Running an Online Business in Nigeria
So you have set up your online business, and you are ready to run it properly and professionally? If you have, please read on…if you haven’t then please read our article on starting an online business here.
Tax Issues
The first thing that you need to ensure is that you are keeping up with your tax responsibilities. Every business is obligated to pay tax. If you are an incorporated company, then you will need to register for company income tax and Value Added Tax. Once a company registers for Company Income Tax it is given a unique Taxpayer’s Identification Number (TIN). The TIN is a unique number that identifies a specific company for the purposes of paying taxes. You can read more about the process to register for TIN here.
Further, as you will be selling goods online, the sale of goods in Nigeria is subject to Value Added Tax (VAT). VAT is a tax imposed on the supply of goods and services. The tax is charged in Nigeria at 7.5% of the value of the taxable goods and services. You can read more about the process to register for VAT here.
Under Nigerian Law, there is also a tax levied on ICT companies called the Information Technology Tax. This tax is payable by specified companies (GSM service providers and all telecommunications companies, cyber companies and internet providers, pension managers and pension related companies, banks and other financial institutions, and insurance companies) who have an annual turnover of One Hundred Million Naira (N100, 000,000). The companies are to pay a levy of one per cent (1%) of their annual profit before tax to the National Information Technology Development Fund (“NITD Fund”). This tax when paid is tax deductible for company income tax purposes. The unfortunate thing here is that the term ‘cyber companies’ is not defined by the Act, so there is some ambiguity as to whether e-Commerce companies would fall under that term and therefore liable to pay the tax. It is however something that e-Commerce companies should bear in mind.
Some companies will be liable to pay a tax known as a withholding tax, we will not go deeply into this type, because only a few e-commerce businesses will have to pay this ta. It is best to speak to your lawyer to find out if you are liable to pay this tax.
Advertising
- Regulatory Agencies
In online transactions like in real world face-to-face transactions, an integral part of acquiring new customers is advertising. In operating your online business, you might decide to use a mix of offline and online marketing channels. Below we will give a brief explanation of some regulations which you need to consider in Nigeria when marketing/advertising.
Please note that there are product specific regulations that may apply, which will not be discussed below. For example, if you are advertising alcoholic beverages, there are certain standards that must be met as laid out by the National Agency for Food Drug Administration and Control (NAFDAC). Also, please note that this document deals with the requirements as stated by the Law, and not necessarily what happens in practice. As unfortunately, not many people are adhering to the legal requirements.
The main organization in charge of regulating advertising in Nigeria is the Advertising Practitioners Council of Nigeria (APCON). They are basically in charge of vetting any adverts or promotions that are to be directed at members of the public. The process to follow in seeking approval is as below:
- Application is made seeking approval to advertise attaching all the necessary requirements as applicable to the particular product/service and medium to be advertised on
- The application is forwarded to the Chairman of the Advertising Standards Panel together with all the necessary documents
- Payment of the applicable fee
- A formal letter notifying the applicant of the status of the application will be sent to him/her as soon as the application has been entertained
- Prior to the receipt of a certificate of approval, the advert is prohibited form being exposed
Apart from the above guidelines, if you intend to carry out Outdoor Direct Marketing/Activation, Flyer-ing, and Posting Bills, there are further rules around this. This depends largely on the location where it is based. For example, in Lagos, the Lagos State Signage & Advertisement Agency (LASAA) deals with this.
The regulatory bodies in Nigeria have not yet caught up with the recent growth of the online advert industry in Nigeria, and that is why there are no specific guidelines directed at this space. Although the APCON vetting guidelines specifically includes Internet advertising as one of the mediums which vetting of adverts is required, the process for vetting as laid out by them is not really compatible with online adverts.
If we are to follow the letter of the law, then if a blog wants to display adverts, then it should require any advertisers to provide a certificate of approval for the advert granted by APCON. The reality is that such an application of the law based on the prevailing regulations is doomed to fail, as the structure for the enforcement of such an application does not currently exist.
- Online Networks
These next few paragraphs will highlight some pertinent things that you should note if you intend to use any of the popular online and social media networks to advertise. Google prohibits certain adverts that are to be placed on the Google AdWords platform, this also the case with Facebook, Twitter, and LinkedIn advertising platforms. They all have similar restrictions and you may get more information on each specific one by reviewing their advertising policies. Generally, the networks:
- Do not allow the promotion of counterfeit goods
- Do not allow the promotion of dangerous products like recreational drugs (chemical or herbal); psychoactive substances; equipment to facilitate drug use; weapons, ammunition, explosive materials and fireworks; tobacco products etc.
- Prohibit adverts that promote inappropriate or offensive content
- Prohibit promotions that prompt users to initiate a purchase, download, or other commitment without first providing all relevant information and obtaining the user’s explicit consent.
Receiving Orders Online (e-Commerce)
When you are selling online, an important step in the transaction is collecting information from the customer before the order is made. This information would include personal details of the customer – name and address (at the very least).
The legal issues here are around the protection of the data of the customer, and the protection of his/her privacy rights. The relevant laws seek to ensure that when the customer provides such information, it is only used for the purposes of that transaction, and that is not used for any other purpose not contemplated by the customer (except with his/her express consent).
As of present, Nigeria is yet to enact any specific National legislation with respect to Data Protection and privacy; however, there are some bills presently before the Nigerian National Assembly, which seek to address the issue of data protection and privacy in an e-commerce framework.
However, the fact that the Nigerian legal system does not have any specific laws on Data Protection does not mean that people who sell online can act without regard and do as they please. Section 37 of the 1999 Constitution of the Federal Republic of Nigeria provides for the Right to Privacy and family life, it provides; ‘The privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications is hereby guaranteed and protected.’
It may be argued that the right to have your personal data protected can be subsumed under this section of the constitution. This is in light of the definition of privacy as ‘a private person’s right to choose to determine whether, how and to what extent information about oneself is communicated to others, especially sensitive and confidential information’ (Black’s Law Dictionary 9th Edition).
Further, businesses engaging in online selling need to be aware of the provisions of the Nigeria Data Protection Regulations (NDPR). The NDPR amongst other things lays out the process to be followed in collecting personal data, how it should be stored, and who can access this data.
Processing Delivery
Once an item is sold online, the next stage is to ensure the goods are delivered to the customer. The issues involved here are – timelines for delivery, liability for goods when in transit, and customer’s right of withdrawal. With respect to timelines for delivery, ideally every online seller at the time of sale should inform the customer what the expected delivery times are.
The law however is that where no time for delivery is stated by the seller (or agreed by the parties), then delivery must be made within a reasonable time. What constitutes reasonable time will be determined by the nature of the goods sold, and the prevailing average delivery timelines in that sector.
Also important is who bears liability for the goods when in transit. Obviously, the customer will not bear liability, as he hasn’t taken physical possession of the goods. Normally, the seller will bear liability, but if the delivery is not carried out by the seller, but is contracted to a third party logistics/delivery company, then it is important to understand the contractual implications around liability and to what extent the third party company will bear liability.
Finally, it is important to let the customer know what his/her withdrawal rights are. Nigeria is yet to develop direct laws that apply to e-commerce transactions, and as such we have to make recourse to general laws applicable to trade in goods and services. The law is that a customer is not deemed to have accepted goods until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
However, when the goods have been delivered and the customer retains the goods without intimating to the seller that he has rejected them, or does any act which is inconsistent with the ownership of the seller, for example if the item is a shirt and the customer wears it, then it is deemed in law as acceptance.
Accepting Payment
Online sellers also need to be aware of the legal issues involved when they accept payment from customers. The primary area for concern is fraud and the legal liability that comes with it. When sellers accept payment, they either do it through their own payment processor or the payment is processed by a third party who charges a fee e.g. PayPal, WorldPay, VoguePay etc.
In Nigeria, the Central Bank of Nigeria implemented the Guidelines on Transactions Switching Services. When these provisions are examined, it shows that the legal position in Nigeria with respect to fraudulent transactions that are carried over e-commerce transactions is that the customer is liable for any fraud committed if he is in possession of the card and has knowledge of the PIN code.
However, once the customer reports any theft or loss of card, he/she is automatically absolved of any liability for any future unauthorised transaction on that card, furthermore, if a fraudulent or unauthorised transaction can be traced to the negligence or breach of contract of the issuer or merchant, then the customer would not be liable.
So, as an online seller in order to protect yourself from liability you need to ensure that your payment system is secure and protects the data of the customer, or else you could be held liable for negligence. If you are using a payment processor, then ensure you have reviewed the terms and conditions of the service, to understand the extent of your legal liability if there is a breakdown in the payment system which leads to a fraud perpetrated on the customer.
Returns and Complaints
In selling online, it is important for the seller to set up a system in place for dealing with returns of goods and complaints. There are no current guidelines or laws specifically dealing with consumer rights in Nigeria.
The Federal Competition and Consumer Protection Council (CPC) has been set up to protect the rights of consumers, it is best practice for issues like how to deal with returns and complaints to be adequately covered in the Terms and Conditions of the seller.
There are a number of platforms which provide free templates for e-Commerce websites, but with due respect something as important as your contract with every single future customer shouldn’t be predicated on a one size fits all template. Get a lawyer who understands the online business to draft one for your business which takes into consideration the nature of the goods you are selling, the inherent risks involved, the prevailing legislation, and also pre-empts pending legislation being deliberated at the National Assembly.
The FCCPC has considerable oversight and regulatory functions and so if an online seller has unfavourable terms or procedures for its returns and complaints policy, customers could report the seller to the FCCPC and the seller could be fined or have more severe action taken against him.
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We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.