and Inno- entrepreneurs, including: (i) the IP policy and legislative vation) show that coordination mechanisms with a high framework; (ii) the Cybercrimes Prevention Act; (iii) the VC degree of influence on society and policy making con- Incentives Act; and (iv) the tax incentive system akin to sist of several key characteristics: they are made up of the Pioneer Tax, to ensure the regulatory environment is influential business leaders and government represen- conducive and not an impediment to the growth of digi- tatives, they develop comprehensive strategies, and tal entrepreneurship. they disseminate these strategies through a small but stable secretariat. TCAG already has the right member- R2. Conduct an assessment of existing SME support ship, and so there needs to be a focus on establishing a mechanisms dedicated secretariat that will support the development An evaluation of SME support programs in Nigeria, and implementation of an action plan. Engaging with such as a Public Expenditure Review (PER), should be best practice councils in other countries could also ben- conducted to identify key areas of improvements given efit the newly created TCAG to prioritize its activities, the limited fiscal space available. There are established ensure sound and effective private sector consultation, methodologies for Public Expenditure Reviews (Cor- establish partnerships and coalitions, and be effective in rea, 2014) that could be applied in the Nigeria con- providing independent advice on the digital entrepre- text. It will also be important to assess the distortive neurship agenda. effect of the various interventions and explore alter- native support mechanisms that will instead crowd in R4. Update the legal framework for private equity private investment. An independent review will allow investment and allow for the introduction of innovative for an arms-length assessment of the quality of public financing mechanisms spending and should result in the development of an This could include revising current laws and regulations integrated set of actionable measures that combines relevant to access private equity finance, such as the Ven- institutional reforms with changes in the policy mix and ture Capital Incentives act, and ensuring they effectively catalytic investments. incentivize and remove impediments to investment with properly calibrated consumer and investor protection R3. Strengthen the institutional structure to support rules in place. One potential option would be to introduce digital entrepreneurship a regulatory sandbox for innovative financing mecha- It is essential for Nigeria to ensure consistency and nisms, such as crowdfunding, which would allow the gov- coordination across the government in support of dig- ernment to study effects and risks of proposed legislative ital entrepreneurship. The TCAG could be structured changes in a controlled environment before implement- to ensure effective overall coordination across the ing any changes nationwide. SWOT Matrix Strengths Weaknesses −  Vibrant ecosystem in Lagos and Abuja −  Lack of coordination among players −  Expanding digital ecosystem networks −  Weak ecosystem outside the cities −  Private sector–led digital hubs − Inadequate legislation for innovative financing and digital start-ups −  VC for growth-stage start-ups −  Burdensome and unclear tax policy −  Diaspora networks −  Lack of digital skills − Expansion of e-governance and public −  Lack of early stage investors procurement −  Uneven Internet/mobile penetration Opportunities Threats − Government championship of digital agenda − Tightening international competition for digital investments −  Platform for public-private dialogue (TCAG) − Weak business climate −  Proposed Companies & Allied Matters Bill − Brain drain −  International investments in digital start-ups − Weak IP protection and cybercrimes −  Entrepreneurial culture and young labor force − Low digitalization of traditional industries limiting the B2B markets Nigeria Digital Economy Diagnostic Report   57 Support efforts to strengthen the pipeline of digital equity, and public equity markets globally, and Nigeria entrepreneurs should not be an exception. In addition, there is over- whelming evidence that diversification of institutional R5. Collect data on digital entrepreneurs and technol- investment (both in terms of sectors and geography) is ogy-enabled firms, and conduct a technology adop- important to protect portfolios across economic cycles. tion survey to systematically assess the firm-level PENCOM should review successful international experi- barriers to adoption of digital technologies ences to identify potential options for creating domes- This assessment will provide a basis for need-based tic investment opportunities for pension funds, allowing development of government policies and programs, and them to diversify their portfolio and deliver required long- evidence for consultations with ecosystem stakeholders. term returns, including through public and private equity This information will be a public good that allows digital investments. entrepreneurs to better understand needs and constraints of their potential clients in internal markets and develop R9. Explore avenues to de-risk and scale up early-stage customized products for different client segments. It can funding for digital entrepreneurs also inform the design of programs of innovation hubs The government could play a catalytic role for early stage and other ecosystem enablers. investments in digital ventures by helping to de-risk the market. There are a range of options available based on R6. Conduct a review of innovation hubs and other international experiences, including mezzanine financing, programs that target digital entrepreneurs in Nigeria guarantees, and fund-of-funds that invest alongside seed- and develop a Monitoring and Evaluation framework and early-stage investors that mitigate the exit risks to (M&E) for innovation hubs in partnership with the pri- investors in a shallow Nigerian secondary market. What- vate sector ever solution is employed will need to be implemented in Performance data will promote competition among hubs a transparent manner, with the private sector in the lead and improve resource utilization. It will also help identify role, to eliminate the potential for market distortions prev- good practices and scale up the most impactful models. alent in existing solutions. The government can support existing incubator networks and other stakeholders in developing an M&E framework Strengthening markets for digital products and services for innovation hubs in the country. This information will be critical to assure effective design and implementation R10. Support mechanisms to facilitate provision of ser- of new university-based incubators that the government vices to large corporations by start-ups with innovative is planning to set up across the six geopolitical zones. products/services To promote the linkages with large buyers, the govern- R7. Foster collaboration between ecosystem players ment should help to address the following key challenges including digital entrepreneurs, innovation hubs, aca- of Nigerian digital startups: (i) the information gap, by demia, big corporates, investors, and the government providing matchmaking services between start-ups and The government could play an important role in facilitat- large corporate and incentivizing contracting of local ing the digital entrepreneurship ecosystem by providing firms; (ii) the firm capabilities gap, through upgrading open data and statistics, platforms for public-private dia- programs that improve management and employee skills, logue, and incentives for collaboration. However, suc- quality control, and technology; and (iii) the challenge cessful implementation of these initiatives will depend on of informality by lowering the administrative barriers to ownership and participation of the private sector. The first formalization. These initiatives will help to connect large step in that direction in Nigeria could be in helping the corporates and multinationals in Nigeria with innovative digital industry to self-organize by supporting the capac- start-ups locally. ity of digital industry associations, providing forums for industry dialogue, showcasing success stories of digital R11. Support adoption of digital technologies in strategic ventures, and providing awards to digital entrepreneurs industries to increase their visibility Based on the results of the technology adoption survey and in collaboration with the private sector (e.g., inves- Encourage private sector solutions for funding digital tors, lead firms), the government should launch targeted entrepreneurs programs for digital technology adoption in industries like R8. Incentivize institutional investors to invest in public agriculture and agribusiness that can have a transforma- and private equity markets tional impact on productivity and livelihoods, as well as Institutional funds such as pension funds are the most expand digital markets. Based on lessons of experiences important source of capital for venture capital, private from other SSA countries, programs such as the e-voucher 58   Nigeria Digital Economy Diagnostic Report program for smallholder farmers may provide a platform It is unpredictable, however, what jobs will emerge, for collaboration between the government and digital disappear, or change in the future due to digital tech- businesses and activate new markets for digital services nologies. Therefore, Nigeria’s education sector needs to (World Bank, 2019). Other sectors may also benefit from be flexible to respond not only to new jobs in ICT pro- similar initiatives. fessions, e-commerce, and online-service provision, but also for changes in traditional industrial and artisan jobs. R12. Improve collaboration with digital entrepreneurs For example, digital devices or mobile money will likely in provision of public services through transparent affect the work of technicians, lower end service provid- public contracting, digitalization of public services, ers, mechanics, and retailers, etc., who will need basic to and ICT up-skilling of public workers advanced digital skills in order to be able to compete in The government should expand contracting of public the digital economy. Consumers, on the other hand, will services through SMEs and actively pursue opportunities also need to acquire digital skills in order to shop, pay, to increase the reach and accessibility of public services work, communicate, or study. In relation to studying, through digital solutions. These solutions should rely on technology-based teaching and learning, such as the a range of digital technologies that are accessible to bridge academy in Lagos and Edo, will bring in increased the poor (e.g., basic mobile phones). There are proven demand for personalized and self-learning using online digital solutions that use mobile and other information resources/mobile learning labs. All of these changes will technology to improve access and quality of services, pose considerable demands on the existing skills devel- such as Internet kiosks for payments and smartphones opment system in Nigeria. for medical information for health professionals (World Bank, 2017). The government should also launch joint Digital skills exist on a continuum, ranging in level from ICT up-skilling programs for government agencies and basic to intermediate to advanced. According to the local entrepreneurs to improve collaboration and trust World Bank Digital Jobs for Youth report, these skills refer and reduce rigidities in procurement of the necessary to a combination of behaviors, expertise, know-how, work ICT services habits, character traits, dispositions, and critical under- standings that enable youth to actively participate in and contribute to the digital economy (World Bank Group, 2.5 DIGITAL SKILLS PILLAR 2018). According to the European Commission, three 2.5.1 Importance of Digital Skills Pillar main types of digital skillsets are needed in contemporary society (Institute for Public Policy Research, 2018): Digital technologies are forecast to be a major driver of productivity, with successful economies depending 1. Basic digital skills: Skills that enable people to play an on greater numbers of digitally skilled workers than active role in the digital society as ‘digitally literate’ and has previously been the case. As an example, the cre- empowered individuals. This includes the skills to use ation of a digital single market in Europe is expected to every day digital applications (including e-commerce add €415 billion in annual GDP to the EU (Institute for and e-government), carry out basic Internet searches, Public Policy Research, 2018), requiring a new set of skills and be safe online. for workers. It is estimated that roles requiring digital 2. Digital skills for the general labor force (intermedi- skills will grow up to 12% by 2024. As firms’ production ate skills): In addition to basic skills, these skills are and employment needs continue to change rapidly, the needed in most digitally enabled workplaces. This labor supply needs to be able to rapidly adjust to meet subset includes new skills for established workers in demand (World Bank Group, 2018). sectors that are adopting digital avenues, and skills for seeking work in the digital economy. These general In order for workers to successfully perform dig- skills enable people in a vast range of roles to use the ital work, they must develop digital skills. With 46% applications created by ICT specialists, without them- of work activities in Nigeria susceptible to automation selves having specialist expertise. (World Economic Forum, 2017a), digital skills will qualify workers for jobs in traditional sectors, while also empow- 3. Digital skills for ICT professionals (advanced skills): ering them to thrive in emerging sectors and even launch Advanced digital skills for ICT experts and leaders their own businesses. As the nature of work continues to across all industry sectors. These include skills linked to change, digital skills will become increasingly important developing new technologies, products, and services. for workers to engage in new forms of work, such as vir- tual freelancing, and participate in the gig economy and Finally, regardless of sector or occupation, new work online job marketplaces (World Bank Group, 2018). formats will offer individuals and entrepreneurs new Nigeria Digital Economy Diagnostic Report   59 opportunities. One example of these new work formats • Promote development of local capacity to meet the is online platform work, which is on the rise globally, needs of the ICT sector in order to develop an indus- including in Sub-Saharan Africa. The region currently trialized economy; has 56 e-ridesharing services, most of them homegrown • Encourage research and development within the ICT apps launched over the last three years. In Africa, online sector; talent platforms have the potential to create significant benefits by moving people from informal to formal jobs, • Promote private sector–led ICT investment, entrepre- and by increasing workforce participation and hours neurship, innovation, and local capacity development; worked of those formerly underemployed or inactive. By and 2025, this could result in 1.9 million jobs and USD 20 bil- • Government will facilitate and be a catalyst of ICT sec- lion additional GDP in Nigeria (World Economic Forum, tor initiatives. 2017a). The strategic initiatives envisioned to drive implementa- tion of policy within the ICT sector linked to digital skills  iagnostic Findings: Current State of Digital 2.5.2 D include (Government of Nigeria, 2010): Skills Pillar • Mainstreaming ICT into the education curriculum; Policy Framework This section assesses the education policy framework • Encouraging local production of ICT components and in Nigeria, including the institutional structure, govern- subsystems by providing incentives for manufacturers ment programs, and education strategies. for major ICT projects; • Establishing a national digital library with access points A. INSTITUTIONAL STRUCTURE strategically located in both rural and urban areas; Education is a shared responsibility of the three tiers • Promoting e-learning, e-governance, e-business, of government in Nigeria (federal, state, and local) and e-commerce, and e-banking; and suffers from insufficient interagency and intergovern- mental coordination. The Nigerian education system can • Providing regular and affordable access to Internet be described as a 1-6-3-3-4 system. First, in basic educa- resources in all educational and research institu- tion there are one pre-primary year, six years of primary, tions, with particular focus on basic and post-basic and three years of junior secondary education. Then, the education. next three years are senior secondary education, followed by four years of tertiary education (World Bank, 2017a). In Education Sector order to access and qualify to university, all students must This section assesses the state of educational levels take the West African Senior Secondary Certificate Exam- and access to education in Nigeria. As described below, ination (WASSCE) and must get at least five credits includ- Nigeria has made great strides in expanding access to ing English and Mathematics relevant to his/her major education, though gains have been reversed in recent course (HALI Access Network, 2018). UBEC and SUBEBs years. Regional disparities exist mostly in the north and manages basic education, including junior secondary, rural areas. The conflict crisis contributes significantly while the state ministries of education oversee senior to North-East disparities. The gender gap is reversing secondary. State governments own state universities and most significantly in the North-West region among the the federal government owns and manages Federal Unity pupils in basic education. A recent study by the World Colleges and all federal universities. Bank showed the gap between girls and boys who never attended school is small (about 1 percent). The educa- B. VISION 2020 tional system, which should provide the basic and founda- Nigeria’s Vision 2020 is a strategic document that iden- tion literacy and numeracy skills required to be effective in tifies the long-term developmental objectives with the the digital age, does not produce the kinds of candidates aim of achieving accelerated and sustained economic who can hit the ground running. Nigeria’s general educa- development in Nigeria. Furthermore, Vision 2020 rec- tion standards are low, with the quality offered at all levels ognizes the importance of ICT skills development and continuously suffering from poor funding and deteriorat- greater diffusion of ICT across subsectors within the econ- ing teaching capabilities. Traditional educational empha- omy, including education, finance, farming, trade, manu- sis on theoretical components and insufficient promotion facturing, services, oil and gas, and the public sector. In of practical applications of using new technology are line with this objective, Vision 2020 will (National Planning obstacles to overcome. Universities are often themselves Commission, 2009): under-skilled, under-equipped and under-funded to inno- vate the curriculum or recruit and up-skill teaching person- 60   Nigeria Digital Economy Diagnostic Report nel that can capably train digitally literate graduates. The teaching capabilities. According to the World Economic following broad issues persist: Forum Executive Opinion Survey, the quality of Nigeria’s education system ranks low in the continent with 2.8 out Availability of trainable pool of labor of 7, and below the world average, which stands at 3.8 • Only 2–4% of total secondary and tertiary-level gradu- (World Economic Forum, 2017a). Furthermore, Nigeria is ates are employable with a minimum of training inter- reported to have one of the lowest shares of government ventions (6–9 months training); and expenditure in education (7%). This rate goes up to more than double in the Sub-Saharan Africa region according to • A large part of the tertiary graduate trainable pool the World Bank. In addition, the International Labor Orga- available (18–20%) requires training interventions for nization (ILO) estimates that 21.4% of youth in Nigeria are 1–4 years. not in education, employment, or training (World Bank Group, 2019). Quality of trainable pool at primary, secondary, and tertiary levels Despite Nigeria’s commitment to free, compulsory, and • There is a lack of proficiency in English language com- universal basic education under the Universal Basic Edu- munication; cation Act of 2004, basic education continues to suffer • Math and Sciences are not well developed for many from low and inequitable access. Based on the 2015 primary, higher secondary, and tertiary graduates; Nigeria Education Data Survey (NEDS), the Nigeria Gross Enrollment Rate (GER) in primary education is 87% • There is a lack of self-motivation and self-learning (compared to 100% for Sub-Saharan Africa), and while initiatives, problem-solving skills, and process-based the rate for junior secondary education (65%) is above learning (discipline) in a large portion of tertiary grad- the average for SSA, it remains well below the universal uates; and average. • There is a need to nurture and support a sense of cre- ativity, innovation, and learning from failure among Nigeria’s primary school gross enrollment rates com- the talent pool. puted using the household survey data were 72% and 74% in 2010 and 2015, respectively. These GERs are Inadequate ICT training opportunities for teacher significantly below UNESCO’s 2016 estimate of 85%. (trainer) programs at all levels of education Nigeria ranks among the bottom 20% of countries in SSA whose average is 97%. The basic education GER (mean- • More teachers require regular training in teaching new ing for the first nine years of school) was 75% in 2015. The digital technologies; Net Enrollment Rate (NER) for basic education improved • There is a lack of qualified trainers in ICT at primary marginally in 2010–2015, increasing from 69% to 72%. and secondary schools; International comparison of primary school NERs shows that Nigeria’s rate of 68% is well below the SSA regional • There is a lack of hard and soft infrastructure in schools average of 78%. and colleges to enable teacher training; and • Train the Trainers programs are available, however are This inequitable access to education observed in Nigeria often not implemented due to lack of coordination will lead to increased inequality in digital skills, and sub- between key stakeholders. sequently low access to new jobs in the digital economy. Initiatives to overcome these challenges include, for The quality of basic education, measured in terms of stu- instance, the Basic Digital Education Initiative (BDEI) orga- dent learning outcomes, is also low in Nigeria. A recently nized by Tech4Dev and Microsoft, which are expected released report by the National Bureau of Statistics shows to train 500,000 young Nigerians. Yet, high poverty and a decrease in students’ performance in 2018 relative to illiteracy rates, the urban-rural divide, disadvantages in 2017. The percent of candidates, 47.21, who sat for the opportunities faced by women and girls, and low human exams in 2018 passed with 5 credits including English development investments are factors hindering the clos- Language and Mathematics compared to 53.97% in ing of digital skills gaps. the previous year. Of the candidates that passed in 2018, 50.47% were female while 49.53% were male. Further- A. EDUCATION LEVELS more, regional data shows the South-East (66.25%) is the As described in other pillars, Nigeria’s education stan- best performing region while the North-East (19.96%) had dards are low, with the quality offered at all levels con- the poorest performance among candidates. tinuously suffering from poor funding and deteriorating Nigeria Digital Economy Diagnostic Report   61 These foundational skills gaps underscoring basic math the highest rate. Whereas in the northern zones, the rates and/or literacy will pose challenges in improving digi- range from 55 to 69%. Despite an increase in NER, the tal literacy in Nigeria, and thus limit the opportunities north and south are not converging. Similarly, the NER for offered in the digital economy (World Bank, 2017a). Fur- primary education in urban and rural areas showed a large thermore, Nigeria lags Ghana, Kenya, and Senegal in the gap: 82% and 62%, respectively, in 2015. This represents quality of its Math and Science education. While it is not an improvement since 2010, though mostly in urban areas surprising that Ghana and Kenya are rated higher than (World Bank, 2015). Nigeria, Senegal’s rating indicates a potential to over- take Nigeria in digital skills in the future (World Economic The gender gap in school enrollment appears to be Forum, 2016). Nonetheless, there is still a huge opportu- minor. The difference between female and male enroll- nity for Nigeria to devise and apply workable strategies ment rates, both net and gross, are consistently around for advancing overall digital skills and benefit from the or below 1 percentage point. Girls’ GER in secondary digital ecosystem. education increased from 60% to 63% in 2010–2015, effectively closing the gender gap. However, at the While access to education has stagnated at the pri- senior secondary level in 2015, a gender gap remains, mary level, it has expanded substantially at the sec- but in favor of girls: 42% versus 38% for girls and boys, ondary and tertiary levels. Secondary gross enrollment respectively. more than doubled from 24% in 1990 to 56% in 2013, the highest in the time series. Since then, it decreased Access to digital skills learning can indeed decrease to 42% in 2016, in line with SSA average that same year, regional gaps between the north and south by pro- and far from the universal average. Tertiary gross enroll- viding access to underserved areas in both regions of ment, on the other hand, increased more than twofold Nigeria, particularly regions where access to schools from 4% in 1990 to 10.2% in 2011, with the latest avail- and physical education infrastructure are limited. Fur- able data setting Nigerian tertiary enrollment above the thermore, in the northern region where existing cultural average for SSA (8% also in 2011). The rapid expansion barriers prevent women and girls from access to most of enrollment in secondary and tertiary education could kinds of formal education, digital skills programs can be place additional pressure on the share of resources avail- applied in a manner that includes more females to tackle able for the pre-primary and primary subsectors (World existing gender disparities in accessing digital skills train- Bank Group, 2019). ing and development. B. REGIONAL DISPARITIES C. DIGITAL SKILLS DEVELOPMENT Enrollment rates in the south and in urban areas are Nigeria has over 500 tertiary and secondary institu- much higher than in the north or in rural areas. The tions offering skills development and/or Technical and primary school NER in the southern geopolitical zones Vocational Education and Training (TVET) programs, ranges from 81–87%, with the South-East zone having some of which also offer digital skills for employment. 62   Nigeria Digital Economy Diagnostic Report These include Abu Bakar Tafawa Balewa University (ATBU), economic change through entrepreneurship. In Nigeria, Bauchi, Federal University of Technology Akure (FUTA), the program had a specific aim of training unemployed Federal University of Technology Minna (FUTM), Federal young people, thus enhancing their employability for a University of Technology Owerri (FUTO), and Modibbo global digital labor market. The country’s population is Adamu University of Technology Yola (MAUTECH). The expanding, and if the economy is to sufficiently provide TVET programs offered at these universities are Electrical jobs, it must diversify beyond commodities and into tech- and Electronics, Automobile and Mechanical Productions, nology. However, this will not be practical unless digital Agriculture and Business Education, and Building and skills levels rise substantially. The program is also linked to Woodwork (Ismail & Sale Mohammed, 2015). An increas- Nigeria’s commitment to the United Nation’s Sustainable ing number of Nigerian universities have skilled lecturers Development Goals (SDGs) for 2030 (Institute for Public with requisite facilities to build the digital skills of their Policy Research, 2018), specifically the following SDGs undergraduates and postgraduates. Funding to support (Gillwald, et al., 2018): innovation in the digital space in most universities is still a • ICT SDG Goal 4: Ensure inclusive and equitable major challenge for addressing existing skills gaps. quality education and promote lifelong learning D. DIGITAL EDUCATION AND TRAINING PROGRAMS opportunities for all. In recognition of the need to create a digitally enabled – Target 4.4: By 2030, substantially increase the workforce, several firms are increasingly offering a number of youth and adults who have relevant variety of education and training programs at global skills, including technical and vocational skills, for and regional scales. Some of the dominant education employment, decent jobs, and entrepreneurship. and training programs in Nigeria are offered through • ICT SDG Goal 5: Achieve gender equality and em- private sector–led interventions by Andela and Google, power all women and girls. while the government has also established implemen- tation of digital skills programs as a component of a – Target 5b: Enhance the use of enabling technology, national digital economy project. in particular information and communications tech- nology, to promote women’s empowerment. The Smart Nigeria Digital Economy Project Andela The Smart Nigeria Digital Economy Project is a digital- led strategy initiative of the government which cen- Technology has also facilitated the creation of jobs ters around the establishment of an ICT ecosystem in through working online or joining the so-called gig Nigeria. This is enabled through significantly expanding economy. Andela, a U.S. company that specializes in broadband coverage, increasing e-government, and training software developers, has built its business establishing ICT clusters, starting in the Special Economic model on the digitization of Africa. Andela has trained Zones (SEZs). Government will also drive a program to 20,000 software programmers across Africa using free build the skills in this sector that are focused on train- online learning tools. Once qualified, programmers work ing ICT engineers in software development, program- with Andela directly or join other Andela clients across the ming, network development, and cybersecurity. The world. The company aim is to train 100,000 African soft- project’s objective is to increase the contribution of ICT ware developers by 2024. 90% of its workers are in Lagos, and ICT-enabled activities to GDP by an estimated 10% Nigeria, with other sites in Nairobi, Kenya, and Kampala, and create 2.5 million new jobs between 2017 and 2020 Uganda (World Bank, 2019d). (Ernst & Young: Nigeria, 2018). The Labor Market Google Digital Skills for Africa Program This section assesses the state of digital skills in Nige- Google’s Digital Skills for Africa program was initially ria’s labor force, including a description of Nigeria’s launched with the stated aim of training 1 million young presence in the virtual economy. people in the region between April 2016 and March A. LABOR FORCE 2017. This was achieved within 10 months, with over half of those trained being residents of Nigeria. The online Out of a total population of 190 million, the Nigerian program has trained people in 29 countries, and the face- labor force is estimated to be in the region of 59 mil- to-face program is offered in 11 countries. In July 2017, lion, with a literacy rate of 51%. Furthermore, the World a new target was announced—to train 10 million people Bank’s Nigeria Jobs Report of 2015 found that the Nige- by 2022. To date, more than 2 million learners have taken rian economy needs to create 40–50 million jobs between part. The objectives of this are to create a ‘level playing 2010 and 2030. These numbers translate into over 2 mil- field’ of digital skills and opportunities, and to drive socio- lion additional jobs per year. These jobs will need to be Nigeria Digital Economy Diagnostic Report   63 are also affecting secondary school and university gradu- ates (World Economic Forum, 2017a). In addition, Nigeria is far from making optimal use of its human capital potential and is underprepared for the impending disruption to jobs and skills brought about by the Fourth Industrial Revolution. This underprepara- tion is portrayed by the 2017 ITU ICT Development Index and the World Economic Forum Index, where Nigeria ranked 143rd out of 176 and 15th in the region, respec- tively. In the 2017 ITU ICT Development Index, Nigeria obtained 3.53 points in the IDI Skills Sub-Index, although the lowest score was for the IDI Use-Sub-Index with 1.58 points (ITU, 2017b). Furthermore, the World Economic Forum’s Human Capital Index, which measures the extent to which countries and economies optimize their human capital through education and skills development and its deployment throughout the life-course, ranked Nigeria 114th out of 130 countries, with a score of 51.06. The same Human Capital Report revealed that Sub-Saharan Africa, on average, currently only captures 55% of its full human capital potential, compared to a global average of 65%, ranging from 67 to 63% in Mauritius, Ghana, and South Africa to only 49 to 44% in Mali, Nigeria, and Chad (World Economic Forum, 2017a). Finally, the World Eco- nomic Forum digital skills indicator reflects answers to the question: “In your country, to what extent does the active population possess sufficient digital skills (e.g., computer skills, basic coding, digital reading)?” [1 = not all; 7 = to a great extent] Nigeria ranks the lowest among all its regional peers (World Economic Forum, 2018). In this regard, among its regional peers, Nigeria is the only country that has shown a significant decline in firms, iden- tifying the lack of an educated workforce as a major con- straint. This is not necessarily a positive sign as Ghana and Kenya’s demands for educated workers are underpinned by growing economies (World Bank, 2014). THE WORKING TO ADVANCE SCIENCE AND TECHNOL- B.  created in urban and rural areas, and predominantly in OGY EDUCATION FOR AFRICAN WOMEN (WAAW) nontraditional sectors, such as Information Communica- The Working to Advance Science and Technology Edu- tions Technologies (ICT) (World Bank Group, 2019). cation for African Women (WAAW) Foundation is an international nonprofit organization based in Nigeria Labor force participation in the Sub-Saharan region is that works to increase the number of African women high and characterized by the generally strong economic entering STEM fields through bootcamps, scholar- participation of women. However, significant gend- ships, and workshops. WAAW also connects girls and er gaps in workforce participation remain in countries such young women with working professionals in the IT indus- as Mauritius, Mali, Côte d’Ivoire and Nigeria. Further- try who have volunteered to serve as mentors. Program more, Nigeria maintains large proportions of workers in beneficiaries receive advice and insights from mentors lower-skilled jobs, and high formal sector unemployment on a range of personal and professional topics, including: rates, which increased from 11.92 to 15.99 million in 2017, future career options; suggestions for self-learning using with the youth reported to be the most affected at 33%. online resources and additional trainings; academic chal- These high unemployment and underemployment rates lenges at school; the importance of maintaining an online 64   Nigeria Digital Economy Diagnostic Report presence through social media sites such as LinkedIn; FIGURE 29: Virtual Economy Three Layer Model Ernkvist, D. V., and resources to support their success as girls in STEM; and Mirko, D. (2011). Knowledge Map of the Virtual Economy: Converting support for internship opportunities. WAAW’s STEM and the Virtual Economy into Development Potential. Outreach Mentoring Program is currently being run in 19 chapters across 11 African countries, and reaching over 10,000 young people (World Bank Group, 2018). VIRTUAL ECONOMY: MICROWORK AND ELANCING C.  (VIRTUAL FREELANCING) According to the World Bank, the virtual economy consists of a three-layer model that comprises the ICT physical infrastructure; the digital economy of services supported by the ICT infrastructure; and also, the vir- tual economy that emerges from the digital services and the infrastructure. Most of the initiatives in both the developed and developing world, in order to allow FIGURE 30: Microwork and elancing subsegments. Self-elaboration. the virtual economy to thrive, are focused on the phys- The third layer, i.e., the virtual economy, crosscuts multiple sectors, regions, ical infrastructure (pipes, microwave towers, or devices) industries, employers, and workers. Traditionally, this third layer is divided and the proliferation of high-skilled and semi-skilled busi- into two segments: nesses around ICT, from BPOs to e-commerce. However, the rise in virtual transactions (both social and monetary) and the use of Internet and smartphones in our daily lives, have created new digital needs, ranging from the lower to the higher set of skills. The virtual economy, therefore, introduces a new paradigm in digital content industries. This low and medium-skilled labor virtual economy opens the door to a growing number of unemployed and under- employed pool of workers, both in the developed and developing world, that are willing to take advantage of the opportunity provided by the virtual marketplace. Elancing and microwork represent work opportuni- ties for skilled and semi-skilled workers, respectively. While job opportunities in the real economy (as opposed to virtual) may be limited within geographical boundar- ies, there are over a million tasks available online on just Nigeria Digital Economy Diagnostic Report   65 one of many active platforms. Workers are therefore just The same report assesses the level of education and beginning to scratch the surface of the online work indus- employment status among microworkers. Very small try. Elancing tasks include writing business plans, design- numbers of highly skilled workers undertake the very ing websites, editing legal documents, etc., for which they small amount of high paying freelance work across the may earn from twenty to a few hundred dollars per task. seven countries assessed, mostly in South Africa and Microwork tasks on the other hand include answering sur- to a lesser degree in Nigeria and Kenya. Furthermore, vey questions, tagging images, translating lines of text, while a 47% majority of Nigerian microworkers are bach- etc., with workers earning on average only a few cents to elor’s degree holders, the majority of microworkers in the a couple of dollars per task. other countries assessed tend to have a secondary edu- cation. In terms of employment, the majority of Nigerian According to the report “What is the state of Microwork microworkers are self-employed, followed by employed, in Africa?” Nigeria is second in the continent, behind with both categories accounting for 80% of the sam- Mozambique, with almost 8% of microworkers. Interest- ple. Similar trends are observed in the other countries, ingly, the gender gap observed in both education and the except for Mozambique, where the majority are students labor market in Nigeria is reverted in the virtual economy, and unemployed (75%) and Ghana, where the majority with the microwork gender gap standing at 63% (Onko- are unemployed (60%) (Onkokame, et al., 2018). kame, et al., 2018). Furthermore, according to Upwork, the biggest elance platform in the world (formed from the The Nigerian government, supported by the World merger of oDesk and Elance in 2013)59 is comprised of Bank and the Rockefeller Foundation, organized work- 605 Nigerian elancers in Upwork, out of 5,427 elancers in shops in 2013 to introduce thousands of citizens into Africa as of December 2018 (11%) (Upwork, 2016). microwork platforms. NaijaCloud first edition in 2013 targeted both segments in the virtual economy, i.e., TABLE 7: Percentage of Microworkers and gender microwork and elancing, with workshops in both Lagos distribution and Abuja that provided Nigerian youth and companies with the foundations to start working or hiring in the vir- Microwork Male Female Gender gap tual economy. In 2018, the World Bank and the Rocke- County (%) (%) (%) (%) feller Foundation, in partnership with the Kaduna State Ghana 1.99 1.93 2.08 –7 Government, organized Click-On Kaduna. This was a Kenya 3.36 2.99 3.79 –26 three-day event attended by almost 1,000 participants Mozambique 7.90 10.81 3.34 69 who were involved in workshops on how to become free- Nigeria 7.63 6.26 10.21 –63 lancers, tips from professional Nigerian freelancers, and Rwanda 3.74 4.25 2.64 37 hands-on profile creation. The event included a selection of Nigerian microwork and elancer platforms, i.e., Efiko South Africa 6.48 7.45 5.56 25 (www.efiko.co), Jolancer (www.jolancer.com), Motion- Tanzania 0.56 0.22 1.00 –355 wares (www.motionwares.com), and Asuqu (www.asuqu. Source: Onkokame, et al., 2018. TABLE 8: Distribution of microworkers by education and employment status Ghana Kenya Mozambique Nigeria Rwanda South Africa Tanzania EDUCATION Primary 16.37 22.03 Secondary 56.36 50.15 44.10 65.46 49.21 Certificate/Diploma 43.64 49.06 7.45 8.63 Bachelor’s 0.79 47.39 9.54 28.75 Master’s 1.06 EMPLOYMENT Student/Pupil 12.18 18.07 51.30 7.99 16.71 28.75 Unemployed, active 59.79 16.26 24.57 13.66 16.37 15.17 Employed 7.35 21.32 18.81 31.86 58.46 60.08 22.03 Self-employed 20.68 44.35 4.16 46.49 25.18 7.31 49.21 Source: Onkokame, et al., 2018. 66   Nigeria Digital Economy Diagnostic Report SWOT Matrix Strengths Weaknesses −  Secondary and tertiary education growth −  Quality of education −  Google Digital Skills for Africa −  Low basic education enrollment − Andela −  Gender gap in education and labor − WAAW −  Digital Skills in Curriculum −  Gender gap in microwork −  TVET and digital skills −  Microwork ranking Opportunities Threats − Universal basic education − Institutional structure − Vision 2020 − Government expenditure − Labor force − Human capital potential − Virtual economy − Regional disparities − Upcoming digital skills programs (Click-On Kaduna, IDEAS, Smart Nigeria Digital Economy Project) com), as well as local SMEs interested in using the vir- underscored by ineffective policy making and imple- tual economy labor force. In addition, Click-On Kaduna mentation, mainly because of conflicts of jurisdiction included an innovative pilot with a selection of 150 best between the three tiers of government that undermine profiles from the three-day event, who accessed a set of policy coordination. Likewise, accountability mecha- five paid tasks aimed at improving the Job Success Score nisms along the service delivery chain are inadequate. (JSS)60 of these new elancers. This recommendation will focus on integrating digital skills in the curriculum, starting in primary school, and all Digital Skills Recommendations and 2.5.3  the way to tertiary and TVET education, as well as reduc- Next Steps ing regional disparities. This will require an increase in The findings from the assessment of the current state public funding for education, which as described in the of Digital Skills in Nigeria aimed to identify the factors diagnostic section is half the average of SSA, in order in the macro and microenvironment that influence the to improve the poor infrastructure conditions in schools behavior of companies and individuals. Each factor in across Nigeria. the macro and microenvironment and its impact help in the identification of the factors in the generic external R2. Explore innovative ways of including digital skills environment, i.e., Opportunities and Threats; and the fac- in the wider curriculum and scale up private sector–led tors in the generic internal environment, i.e., the Strengths initiatives and Weaknesses, both of which constructed the final The process of developing, aligning, testing, training, SWOT Matrix. and implementing new formal curricula (in schools and post-school institutions) is too lengthy to be responsive As observed in the SWOT Matrix, despite the chal- to the fast-changing demand. Innovative ways of train- lenges and bottlenecks related to digital skills in Nige- ing through partnerships (public/private, inter-sectoral, ria, there are clear strengths and opportunities that intra-sectoral, regional, and so on) should be considered indicate the country can achieve much greater digital as part of meeting this need. Leverage initiatives such as inclusion in the future. This section details recommen- Google Digital Skills for Africa, Andela, or WAAW, have dations and next steps based on the SWOT Matrix built, wider experience in delivering this type of curriculum, which would support Nigeria toward developing digital including addressing the gender gap. skills in the country. Indeed, the importance of digital skills are still evolving and gaining more recognition in Nigeria. R3. Emphasize formalized teacher training in general, As such the analysis in this chapter indicates a knowledge as well as use of technology to enhance learning gap that requires further analytical exploration to better Going beyond showing teachers how technology works, understand the state of digital skills in Nigeria. partnerships with educational technology consultants and closer collaboration with teacher training centers R1. Leverage the Smart Nigeria Digital Economy Project, and universities are required, in order to align formal using it to improve government coordination teacher education with the technological revolution The established institutional framework in Nigeria is envisioned in schools. Nigeria Digital Economy Diagnostic Report   67 R4. Tackle out-of-school children issue R7. Improve virtual economy awareness in Nigeria, The large number of out-of-school children is the result making the country a hub for microwork and elancing of a wide range of demand- and supply-side factors that Leverage initiatives such as Click-On Kaduna, and Nige- vary by state and geographic location. Demand-side con- ria’s current ranking in Africa with regards to microwork, straints have become increasingly severe, especially in to transform Nigeria into a hub for microwork and elanc- the conflict-affected North-East, while supply-side chal- ing activities. This will require revising the current labor lenges include distant school facilities, and overcrowded law, as well as addressing infrastructure deficits (i.e., and ill-equipped classrooms. It is also paramount to electricity, Internet, and payment services) so as to max- address the issues that prevent children from enrolling imize the virtual economy impact in Nigeria. In addition, in school, including perceived low benefits of education, since Nigeria seems to start from a positive gender gap especially for girls. in microwork, it is important to maintain this and support more initiatives that target women, especially within the R5.  Implement post-school curriculum reform per- digital ecosystem. taining to qualifications related to professional digital skills R8. Create a centralized digital database of skills pro- Innovative ways of speeding up the responsiveness of grams to track digital training provision via the public formal qualifications to the needs of the labor market education system should be explored and developed. Examples of part- With the exception of Artificial Intelligence Lagos, which nerships between public and private sectors show great is a self-organized group of learners studying data science potential to help in this regard. and artificial intelligence, there is a scarcity of detailed dig- ital skills training data in Nigeria. The Ministry of Education R6. Formalize the entrepreneurial link between ICT should create a database tracking the number of students and business studies within and beyond higher edu- that receive skills training, the curricula undertaken, their cation assessment results, and their education profiles. With a The trend of merging ICT subjects with business degrees national database, it would be possible to track Nigeria’s or vice versa could be broadened and incorporated into progress in developing a skilled workforce for the digital qualifications offered by TVET colleges. Curricula could economy. also be reviewed to optimize the relevance of com- plementary subjects to enhance entrepreneurship, as described in the digital entrepreneurship pillar recom- mendations. 68   Nigeria Digital Economy Diagnostic Report NOTES 4. Carlo Rossotto et. al. (2018), “Digital platforms: A liter- the seventh country in the world to adopt this system ature review and policy implications for development,” in 2018 and the third in Africa (after Côte d’Ivoire and CRNI, pages 1–17. Djibouti). 5. OECD Public Governance Reviews 2016. 27. http://www.financialnigeria.com/implica- 6. A 2015 study on ICTs and Public Service Delivery in tions-of-the-new-pioneer-status-incentives-in-nige- Nigeria published in the International Journal of Social ria-s-tech-industry-feature-171.html Sciences and Humanities Vol.5, No 2 by Nwachukwu, L. 28. https://www.export.gov/article?id=Nigeria-E-Commerce C. and Pepple, S. 29. The Nilson Report (2018). Flutterwave Payment Gateway 7. ONI, S., et al. “Electronic Mediated Administration and to Africa. Public Service Delivery in Nigeria” published by Acta 30. http://gravitasreview.com.ng/shop/taxation-of-e-com- Universitatis Danubius. Administratio, Vol 7, No 2 (2015) merce-in-nigeria/ http://journals.univ-danubius.ro/index.php/administratio/ 32. http://stillwaterslaw.com/newsletter/2015/05/e-com- article/view/3082/3076# merce-income-tax-regime-in-nigeria/ 8. See OECD op cit. 32. Ibid, and FIRS in https://iclg.com/practice-areas/corpo- 9. Draft Open Data, Federal Ministry of Communications, rate-tax-laws-and-regulations/nigeria 2018. 33. Global Legal Group Limited. 10. Ibid. 34. (EFInA, 2018). 11. NEITI Open Data Policy 2016. 35. (Macheel, 2017). 12. Ibid. 36. High costs and unpredictability of cash-on-delivery have 13. Open Government Partnership Secretariat, Federal Min- been mentioned, for example, as one of the risks in the istry of Justice. Jumia initial public offering (IPO) documents. (Jumia, 14. Kale, Y. (Statistician General of Nigeria and CEO of n.d.) National Bureau of Statistics) Keynote Presentation at the 37. (United Nations Population Division, 2017). 1st Summit on Big Data, October 12, 2017. 38. (World Bank Group, 2019). 15. Federal Ministry of Communications correspondence. 39. (Migration Policy Institute, 2015). 16. Insight 2 Africa (2018), “Africa’s digital platforms and 40. (World Bank Group, 2019a). financial services: An eight-country overview.” The eight 41. (Transparency International, 2018). countries covered were Nigeria, Ghana, Kenya, South 42. (Financial Action Task Force, 2016). Africa, Rwanda, Tanzania, Uganda, and Zimbabwe. 43. (Daniel, 2019). 17. Ibid. Page 24. A more recent assessment (May 2019) has 44. (Securities and Exchange Commission, 2019). indicated that there are currently 116 platforms operating 45. Ministry of Budget and National Planning, 2016. in Nigeria. 46. Central Bank of Nigeria, 2018. 18. Global Startup Ecosystem Report 2019, page 13. 47. Awojulugbe, 2019. 19. Bola Adetunji et al. “Microeconomics of Competitive- 48. Awojulugbe, 2019. ness Final Paper—Lagos ICT Services Cluster,” Harvard 49. Adeyemi, 2018. Business School (2017). 50. This number aligns with the 2017 Global Findex data, 20. Dalberg (March 2017), “Catalyzing Growth in Nigeria reporting that 40% of adult Nigerians have an account. through Regional Innovation.” 51. While a number of Ethiopian brands (e.g., M-BIRR) 21. EFInA (2018). Access to Financial Services in Nigeria marketed themselves as mobile money providers, in 2018 Survey. accordance with the central bank regulations, they actu- 22. Kazeem, Y. (2019, January 11). Start-up investment in ally offered mobile access channels to accounts formally Africa jumped to record levels in 2018 as later stage held with traditional banks or microfinance institutions. rounds rose. 52. These include Guidelines on Mobile Money Services 23. Mallinz, P. K. (2018, October 18). Nigerian start-ups in Nigeria, Guidelines For Licensing and Regulation of raised at least $117M in the first 3 quarters of 2018. Payment Service Banks in Nigeria, Regulation for Bill 24. UNCTAD (2018), “UNCTAD B2C E-Commerce Index Payments in Nigeria, Regulation on Instant (Inter-Bank) 2018 Focus on Africa,” page 13. Electronic Funds Transfer Services in Nigeria, Circular on 25. US Government—Nigeria Country Commercial Guide the Implementation of Interchange Fee, Guidelines on (Nov. 2018), “Nigeria e-Commerce” at //www.export.gov Operations of Electronic Payment Channels in Nigeria, 26. Op. Cite. note 15, page 25. The UPU assessed Nige- Guidelines on International Mobile Money Remittance ria’s reliability as being the highest in the sample of 25 Service in Nigeria, Regulatory Framework for Mobile countries. This is partly due to the country adopting the Money Services in Nigeria, Regulatory Framework for innovative “what3words” addressing system. This system Licensing Super-Agents in Nigeria, and Regulatory and has divided the world into 57 trillion 3X3 meter cells with Supervisory Guidelines for Micro-finance Banks. each cell associated with three words. Nigeria became Nigeria Digital Economy Diagnostic Report   69 53. Central Bank of Nigeria, 2017. 56. The Nigerian Bureau of Statistics (NBS) includes the 54. For a description of a large-scale unofficial agent following subsectors in ICT: Telecommunications and business, see Egbejule, 2018.: “Acheme [the shop- Information Services; Publishing, Motion Picture, and keeper] says he handles approximately NGN 9 million Sound record; and Broadcasting (USD 24,840) daily and takes an additional NGN 400 57. 10% of the Fund is allocated to grants, capacity building, (USD 1.09) on every NGN 10,000 (USD 27.39) or NGN and administrative costs while 90% is to be allocated to 50 (USD 0.13) on every NGN 1,000 (USD 2.73). The Participating Financial Institutions at 2% for on-lending to additional amount works out to between USD 981 and MSMEs at a maximum interest rate of 9% per annum. USD 1,170 a day. Half that amount goes to the bank 58. Regulation on Investment of Pension Fund Assets, April as fees—so the bank, which otherwise can’t charge for 2010. over-the-counter transactions of up to NGN 500,000, 59. In 2016, Upwork paid USD 1 billion in salaries among the also benefits. And Acheme’s net earnings—at least USD 12 million freelancers registered in the platform. 490 a day—are at least 70 times the per capita daily 60. A Job Success Score is a measure of the client’s satisfac- income of USD 7 in Nigeria.” tion with the freelancer’s work and success on Upwork. 55. Established by the Secured Transaction in Movable Asset Talented freelancers who deliver high-quality work to Act (STMA) 2017 and being operationalized through the their clients find that the scores on their profiles help National Collateral Registry. them promote their freelance businesses in the Upwork marketplace and win new clients. 70   Nigeria Digital Economy Diagnostic Report 3 CONCLUSION: A WAY FORWARD A holistic approach to digital economy development DIGITAL PLATFORMS is necessary to maximize Nigeria’s chance of attaining Nigeria is only realizing a small part of the potential of its digital potential. Rather than implementing multiple, its digital platforms. Some of the recommendations and fragmented interventions, a coordinated and high-level next steps for Nigeria are: cross-boundary approach that maximizes complementar- ities is needed to build an inclusive digital economy. This • Remove the overlap of responsibilities between the would ultimately spur the development of high-impact different entities responsible for the regulation of the applications for health, education, e-commerce, agricul- ICT sector in Nigeria; ture, and social service delivery, among others, while mit- • Review procurement policies and practices in order to igating exclusion, fraud, and cyber risks. ease access to public procurement for local compa- nies; DIGITAL INFRASTRUCTURE • Build core capacity on Internet-era skills, focusing on Nigeria is currently capturing just a small fraction of its teams responsible for the procurement, development, potential for digital development. Strategic investments and maintenance of digital services; and interventions are needed for Nigeria to develop a • Undertake a value for money audit of investments vibrant digital economy and kickstart its digital transfor- made in government digital systems; mation. First, the supply of broadband infrastructure is the necessary condition to expand access, which requires • Prioritize citizen-centric digital services and improve strategies for promoting the deployment of networks and QoS monitoring; appropriate solutions in underserved areas. Second, with • Promote bottom-up interoperability; evidence that the spectrum is not used to its full capac- • Implement the Strategic Road Map for a digital ID sys- ity and that prices of devices and even low-priced data tem in Nigeria; and services are not affordable to most Nigerians living under the poverty line, the government needs to find ways to • Provide special support to Lagos so it emerges as the support the reduction of these costs, provide additional leading ICT hub in Africa. complementary public access, and stimulate demand by addressing awareness and attractiveness issues. Third, as DIGITAL FINANCIAL SERVICES a cross-cutting issue, the government needs to design policies and interventions to mitigate the risks of skewing Nigeria is currently capturing just a small fraction of the benefits of broadband toward the well-educated and its DFS potential. Some issues currently present in Nige- wealthy, which entrenches the digital divide and inequal- ria include lack of institutional coordination; provision of ities, and instead they should ensure that investments in digital financial services being dominated by commercial technology benefit the bottom of the pyramid. banks; nonbank DFS providers presently not being suc- Nigeria Digital Economy Diagnostic Report   71 cessful in targeting unbanked customers; mobile network work must be assessed and structured to ensure that it operators being, until recently, not eligible to provide can support the development of a digital economy. To financial services; and agent-based models being unsuc- ensure the effectiveness of reforms, it will be critical to cessful in Nigeria in increasing the number of access strengthen the institutional structure, collect and assess points. The following measures could be introduced in data on digital entrepreneurs, update the legal frame- Nigeria to expand DFS, together with the private sector: work for private equity investment, and allow for the introduction of innovative financing mechanisms. It will • NIBSS and NIMC should expediently complete the also be critical to foster collaboration between ecosys- integration between the NIN system and the BVN tem players, including digital entrepreneurs, innovation database; hubs, academia, big corporates, investors, and the gov- • The authorities should implement the guidelines for ernment, and to develop a Monitoring and Evaluation licensing and regulation of PSB by expediting the framework (M&E) for innovation hubs in partnership with review of applications for PSB licenses with a view of the private sector. The government could play a cata- making the final decision on this process by end of lytic role for early-stage investments in digital ventures 2019; by exploring avenues to help de-risking the market. It will also be essential to increase the scale of early-stage • The CBN and state licensing authorities should reduce funding for digital entrepreneurs and incentivize insti- the number of different license types and the overlap tutional investors to invest in public and private equity between them; markets. Markets for digital products and services can • Regulations on agent networks should be revised to be strengthened by facilitating the provision of services incentivize investments in access points in financially to large corporations by start-ups with innovative prod- excluded communities; ucts/services, supporting technology adoption in stra- tegic industries, and facilitating the inclusion of digital • Incentives need to be given to merchants to encour- entrepreneurs in the provision of public services through age acceptance of digital payments; transparent public contracting, digitalization of public • The government should accelerate the digitization of services, and ICT up-skilling of public workers. its own payments, social transfers, and tax collections, including via related awareness and training programs; DIGITAL SKILLS • The financial consumer protection frameworks should Ensuring that every person has the appropriate skills be accompanied by detailed, clearly binding, priority for an ever-growing digital and globalized world is guidelines tailored to the full range of DFS products as essential to promote inclusive labor markets and to well as regular financial products; and engender innovation, productivity, and growth. The • Advancing digital literacy in the economy, both for following measures could be introduced in Nigeria to youth and adults, to advance the DFS sector in Nigeria. expand digital skills. First, leverage the Smart Nigeria Digital Economy Project, using it to improve government coordination, explore innovative ways of including digi- DIGITAL ENTREPRENEURSHIP tal skills in the wider curriculum, scale up private sector– To support the development of digital entrepreneur- led initiatives. Second, formalize the entrepreneurial link ship in Nigeria there will need to be the following: between ICT and business studies within and beyond (i) legal, regulatory, and institutional reforms, (ii) the higher education, so digital entrepreneurship and skills pipeline of digital entrepreneurs must be strength- are seen by both males and females as a viable livelihood. ened, (iii) early-stage funding needs to be de-risked Third, improve virtual economy awareness in Nigeria, and institutional investors incentivized to invest; and making the country a hub for microwork and elancing, (iv) markets for digital products and services must leveraging initiatives such as Click-On Kaduna, and Nige- be strengthened. Nigeria’s legal and regulatory frame- ria’s current ranking in Africa with regards to microwork. 72   Nigeria Digital Economy Diagnostic Report 4 REFERENCES Adeyemi, S. (2018). A Guide to the Payments and Fintech Landscape in Nigeria. 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(2018). http://www3.weforum.org/docs/GCR2018/05FullReport/TheGlobal CompetitivenessReport2018.pdf Nigeria Digital Economy Diagnostic Report   75 5 ANNEXES 5.1  DIGITAL INFRASTRUCTURE INDICATORS AND INDEXES TABLE 9: Key digital infrastructure indicators and indexes Nigeria Southern Sub-Saharan Source Africa region Africa PENETRATION Percentage of population using Internet 25.7 29.1 19.9 ITU, 2017 Number of mobile-cellular subscriptions (per 81.8 91.4 74.7 ITU, 2017 100) Number of fixed-broadband subscribers (per 0.1 1.4 0.6 ITU, 2017 100) COVERAGE Percentage of population covered by at least 54 67.7 68.4 ITU, 2017 3G mobile network signal International bandwidth (bit/s per Internet user) 11.3 N/A N/A DAI, 2016 AFFORDABILITY Average retail price of mobile broadband—1GB 1.7 12.7 11.0 ITU, 2017 (% of GNIPC) Fixed-broadband basket (% of GNIPC) 13.4 41.5 34.0 ITU, 2017 MARKET ITU country ranking 143 132 150 ITU, 2017 ICT Development Index (1–6) 2.6 3.2 2.4 ITU, 2017 TECHNOLOGY Infrastructure and digital content pillar 2.6 3.1 2.6 WEF, 2016 Network Readiness Index country ranking 119 105 114 WEF, 2016 Nigeria Digital Economy Diagnostic Report   77 5.2  DIGITAL ENTREPRENEURSHIP INDICATORS AND INDEXES TABLE 10: Key digital entrepreneurship indicators and indexes Mozambique Nigeria Botswana South Africa Source PERFORMANCE Entry rate of new firms (new registrations as 13.9 0.76 18.37 10.22 National firm-level census or % of total) (2016) (2016) (2016) (2016) registered firms Number of registered firms in ICT sector N/A N/A N/A N/A National firm-level census or per 100,000 people in the working age registered firms population Number of green field FDI (ICT & Internet 6,476 4,506 (2017) 37 4,240 fDi Intelligence Database infrastructure, R&D, business services) per (2017) (2017) (2017) 100,000 people in the working population POLICY Research and development expenditure 0.34 N/A 0.54 0.72 World Bank (% GDP) (2015) (2015) (2015) Innovation capacity—ranking; and score 115; 23.1 118; 22.4 91; 28.2 58; 35.1 Cornell University, INSEAD, (2018) (2018) (2018) (2018) WIPO: Global Innovation Index Regulatory Framework for Digital Markets N/A N/A N/A N/A World Bank Digital Business Indicators IP protection (index 1–7) 3.18 (2017) 3.16 (2017) 4.2 (2017) 4.82 (2017) WEF Global Information Technology Report (GITR) Barriers to entrepreneurship (aggregate N/A N/A N/A 2.17 OECD—Product Market indicator representing the complexity of Regulation Database (2013) regulatory procedures, administrative bur- dens on start-ups, and regulatory protection of incumbents) Ease of doing business—ranking in the 135 (2019) 146 (2019) 86 (2019) 82 (2019) World Bank DB Doing Business survey Total tax and contribution rate (as % of 36.1 (2019) 34.8 (2019) 25.1 (2019) 29.1 (2019) World Bank DB profit) Infrastructure and supports Number of tech hubs and accelerators in 5 (2019) 55 (2016) 2 (2016) 59 (2018) Desk Research (F6S, Afrilabs, the country Seed-DB, GAN, etc.) % of firms with access to e-mail or website E-mail: 13.7 E-mail: 22.3 E-mail: 36.6 E-mail: 36 World Bank Enterprise Survey (2007) (2014) (2010) (2010) Website: 13.7 Website: 22.3 Website: 36.6 Website: 36 (2007) (2014) (2010) (2010) FINANCIAL CAPITAL Venture capital availability [1 = extremely 2.18 (2017) 1.8 (2017) 2.86 (2017) 2.87 (2017) WEF Global Competitiveness difficult; 7 = extremely easy] Report, Executive Opinion Survey, 2016–17 weighted average Venture capital: deal flow by country (num- N/A # of deals: 6 N/A # of deals: 6 EMPEA ber of deals, capital invested (USD)) (2017) (2017) USD: 43.1 USD: 3.31 (2017) (2017) Debt: % of firms identifying access to 50.1 (2007) 33.1 (2014) 25.5 (2010) 15.5 (2007) World Bank Enterprise Survey finance as major constraint Access to credit (as score from 1 to 100) 25 (2019) 85 (2019) 55 (2019) 50 (2019) World Bank DB 78   Nigeria Digital Economy Diagnostic Report TABLE 10, continued Mozambique Nigeria Botswana South Africa Source MARKETS New product early-stage entrepreneurial N/A N/A 33.23 (2016) 10.96 (2017) GEM activity (% of 18–64-aged population who are either a nascent entrepreneur or owner-manager of a new business) Share of firms that invest in R&D 0 (2007) 13.8 (2014) 0 (2010) 0 (2007) Enterprise surveys Firm-level technology absorption, 4.24 (2016) 4.34 (2016) 4.32 (2016) 5.43 (2016) WEF-GITR, Executive Opinion [1 = not at all; 7 = to a great extent] Survey, 2016–17 weighted average Trade openness (share of exports and 108.91 (2017) 20.72 (2016) 97.13 (2016) 58.18 (2017) World Bank Development imports in respect to GDP) Indicators ICT service exports (% of service exports, 3.18 (2017) 5.77 (2017) 1.99 (2017) 4.22 (2017) WITS data (sectors ISIC rev 4, BoP) division 61, 62, 63) Value B2C E-commerce Index, Index N/A 46 (2016) 43 (2016) 54 (2016) UNCTAD (0–100) Culture Risk taking index N/A 0.39 0.69 0.97 Global Preferences Survey Gender/percent of firms with female 24.4 16.2 55.3 22.6 World Bank Enterprise survey participation in ownership (2007) (2014) (2010) (2007) Whether discrimination based on gender or N/A N/A N/A N/A World Bank Women, Business marital status prohibited in access to credit and Law Indicators Nigeria Digital Economy Diagnostic Report   79 5.3  INNOVATION HUBS IN NIGERIA (ACCELERATORS, INCUBATORS, AND CO-WORKING SPACES) Name Location Services Civic Innovation Lab Abuja Incubator focused on civic tech Engages with government and international institutions Enspire Incubator Abuja Four-month tech-focused business incubator program Startpreneurs  Abuja Accelerator and seed fund. Partners include ABAN and Silicon Valley 500 start-ups accelerator Ventures Platform Abuja Incubator, accelerator and early stage fund focused Wennovation Hub Initiative Nigeria Abuja, Ibadan, Co-working and incubator Lagos Roar Nigeria Enugu Incubator based in the University of Nigeria nHub Jos One of the first hubs in northern Nigeria. Incubation and skills development CoLab Kaduna Incubation and ICT skills training (CoLab Elite) Blue Sapphire Hub Kano Ideation, incubation, and acceleration programs Founders Hub Kwara Incubation, co-working space Accion Venture Lab Lagos Acceleration program by global nonprofit Accion (company builder) to support fintech start-ups in Nigeria Co-Creation Hub (CcHUB)  Lagos Nigeria’s first incubator. Also offers co-working space, and pre-incubation. Opened in 2011 Google’s Launchpad Accelerator Lagos Acceleration program for African start-ups Greenhouse Lab Lagos Acceleration program for women-led technology start-ups. Funded by Greenhouse Capital iDEA Nigeria Lagos Incubation and acceleration programs Impact Hub Lagos Lagos Co-working, coaching, mentoring, networking Part of the international Impact Hub network (80 hubs globally) Itanna Lagos Accelerator. Joint-venture between Honeywell Group and African Eco- nomic Revolution Fund (AERF) L5 Labs Lagos Co-working and incubation Partnered with The Presidential Enabling Business Environment Council for the first edition of the #PEBECHack Meltwater Entrepreneurial Lagos Founded in Ghana, provides incubation for African software entrepreneurs. School of Technology (MEST Opened a new center in Lagos in 2017 Microtraction Lagos Accelerator funded by NG_Hub Lagos Facebook’s first community hub in Africa, in partnership with CcHub.  Facebook is also partnering in other parts of the country with Ventures Platform (Abuja), Colab (Kaduna), and Roar (Enugu) She Leads Africa Lagos Acceleration program for female entrepreneurs The Passion Incubator  Lagos Co-working space and incubation The Tony Elumelu Lagos A pan-African $100-million entrepreneurship program that includes a Entrepreneurship Program 12-week training program and $5,000 seed funding Hebron Startup Labs Ogun Nigeria’s first university-based incubator in Covenant University FocusHub Port Harcourt Incubation services Olotu Square Port Harcourt Co-working space and incubation Root Hub Uyo Co-working space and training Y Combinator Silicon Valley Accelerator which offers $150,000 investments in seed funding and a three- (United States) month acceleration program in Silicon Valley. Nigeria start-ups supported include BuyPower, Kudi, Flutterwave, and PayStack 80   Nigeria Digital Economy Diagnostic Report INVESTORS ACTIVE IN NIGERIAN DIGITAL ECOSYSTEM (ANGEL NETWORK AND 5.4  VENTURE CAPITAL) Name Services Acumen Fund The fund has invested in Nigerian mobile money transfer Paga Adlevo Capital Private equity fund manager with prominent investments made in Nigeria include Paga and Interswitch African Business Angel Pan-African non-profit association founded to support the development of early-stage Network (ABAN) investor networks across the continent EchoVC Partners Seed and early stage venture capital pan-African firm. The average investment sizes range from $25,000 to several million dollars. Nigerian investments include Hotels.ng, Easyshop Easycook, myPadi.ng, Printivo, and S&T Media Greenhouse Capital Fund raised by founders of Ventures Garden Group technology solutions firm. Nigerian investments include Flutterwave, Riby, ESL and Growth Capital Growth Capital New fund being raised by CC-Hub founders. Raised NGN 280 M out of targeted NGN 1 billion, from CC Hub, Venture Garden Group, Bank of Industry, and Omidyar Network Lagos Angel Network First angel network in Nigeria. 40 active members (meaning they have made a minimum investment of NGN 500,000 within the past year)   Leadpath Nigeria Seed capital fund that provides short-, medium-, and long-term funding to tech startups. Nigerian investments include Paystack, CoSign, PushCV, and Fashpa Omidyar Network Global impact investor. Invested in Andela Savannah Fund Kenya-based seed capital fund providing $25 K–$500 K investments in early-stage, high-growth tech startups in SSA. Nigerian investments include Supermart.ng, and Lidya Synergy Capital Lagos-based private equity firm that invests in technology start-ups as well as traditional businesses. Nigerian investments include Surburban Telecommunications Tekton Ventures U.S.-based early stage investor. Nigerian investments include Flutterwave TLcom Capital Partners Venture capital firm based in Nairobi, Lagos, and London, investing in Europe, Israel, and Sub-Saharan Africa. Nigerian investments include Kobo 360 Tiger Global  U.S.-based private equity firm. Investments include iROKOTV Partners Nigeria Digital Economy Diagnostic Report   81