Data Protection by Public Institutions in Nigeria

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On May 18, 2020, the National Information Technology Development Agency of Nigeria (“NITDA”) issued ‘Guidelines for the Management of Personal Data by Public Institutions in Nigeria’ (the “Guidelines”). It is aimed at directing public institutions in securely managing personal data in accordance with the Nigeria Data Protection Regulation, 2019 (“NDPR”).

This development is in line with the Nigerian Government’s National Digital Economy Policy and Strategy launched in November, 2019, particularly the E-Governance Initiative aimed at digitizing the provision of public services. A key provision in the Guidelines is a requirement for all Public Institutions holding or processing personal data to securely digitize its database within 60 days from the issuance of the Guidelines. In addition to this, below are highlights from the Guidelines:

  1. Which institution does it apply to? It regulates all Public Institutions in Nigeria (“PI”), including ministries, agencies and incorporated entities with government shareholding.
  2. How does the NDPR fit in with the Guidelines? The NDPR is the primary data protection regulation and remains binding on PIs. The Guidelines clarify the intent of the NDPR and should be read together.
  3. What duty of protection is placed on PIs? PIs are obligated to protect all personal data they process. Processing means any operation which is performed on personal data by PIs, whether or not automated.
  4. Whose data is protected? Personal data of a Nigerian citizen (resident and non-resident) which PIs have access to, whether through direct interaction or in furtherance of its statutory or administrative purpose.
  5. How can PIs process personal data lawfully? In addition to the 5 lawful basis for processing Personal Data set out in the NDPR (consent, contractual obligation, vital interest, public interest and legal obligation), the Guidelines include legitimate interest as the 6th lawful ground for processing by PIs. Legitimate interest is, however, not defined.
  6. Are there additional conditions attached to lawful processing? Yes, all processing by PIs must fall within any of these 3 categories; public interest, legal obligation and vital interest.
  7. How is sensitive personal data to be handled by PIs? PIs are to apply a higher standard to Sensitive Personal Data. They are to directly and unambiguously request for consent from Data Subjects prior to processing it. Sensitive Data includes data on health, ethnicity, biometric and sexual orientation.
  8. Are there exceptions to the rule? Yes, it appears that consent would not be required for Health Emergency, National Security and Crime Prevention.
  9. What Information Security Standard should be adopted when processing personal data from another institution? PIs seeking to process personal data from another institution (private or public) are to show compliance with international information security standards such as ISO 27001:2013 or any similar standard, amongst other conditions.
  10. Does a PI require a Data Protection Compliance Organisation (“DPCO”)? Yes, a DPCO is to be appointed to train and audit PIs.
  11. Is there a consequence for non-compliance? Non-compliance by the PI would be an offence under the NITDA Act and NDPR; and the consequences for such offence would be applied.

The Guidelines are a welcome development which should better guide PIs in handling personal data. It would, however, be useful for NITDA to provide clarity on what instances PIs may rely on ‘Legitimate Interest’ as a ground for lawfully processing personal data.

 

Doing Business Simplified: Application of Withholding Tax on Non-Resident Companies Under the Finance Act

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Withholding Tax (WHT) is an advanced payment on income tax deducted directly from source by a service provider. The taxpayer could be a company or an individual and the rate of WHT ranges from 2.5% to 10%, depending on the nature of the transaction. WHT is not a separate tax but serves as a credit against the tax liability of the taxpayer. For example, companies are required to pay Companies Income Tax (CIT) at the end of their accounting year and after their audited accounts have been filed. At the point of the assessment of their CIT liabilities, the WHT deducted from their invoices to service providers during the year would be deducted from the CIT payable for that financial year.

WHT and Non-Resident Companies

Non-resident companies are companies not incorporated in Nigeria. Under the Companies Income Tax Act (CITA), non-resident companies which have a “fixed base” in Nigeria are liable to pay CIT on profit generated in Nigeria and therefore subject to WHT.

A fixed base implies some degree of permanence and will include facilities (such as a factory, office, branch, mine, oil or gas well); activities (such as building, construction, assembly or installation) and provision of services in connection with the activities stated above. Non-resident companies which operate in Nigeria through a dependent agent authorized to conclude contracts or deliver goods on its behalf, execute a turnkey project in Nigeria, or carry out business operation between itself and its Nigeria affiliate which does not appear to be at arms-length, would also be subject to WHT.

However, the new Finance Act (2020) expands the scope of non-resident companies to include digital entities (i.e. e-commerce businesses, online payment platforms, cloud storage platforms, etc) and companies which provide technical, management, consultancy, or professional services to persons resident in Nigeria provided that such companies have “significant economic presence” in Nigeria.

What is Significant Economic Presence?

The Finance Act (2020) requires the Minister of Finance to issue an order to determine what will constitute “significant economic presence” of a non-resident company. The Minister is yet to issue that order and therefore, the application of this provision of the Finance Act (2020) is not yet in effect.

WHT and Fee Payments to Non-Resident Companies

In practice, before the Finance Act(2020), where a Nigerian entity intends to obtain foreign exchange from the official market for the purpose of fulfilling its financial obligations to a non-resident company, the Nigerian company is required by the Central Bank of Nigeria to show evidence of deduction of WHT for the service rendered, whether or not such foreign entity had a “fixed base” in Nigeria. This highlights the need for the Central Bank of Nigeria and Federal Inland Revenue Service to ensure that tax processes are streamlined for uniformity in tax administration.

 

Conclusion

The extent to which non-resident companies would be subject to WHT will be determined by the criteria described by the Minister of Finance on what constitutes a significant economic presence in Nigeria. When this occurs, non-resident companies not already subject to WHT may become so considering the government’s drive to expand the nation’s tax net and increase its tax income.

 

Doing Business Simplified: Incentives to Invest in Nigeria

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In our previous newsletter on managing the risks associated with foreign investments in Nigeria, we discussed practical steps that could be taken by foreign investors to mitigate risks associated with doing business in Nigeria.

Since then, the COVID-19 pandemic (which has affected several countries worldwide including Nigeria), has generally slowed down many sectors of the economy and negatively impacted investments. In spite of this, certain sectors including those which have been categorized as “essential” by the Nigerian government are likely to emerge unscathed and even more profitable after the pandemic. It is also expected that in order to improve the economy, the government is likely to promote investments in these sectors post COVID-19. These include the health sector, agriculture, food production and sales, finance sector, logistics, and start-ups using technology to provide essential services. A case in point are health-tech startups, Helium Health and 54-gene raising millions of dollars in funding despite the pandemic.

Foreign Direct Investment is considered by the Nigerian government as a key factor to the growth of the economy and investments in the sectors set out above are likely to be encouraged post Covid-19. Given the market size potential in Nigeria, it remains one of the most attractive countries in Africa for foreign investments. Investors wishing to invest in the African market may wish to consider investing in businesses in the sectors above.

Below are incentives and measures currently in place which should be taken account of in making a decision to invest in a post-COVID Nigerian economy.

 

  1. 100% foreign ownership in various sectors – The Nigerian government permits up to 100% foreign ownership in most sectors of the economy including the sectors we indicated above which are likely to benefit from the government’s agenda to diversify the economy.

 

  1. Free transferability of capital and returns– The investment regime in Nigeria guarantees investors the right to repatriate capital and profits to foreign jurisdictions, once capital is inflowed through an authorized dealer and a certificate of capital importation is obtained. This assures investors that assets would not be trapped in Nigeria. Expropriation of assets of investors by government is also prevented by the investment regime in place.

 

  1. Double Taxation Treaties – Nigeria has a Double Taxation Treaty with countries such as Belgium, Canada, China, France, the Netherlands, Pakistan, Philippines, Romania, South Africa, and the United Kingdom . Investors from countries with a Double Taxation Treaty with Nigeria pay a discounted percentage of 7.5% on dividends.

 

  1. Tax Incentives – Investors can take advantage of the various tax incentives available in several profitable sectors. For instance, companies carrying out agricultural production are exempt from income tax for a period of 5 years extendable for an additional 3 years. Investors in the health sector enjoy import duty waivers on medical equipment, pharmaceutical products, and investors in the mining sector enjoy waivers on mining equipment.

 

  1. Ease of Doing Business Initiatives – Several initiatives targeted at improving the state of the economy and encouraging foreign investments have been put in place recently. For example, the Presidential Enabling Business Environment Council has worked to remove obstacles to investing in Nigeria. One of such moves is the establishment of a dedicated website (www.pebec.report) where businesses and individuals can lay complaints against government institutions.

 

  1. Incentive for FINTECH Companies – The Central Bank of Nigeria (CBN) recently extended the Microfinance Bank recapitalization deadline. This is especially important since many companies in the fintech space in Nigeria operate with a Microfinance Bank (MFB) license. Prior to the pandemic, the CBN had required MFBs to significantly increase their capital base by April of 2020. Now, a new deadline of April 2021 has been set, thereby giving Fintech companies more time to consolidate and source for investments.

 

 

Conclusion

Although, it is not certain when the pandemic will end and with it the economic slowdown, what is certain is that investment opportunities still abound – even though on a lower scale. What is also certain is that it is those investors who identify potential investments and take the risk to invest in this climate that will emerge the post-coronavirus winners.

 

 

EXAMINING THE PROVISIONS OF THE BEIJING TREATY AND ITS IMPACT ON THE DRAFT COPYRIGHT BILL

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The coming into force of the Beijing Treaty on Audiovisual Performances 2012 (“the Treaty”) on the 28th of April 2020 will undoubtedly propel the Nigerian creative industry, which is currently valued at N156.5 billion, to a new regime as it will introduce several crucial requirements which will inevitably restructure the current copyright administration and ensure for better protection and provision for the beneficiaries. The Treaty creates a regulatory framework for the protection of audio-visual performances (music, television, dance, expressions of folklore) while also safeguarding rights across digital platforms globally.

Background

The Treaty was first adopted in June 2012 by the Diplomatic Conference on the Protection of Audiovisual Performances of the World Intellectual Property Organisation (WIPO) in which Nigeria participated and ratified five years later, alongside three other similar treaties called the “Internet Treaties”. As with all International treaties, it will only become applicable in Nigeria once it has been domesticated. The applicable law in this instance would be the Copyright Act of Nigeria which is currently being amended (“Amendment Bill”). The Amendment Bill includes some provisions of the Treaty such as the right of performers to reproduce, broadcast, live recordings etc. Some salient provisions of the Treaty which are not included in the Amendment Bill and the impact these may have on the Nigerian copyright administration are highlighted below:

Moral rights

This right can be divided into two categories namely: i) Right of Integrity and ii) Right of Paternity. The first gives the performer the  right to object to any distortion of his performance that could be prejudicial to his reputation while the second accords him the right to be identified as the author of the performance.

Economic rights

Transfer of rights: unarguably the most controversial provision of the Treaty, provides for the transfer of  the exclusive economic right from the performer to the producer of the performance once it is in fixed form, i.e, recorded, unless the two parties have a written contract that states otherwise. This brings to light the glaring need for such understanding to be documented.

Broadcast right or Equitable Remuneration: under the Treaty, performers also enjoy the exclusive right to authorize the broadcast of their recorded performances to the public. While this provision is already available under the Amendment Bill, parties to the Treaty may choose to replace this provision with a right for performers to be equitably remunerated for the use of their performances in form of royalties.

Distribution and Rental rights: These provisions give the performers the exclusive right to authorise the distribution and rental of their fixed work to the public.

Impact on the Amendment Bill

The inclusion of the above highlighted rights into the Amendment Bill will ensure that performers are adequately protected, especially on digital platforms and that structures are put in place to remedy infringement on these rights. In addition, the Treaty places emphasis on the protection of producer’s rights and the need for formal contractual agreements.

Conclusion

Despite the obvious benefits of the Treaty, some concerns have been raised by industry stakeholders as to whether the domestication of the Treaty will take into cognisance the current realities and challenges of the creative industry in Nigeria some of which include digital piracy and the difficulty involved in enforcing their rights. Despite these challenges, this development will bring about economic growth and improve cultural exportation for Nigeria.