OPERATING A CRYPTO TRADING COMPANY IN NIGERIA: REGULATORY REQUIREMENTS

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By Seun Timi-Koleolu and Hillary Okorotie

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Introduction

The Nigeria Securities and Exchange Commission (“SEC”) by a press release issued on August 29, 2024, announced that it has granted two Digital Asset Exchanges an “Approval in Principle” under the Accelerated Regulatory Incubation Program (“ARIP”). The framework for ARIP was introduced by SEC in June 2024 (see our previous newsletter for details) for the purpose of onboarding virtual asset exchange companies.

With this new update there is more clarity on the regulatory requirements for companies wishing to provide crypto trading services in Nigeria.  In view of the forgoing we have set out guidelines for companies wishing to provide crypto trading services in Nigeria.

  1. Are all Crypto Trading Companies Required to Register with SEC?

Yes, all digital exchanges and platforms wishing to provide crypto trading services in Nigeria are required to register under ARIP and obtain the approval of SEC in order to provide such services in Nigeria.

  1. What Approval will be Issued by SEC to Qualified Companies.

Upon undergoing registration under ARIP, an Approval in Principle will be granted to eligible companies. Once the condition for the Approval in Principle given by SEC has been satisfied by the company, the company will then be given full registration by SEC.

  1. Is the Company required to be Incorporated in Nigeria?

Yes, all companies wishing to provide crypto trading services must be registered with the Corporate Affairs Commission (CAC). The Certificate of Incorporation is one of the documents that is required to be shown for registration under the ARIP.

  1. Registration Requirements

According to the rules set by SEC, digital asset exchanges specifically are required to have a minimum paid-up capital of 500 million naira and must maintain a fidelity bond covering 25% of the paid-up capital of the company. Additionally, the Chief Executive officer and other principal officers of the company must possess relevant university degrees and at least five years of cognate experience. Furthermore, digital asset exchanges must obtain a “No Objection” letter from SEC before commencing its operations and trading any virtual or digital assets.

  1. Do these rules apply to Foreign Business wishing to operate Crypto Trading Companies in Nigeria?

Yes, these rules apply to foreign companies wishing to provide crypto trading services in Nigeria including incorporating a company with the CAC for the purpose of providing the services.

 

Conclusion

As the market for digital assets continues to grow, businesses interested in entering this space must ensure full compliance with the regulatory requirements set out by SEC and other relevant authorities.

We advise that companies wishing to provide crypto trading  services work closely with their legal advisors to ensure that they successfully operate within the confines of the relevant regulations.

 

The National Minimum Wage (Amendment) Act 2024: Key Updates and Practical Tips for Employers in Nigeria

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By Aderonke Alex-Adedipe and  Kofoworola Ayoola

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Introduction

The National Minimum Wage (Amendment) Act 2024 (the “Amendment Act”) represents a significant step in ensuring fair labor practices in Nigeria amidst the country’s soaring inflation and economic downturn. The Act, which came into effect on the 29th of July 2024, introduces an increase in the minimum wage rate for all workers in Nigeria and also shortens the review period for the minimum wage rate from five years to three years.

In this newsletter, we highlight key provisions of the Amendment Act and provide practical tips to employers to guide them in complying with these provisions.

Key Updates under The National Minimum Wage (Amendment) Act

1.What is the Minimum Wage?

The National Minimum Wage is the minimum total amount of money which the Act stipulates and requires an employer of labour to pay to the lowest paid worker or employee monthly in his establishment. Employers are bound to pay, subject to statutory deductions, an amount no less than is stipulated.

2.What is the New Minimum Wage Rate?

The National Minimum Wage Act 2019, which was the previous law governing remuneration of workers in Nigeria, had set the national minimum wage at #30,000 (Thirty Thousand Naira). The Amendment Act has now increased the minimum wage rate to #70,000 (Seventy Thousand Naira). This represents a 12.9% increase from the previous minimum wage rate.

3.What is the Effective Date of the New Minimum Wage Rate?

The new Minimum Wage rate was stated to take effect on the 1st of May 2024, with the previous rate having expired in April 2024. However, the legislation introducing the new rate was passed into law on the 29th of July 2024. The implication of this therefore, is that employers who previously paid less than the Minimum Wage would be required to pay their employees the difference in salaries between May and July, 2024.

4.Who is a Worker under the Act?

A Worker under the Act is defined as a person who has entered into or works under a contract of employment whether oral or written, or express or implied, with an employer. This definition aligns with the scope of employees covered by the Nigerian Labour Act, encompassing both clerical workers and manual labourers such as maids, drivers, cleaners, who work in both private and public sectors.

5.What is the New Wage Rate Review Period?

The Amendment Act has shortened the wage rate review period from 5 years to 3 years, meaning that the current wage rate is expected to expire in 2027.

6.Who is Exempted from complying with the new Minimum Wage?

All Employers are required to pay the new Minimum Wage to all workers as described above. The following employers are, however, exempted from complying with the Amendment Act:

  1. establishments where workers are employed on a part time basis and paid on commission or piece-rate (paid according to the quantity produced regardless of time);
  2. establishments with less than 25 employees;
  3. workers in seasonal employment such as agriculture, construction, tourism, etc;
  4. workers employed in vessels or aircrafts to which merchant shipping or civil aviation laws apply.

7.What are the Implications for Employers who fail to comply?

Failure to comply constitutes an offense and is punishable by both conviction and payment of a fine not exceeding 5% of the employer’s monthly wages and of all outstanding arrears of the workers’ wage. Additionally, the Employer will be liable to pay a penalty, which is not less than the prevailing Central Bank of Nigeria lending rate on the wages owed for each month of continuing violation.

Practical Tips for Employers

To ensure compliance, Employers are encouraged to:

  1. Review their existing wage structures for all employees/workers.
  2. Identify which employees within the organization are earning below the new minimum wage rate.
  3. Implement the wage increase on their payroll systems to bring the employees up to the new minimum wage.
  4. Record deductions, taxes or contributions made from its employees’ salaries/wages
  5. Document and keep records of all wage increases and adjustments, and also conditions of employment for the purpose of compliance audits. All such records are required under the Act to be kept for a period of 3 years after the period to which they refer. Non-compliance with this requirement constitutes an offence under the Act and attracts both conviction and payment of a fine not exceeding #75,000 (Seventy-Five Thousand Naira) and an additional penalty not exceeding #10,000 (Ten Thousand Naira) for each day the offense continues.

Conclusion

The increase in the minimum wage rate provides some relief to millions of workers in Nigeria amidst the country’s economic challenges. Both State and Federal Governments have initiated the implementation of the new wage rate across Nigeria. Private establishments are encouraged to follow suit by adhering to the updated wage requirements and ensuring compliance to avoid penalties.

ANALYSIS OF NIGERIA’s NATIONAL ARTIFICIAL INTELLIGENCE STRATEGY

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By Seun Timi-Koleolu and Olawale Atanda

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Introduction

In August 2024, the Federal Ministry of Communications, Innovation and Digital Economy released the draft of Nigeria’s first National Artificial Intelligence Strategy (NAIS). The NAIS was co-created by the National Centre for Artificial Intelligence and Robotics (NCAIR) and the National Information Technology Development Agency (NITDA) with support from private bodies.

The unveiling of the NAIS is to position the country to harness AI’s potential responsibly and inclusively. The NAIS vision is clear: to establish Nigeria as a global leader in AI and to foster sustainable development through ethical innovation and collaborative efforts.

In a previous article, we explored the foundational aspects of AI and its legal and regulatory implications in Nigeria. The NAIS takes this a step further by outlining strategic pillars that will drive Nigeria’s AI development and ensure that these technologies are leveraged responsibly and effectively.

In this newsletter, we analyze the main aspects of the NAIS and its importance to the growth of the Nigerian technology ecosystem.

 

  1. Guiding Principles of the NAIS

The NAIS is guided by principles that emphasize responsible and ethical AI development to ensure that AI technologies are designed with societal impact in mind. These principles include, amongst others, a commitment to transparency, accountability, human-centric approaches, inclusivity and shared prosperity.

Another key principle is data ethics and agency. This involves strict adherence to principles of privacy, consent, fairness, and transparency in the collection, use, and sharing of data for AI applications. From a regulatory standpoint, this means enforcing robust privacy* protections and ensuring that individuals have the knowledge and tools to make informed decisions about their data. For businesses, it will mean integrating these ethical standards into their operations to build trust and compliance.

 

  1. Key Strategic Pillars of the NAIS

There are 5 key strategic pillars of the NAIS. These are addressed below.

i. Building Foundational AI Infrastructure

Nigeria’s ambition to lead in AI hinges on developing a solid infrastructure foundation and enhanced computing capacity. This pillar emphasizes investing in AI-specific hardware and software, particularly through domestic solutions to reduce reliance on foreign technology.

Additionally, the NAIS highlights the establishment of clean energy-powered AI clusters and offers tax breaks and incentives to encourage private sector investment in critical AI infrastructure, such as high-performance computing centers. These efforts aim to accelerate innovation, create jobs, and position Nigeria as a competitive player in the global AI arena.

ii. Building and Sustaining a World-Class AI Ecosystem

To achieve global leadership in AI, Nigeria aims to develop a robust and dynamic ecosystem of partners, academia, and a highly skilled workforce. This pillar focuses on fostering sustainable AI partnerships, championing international collaborations, and nurturing a culture of innovation.

Initiatives include the creation of platforms such as the Sustainable Applied AI Partnership Platform (SAAPP) to bring together diverse stakeholders for AI development, and the AI Synergy Alliance to facilitate global partnerships. Similarly, the NAIS aims to establish Deep Tech AI Accelerators and AI Centers of Excellence to drive innovation and commercialize AI solutions.

 iii. Accelerating AI Adoption and Sector Transformation

This pillar seeks to harness AI for real-world impact by driving widespread adoption across various sectors, transforming industries, and promoting economic growth in Nigeria. This pillar emphasizes locally-led AI innovation, data-driven decision-making, and the development of an AI-ready workforce. Key strategies here include launching sector-specific AI adoption roadmaps, implementing global data quality standards, and creating a National AI Research and Development Fund to support cutting-edge research. The pillar also focuses on ensuring AI contributes to environmental well-being through green and sustainable AI initiatives, such as establishing a Green AI Challenge and Grant Programme to foster AI solutions for climate change, resource management, and smart city development.

The 3 Million Technical Talent (3MTT) Programme by the Federal Ministry of Communications, Innovation & Digital Economy aligns with these efforts by focusing on building Nigeria’s future digital workforce. This program, which aims to train millions of Nigerians in tech and AI skills, complements the NAIS goal of building a skilled AI workforce and accelerating AI adoption across sectors.

iv. Ensuring Responsible and Ethical AI Development

Pillar 4 focuses on the need for Nigeria to develop and adopt AI within a responsible and ethical framework while recognizing the transformative power of AI and the inherent risks it poses. A key objective under this pillar is the establishment of a robust AI ethics framework. This involves creating a diverse AI Ethics Expert Group (AIEEG) to guide the development and implementation of ethical AI principles that align with Nigerian values. The framework will focus on fairness, transparency, accountability, privacy, and human well-being, supported by a comprehensive AI ethics assessment tool that evaluates the ethical implications of AI projects throughout their lifecycle.

Another critical objective is shaping a human-centered AI transition, which aims to anticipate and mitigate the societal disruptions AI might cause, such as job displacement and increased inequality. This will involve conducting foresight studies to map out potential challenges and opportunities, as well as implementing legislative reforms to adapt legal frameworks to the evolving nature of AI. These reforms will focus on protecting human rights, privacy, and ensuring equitable access to technology through initiatives like digital literacy programs and community technology hubs.

v. Developing a Robust AI Governance Framework

Pillar 5 emphasizes the need for clear and consistent governance principles to ensure the responsible and successful development of AI in Nigeria. A primary objective is to create well-defined National AI Principles that will guide aspects of AI development, deployment, and usage. Also, it will state Nigeria’s core values and for AI development, including the achievement of the Sustainable Development Goals (SDGs) through AI.

The pillar aims to establish an independent AI Governance Regulatory Body responsible for enforcing ethical standards, providing clear guidance, and mediating disputes related to AI. The pillar also includes the development of a National AI Policy Framework to outline governance guidelines and a National AI Risk Management Framework to identify, assess, and mitigate potential safety and security risks associated with AI systems.

 

Conclusion

This ambitious roadmap outlines a comprehensive vision for AI development across five key pillars –  each addressing critical areas essential for building a robust AI ecosystem. However, while the NAIS is thorough in its scope, it currently lacks an implementation framework detailing key timelines, milestones, and monitoring mechanisms. Also, the NAIS does not yet clarify the funding sources for the various projects it proposes. As this is still a draft, it is anticipated that these gaps will be addressed in the final version of the NAIS to ensure a more complete and actionable plan for Nigeria’s AI future.

 

Download the NAIS document here – https://ncair.nitda.gov.ng/wp-content/uploads/2024/08/National-AI-Strategy_01082024-copy.pdf

 

*For more on privacy and data protection, please see our articles on these here:

1.https://pavestoneslegal.com/tag/data-protection/

2.https://pavestoneslegal.com/tag/data-privacy/

 

 

 

CONSUMER PROTECTION REGULATION IN NIGERIA: THE ROLE OF THE FEDERAL COMPETITION AND CONSUMER PROTECTION COMMISSION

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By Aderonke Alex-Adedipe and  Ebikeniye Best

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Introduction

Consumer Protection has long been a significant concern worldwide, with increased focus on ensuring that suppliers of goods and services embrace fair practices to safeguard consumer rights. To create a transparent, competitive and consumer-friendly market environment in Nigeria, the Federal Competition and Consumer Protection Act (the “Act”), which was passed into law in 2018, established the Federal Competition and Consumer Protection Commission (FCCPC).

In this newsletter, we explore some key functions of the FCCPC and how they contribute to achieving these objectives.

  1. Regulating Competition and Promoting Fair Trade Practices: The FCCPC oversees and regulates market competition to prevent businesses from creating monopolies and anti-competitive practices. This responsibility includes reviewing and approving mergers and acquisitions which meet a specified threshold to ensure they do not adversely impact market competition or undermine consumer welfare. In addition, the FCCPC advances fair trade practices by educating businesses and consumers about their respective rights and obligations. This includes creating awareness about ethical market practices, encouraging firms to engage in responsible and transparent conduct, and providing clear guidance on consumer rights.
  2. Monitoring and Investigating Market Practices: The FCCPC actively monitors market practices to detect and investigate anti-competitive behaviour, unfair practices and consumer fraud. This involves conducting market studies, collecting consumer data and taking disciplinary action based on findings.
  3. Protecting Consumer Rights: The FCCPC plays a significant role in safeguarding consumers’ rights and interests. This involves addressing consumer complaints, investigating grievances, and ensuring that businesses adhere to fair and ethical practices. The FCCPC is empowered by the Act to take legal action against companies that infringe on consumer rights or engage in fraudulent activities. For instance, the FCCPC has recently investigated and issued multi-million dollar fines against companies such as British-American Tobacco, Meta and Coca-Cola on allegations of breach of consumer protection regulations in Nigeria.
  4. Enforcing Compliance: The FCCPC also enforces compliance with consumer protection laws and other regulations which impact consumer rights. It conducts thorough monitoring of market practices to ensure compliance, intervening where necessary to address violations. For instance, the FCCPC regulates digital money lenders and requires that they obtain approvals from FCCPC before their applications can be listed on digital platforms. In addition, the FCCPC collaborates with other regulators whose functions impact consumer protection.
  5. Policy Advocacy and Reform: Finally, the FCCPC advocates for policy changes and reforms to improve consumer protection and competition laws. It collaborates with other government agencies, stakeholders and international organizations to refine and strengthen the legal and regulatory framework for consumers. protection. By doing this, the FCCPC aims to ensure that policies remain effective, relevant, and responsive to the evolving market landscape.

Conclusion

The recognition of Consumer Protection rights in Nigeria, whilst not novel, has gained significant traction under the recently established FCPPC. Therefore, businesses are encouraged to proactively develop and implement robust consumer protection policies in their operations. This will help to prevent violations and ensure compliance with regulatory standards, thereby avoiding potential penalties and ultimately contributing to a fair and transparent marketplace.

 

DATA PROTECTION IN NIGERIA: LESSONS FROM THE META VS FCCPC MATTER

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By Seun Timi-Koleolu and Sharon Okpo

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Meta Platforms Inc. and Whatsapp LLC. (together referred to as “Meta”) have come under the spotlight of the Federal Competition and Consumer Protection (FCCPC). An investigation was launched by the FCCPC into Meta’s practices relating to user data privacy and competition. This move underscores the growing global trend of increased regulatory oversight on tech giants, and the emphasis on stringent compliance with data protection rules and competitive fairness.

In this publication, we have provided a brief summary of the matter between Meta and the FCCPC, and have highlighted key lessons to be gleaned by tech founders/companies from this in improving their data protection practices.

BACKGROUND

According to the FCCPC, investigations were carried out into Meta’s data protection practices on grounds of contravention of the provisions of the Federal Competition and Consumer Protection Act, 2018 (FCCPA) and the Nigerian Data Protection Regulation 2019 (NDPR) (now the Nigeria Data Protection Act, 2023).

Following this investigation, the FCCPC imposed a penalty of $220million on Meta and stated in a report that Meta’s data protection practices, were amongst others- discriminatory against Nigerian data subjects compared to other jurisdictions; and that Meta had abused its dominant market position by forcing exploitative and non-compliant privacy policies which appropriated consumer information/data without the option for self-determination or withholding of consent.

In addition to the penalty imposed, the FCCPC has also ordered that Meta should, amongst other things, immediately reinstate the right of Nigerian users to determine by themselves and control the use, processing and sharing of their data; ensure that the privacy policy complies with applicable data protection laws in Nigeria; and to cease the tying and transfer of data from its Whatsapp market to its Facebook market.

KEY LESSONS FOR TECHNOLOGY FOUNDERS

While conversations and appeals are still ongoing on this matter, there are various key lessons that technology founders can learn from this and implement in their technology businesses, especially as it relates to data protection and compliance:

  1. Integrate Data Protection by Design:

This involves incorporating privacy and security measures throughout the lifecycle of technology products and services- from conception to deployment. This approach ensure that privacy considerations are incorporated in your systems and processes, thereby ensuring compliance with data protection laws. This can involve conducting early risk assessments to identify potential privacy issues; collecting on data necessary for the functionality of the product or the service; providing users the option to opt-in for any additional data collection or sharing features; offering users control over their data including option to access, correct or delete their data; ensuring that employees including developers and management understand data protection principles and their obligations thereunder; continuously gather user feedback on privacy features and make necessary improvements, etc.

  1. Understand and Implement Local Data Protection Laws:

It cannot be overemphasized the need for you to understand the various data protections laws and regime governing each region or jurisdiction where your product or service is being marketed or sold. You should familiarize yourself with these laws and model your data handling practices in compliance with these laws. A regular review of these practices will also be necessary as these local data protection laws are amended or updated to ensure constant alignment with the evolving regime.

  1. Stay Engaged with Regulatory Developments

Data protection laws and regulations are continuously evolving. You should stay informed about changes in the regulatory landscape and adapt your data protection practices accordingly. It will be helpful to engage the services of data protection and/or legal experts to help you stay ahead of regulatory developments and implement necessary adjustments timely.

  1. Enhance User Control and Access

This is important if you are aiming to build trust with your users and ensure compliance with data protection laws. You should provide users with control over their data, including options to access, correct, or delete their information. This can be achieved by doing the following- providing users with clear consent mechanisms; developing user-friendly privacy settings that allow for accessibility and customizable options; notify users of significant changes to your privacy policy, etc.

  1. Transparency is Key

Clear communications about data handling practices can build trust with users and regulators. Design interfaces that provide clear  and understandable information about data collection, use and sharing practices. Also be prepared to explain your data practices to users and regulators when called upon to do so.

  1. Monitor Market Dynamics

It is necessary that you are aware of how your position in the market affects competition generally. There has been an increased level of scrutiny by regulators on the impact of tech giants on market competition, so maintaining fair market practices, especially in light of data protection requirements is essential. It is also important to know and analyse how competitors are addressing data protection to help you identify gaps and opportunities for improvement in your own practice.

CONCLUSION

The Meta and FCCPC case serves as a reminder of the critical importance of regulatory compliance and ethical data practices in the tech industry. For technology founders, it is a call to integrate robust compliance frameworks and maintain transparency in all aspects of data management and competition. By prioritizing data protection and compliance, you not only avoid legal challenges, but you also