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The likely impact on the stakeholders

I- Gaming Expert and Consultant, Harrison Ehiaguina shares Olojede’s sentiments on the need for dialogue between representatives of the sports betting industry and the government. But he is also very concerned about how this tax will impact the customers and thinks this might lead to a case of classism whereby the players with deep pockets find a way to cope with the new tax, while the small players gradually fade away.

What do you think the operational impact of this new tax will be on sports betting companies?

Ehiaguina: Before now, sports betting companies have enjoyed the exemption of Corporate Income Tax (CIT) over the years and that was in a bid to encourage foreign investors because 80% of gaming operators in Nigeria are foreign investors mostly from Europe, who have partnered with Nigerians. This exemption significantly encouraged foreign investors to do business with Nigeria. Considering the fact that gaming and lottery companies have contributed immensely to the Nigerian economy, I think the impact would be negative especially when the rate of unemployment in the country is on a steady rise. It will definitely impact a lot of things such as the cost of technology acquisition and ultimately it will affect jobs.

Based on this imminent negative impact which you foresee, are you content with how most sports betting companies are positioning themselves to survive the change that appears to be imminent?

Ehiaguina: The gaming industry is quite competitive and so it’s more like a power tussle in terms of having deep pockets. If you have deep pockets, you will excel in the industry because you will be able to provide great technology, offer good incentives and bonuses. The impact of this new tax is going to fall on the smaller operators who don’t have deep pockets. Therefore, there is no balancing act and the government is not considering this crucial factor. They are more concerned about the tax and not the smaller companies that are trying to compete in the industry. 

Based on the body language you’ve observed from this administration, do you foresee the government suspending this tax, as was the case with the cybersecurity levy? 

Ehiaguina: I think for example, the issue of double taxation has been going on between the National Lottery Regulatory Commission (NLRC) and the Lagos State Lotteries and Gaming Authority. At t a conference earlier this year, I stated that there was a need for harmonization between the federal and state laws and I still think the government needs to harmonize when it comes to taxation, so that there won’t be an issue of double taxation, as has been the case for a while in this industry.
At the start of this year the CEO of Lagos State Lotteries and Gaming Authority assured us that before the end of 2024, there would be harmonization of taxes. Even though the body language of the government says otherwise, we are simply hoping for the best, but I can’t really say for sure how this next tax situation will play out. 

What will be the likely impact of this new tax regime on the customers?

Ehiaguina: This will definitely reduce the incentives which most customers enjoy. For instance, when a new gaming company comes on board, we reward our target audiences with incentives, bonuses and promotions. This new tax regime will definitely reduce the aforementioned which consumers have always enjoyed.

Do you think it would make a difference if consumer advocacy groups and industry stakeholders could collaborate in order to promote the interests and rights of bettors?

Ehiaguina: I think it would. For instance, the Nigerian Bookmakers Association, is a body which serves as a liaison between the operators and the government in terms of taxation. This institution will first need to be strengthened in order to effectively protect consumer rights. Also, bettors need to be more educated regarding the new tax laws, because this will help operators work around it in such a way that it will not affect their Gross Gaming Revenue (GGR). 

Are you concerned about the possibility of bettors opting to migrate to unregulated or offshore betting platforms? 

Ehiaguina: Yes, there is every tendency that unregulated betting platforms will spring up and try to take advantage of this situation. Hence, it's imperative for the government to promote the campaign on consumer protection, so that the players have adequate knowledge to work with. This is because the migration of customers to such platforms means that their rights cannot be protected. Hence, if anything goes wrong, the government cannot intervene. 

If this administration asked for your advice at this stage on how it should proceed, what would you tell them?

Ehiaguina: The issue of taxation needs to be properly addressed in order to encourage foreign investors to keep on coming. Nigeria is a very big market and as a matter of fact the industry is still budding with huge prospects for foreign investors, unlike the United Kingdom for instance, where there is an abundance of betting companies. So, the taxation needs to be worth the influx of foreign investors.
There is no need to increase the NLRC tax and Nigerian Lottery Trust Fund tax because the operational cost is huge. Getting an NLRC license for sports betting costs 50 million naira, getting the casino license costs 100 million naira, obtaining the Lagos state license runs into another tens of millions. These precede setting up the company, getting the technology, the overhead costs, etc. I think the government is not looking at the operational costs at all, they are simply looking at it from the revenue angle and assuming that the players are making money. But, before any money is made, a lot of money is put into it. Hence, less tax on gaming companies will do a lot of good. 

Conclusion

In navigating Nigeria's new sports betting tax regime, the divergent perspectives of finance expert Gbolahan Olojede and i-gaming consultant Harrison Ehiaguina underscore the need for a nuanced approach. While Olojede sees potential benefits in industry consolidation and revenue reinvestment, Ehiaguina warns of adverse impacts on smaller operators, reduced consumer incentives, and the lure of unregulated platforms. Their consensus? Proactive dialogue between the government and industry stakeholders is crucial to strike a balance – setting clear performance metrics, harmonizing taxation, safeguarding investments, and prioritizing consumer protection. Only through such collaborative solutions can Nigeria harness the full potential of its burgeoning sports betting market while ensuring sustainability, responsibility, and a level playing field for all.