As States Align with FSGRN, Operators Worry About  Data, Tax and Cost Risks

Nseobong Okon-Ekong and Iyke Bede report on pertinent concerns raised by operators in the gaming industry as the regulators addressed them 

Following the consolidation of lottery regulatory authority under the Federation of State Gaming Regulators of Nigeria (FSGRN), a move set in motion by the Supreme Court’s landmark ruling on jurisdiction late last year, operators have expectedly been trying to get the required clarity on the way forward.

In response to their concerns, the Chief Executive Officer of the Lagos State Lotteries and Gaming Board, Bashir Are, who doubles as chairman of FSGRN, addressed pressing regulatory issues at the third edition of the ‘Compliance Training and Interactive Session’ facilitated by the Association of Nigerian Bookmakers, Lottery Operators Forum of Nigeria and Licensed Casino and Machine Operators Forum, featuring trainers from the Economic and Financial Crimes Commission’s  Special Control Unit against Money Laundry (SCUML) and the Nigerian Financial Intelligence Unit (NFIU). 

Top on the list of issues bothering the operators was withholding tax on winnings, which was initially paused for a period of three months between last January and March 31, after which internal deliberations and considerations further stalled its implementation. Are said he suggested a six-month period of cooling off after the Supreme Court judgment, but the states were not ready to listen to anything beyond three months. Broadening the scope of the discourse, Are said tax issues go beyond gaming regulation while reporting on the example of Lagos, where he is meeting with officials of the state Internal Revenue Service (LIRS) to arrive at an agreeable framework. He said his agency has engaged a consultant to generate implementation guidelines. This approach, according to him, will address all the grey areas. He assured the operators nothing can be done without a mutually acceptable implementation guidelines.

Making a strong argument against the withholding tax on winnings, Adewale Akande, Head of Legal and Compliance Department at KC Gaming Networks Ltd (Bet9ja), explained that its implementation would ultimately harm the states, noting that Ghana, the country from which FSGRN adopted the model, has since scrapped the tax. 

His argument hinged largely on concerns around personal data, noting that the reporting template requires the unique Tax Identification Number (TIN) of punters—thereby breaching the privacy agreement between operator and punter. Furthermore, he argued that the tax on winnings may be counterproductive as it may urge punters to turn to black market platforms to maximise their winnings, a notion Are concurred with.

“If you win a jackpot, that may be understandable. There has to be a bar, say, between N5 million and N10 million. You can’t tax the winning of someone wins N50,000, for instance,” he stated.

Are went on to state that the issue of withholding tax remains on the burner, reassuring operators that the winning ticket alone should serve as the punter’s unique identifier. He further implied that tax on winnings should only apply to payouts above a certain threshold.

So far, 10 out of the 24 states that teamed up in the legal battle against the defunct National Lottery Regulatory Commission (NLRC) have signed a treaty to become members of FSGRN. Are is positive that two-thirds of the states will sign up formally soon to enable the rollout of the body’s initiatives. He cited the example of the United States of America, which started a similar body with three states.

“Today, they are 47.” So far, FSGRN has advised operators to submit payment information of their licences issued by the NLRC, waiving all licence procurement from states until next year,” he said. “However, operators are mandated to pay gaming tax to state regulators.”

Under the umbrella of FSGRN, Are revealed that licences for sports betting, online casino, and lottery are pegged at ₦100 million, which authorises operators to operate in all states under the body. Although only 10 states have signed the FSGRN treaty, Are expressed optimism for more positive responses from states, including those that were not represented in the 24 states that took NLRC to court.

With multiple taxation out of the way, some operators still expressed dissatisfaction with the licence fees, noting that only the licence fees for Lagos and Rivers were up to ₦10 million, with the licence fees for the remaining states below ₦5 million. Some operators even tagged a couple of states as being “not commercially viable.” They advised the FSGRN to adopt an aggressive onboarding approach that will ensure a minimum of 24 FSGRN states to enable operators to hit their marks. According to them, dealing with a FSGRN that has less than 24 states may not be profitable to operators.

Finally, Are nudged the operators to consider the possibility of mergers, in a style that helped small Nigerian banks consolidate power through partnership in 2004/2005 to raise their capital base.

As the FSGRN continues to gain traction, the path ahead requires careful balancing between unified regulation and operators’ concerns. Addressing issues like data privacy, fair taxation thresholds, and reasonable licence fees will be crucial to fostering a sustainable gaming industry across Nigeria.