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The Legal Framework for Ecommerce in Nigeria: An Overview of Relevant Laws and Regulations
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| Screenshot on https://nitda.gov.ng/ |
1. Data Protection
Extensive information about everyone is stored on the Internet. There is the capability for it to be shared or transmitted instantly, without permission, anywhere in the world.
An individual does not have the right to want to keep themselves to themselves. Everything is under threat because of technology. There is openness and accessibility to the Internet. Many do not trust online transactions.
The Nigeria Data Protection Regulation (NPDR) 2019 works in this regard. They work to ensure that the data of consumers is kept safe from external interference and hacks. This regulatory body mandates every business owner to localize their data and secure customer information.
For online stores, this is particularly crucial as they handle sensitive customer data during transactions. Ensuring secure data handling builds trust and compliance with NPDR helps protect both the business and its customers.
READ ALSO: 15 Best Side Hustle Ideas for Busy Students, Moms and Dads in 2024
2. Cybersecurity
Recently, the Central Bank of Nigeria released a "Cybersecurity levy" payment for companies, which has been withdrawn.
E-commerce is under the threat of hackers and scammers. This is so because online platforms have a lot of personal and financial information at hand. With the increasing use of mobile devices to access e-commerce platforms, the associated cybersecurity risks have also grown.
There is no small business in e-commerce; therefore, necessary legal actions should be put in place in cases of a security breach or breakdown. A breach in the cyber security of an online store can cause distrust, bad reviews, and poor sales. Ensuring robust cybersecurity measures is crucial for safe online shopping experiences.
Trust is vital for online business and side hustle ideas that make you money. Once this is broken, it is difficult to get it back. To put this in check, the Nigerian government passed an act called the Cybercrimes (Prohibition and Prevention) Act. It was established in 2015.
Their role is to penalize those who engage in online fraud and hacking.
3. Consumer Protection
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| Federal Competition & Consumer Protection (https://fccpc.gov.ng/) |
Consumers are at the mercy of online business owners because they have no choice but to blindly trust the business they are patronizing. Social media platforms can be used to promote consumer protection and build trust by allowing customers to share their experiences and reviews.
It will then be a terrible thing if their rights are not protected. Consumer protection is simply to protect the interests and well-being of consumers.
It makes sure that customers or consumers make good choices regarding what they want to purchase online. There are many fraudulent business practices available on the internet. Sellers and manufacturers alike get to be deceptive at times. With the growth of online retail, ensuring consumer protection has become even more crucial.
In Nigeria, the Consumer Protection Council Act of 2019 has been put in place. The act helps protect consumers from unethical business practices going on online. They take legal action against such businesses.
4. Corporate Affairs Commission
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| Screen from the Corporate Affairs Commission Website |
Some call this the primary regulator for business registration in Nigeria. Some e-commerce businesses do not get registered. They just launch out and start functioning. They have no legal backing, no legal work whatsoever. Nigerian e-commerce businesses, however, are expanding globally through cross-border e-commerce, enabling them to reach a broader international market, diversify their customer base, and promote Nigerian products and services internationally.
This is where businesses that engage in fraudulent acts hide. Online consumers, if not careful, will fall into their hands and be scammed.
This legal body in Nigeria helps to make sure all businesses are registered under the law, no matter the kind of structure they run. A robust legal framework is essential to support the growth and competitiveness of the Nigerian e-commerce market.
With this, an online business will have to be transparent and open and establish business legitimacy.
Understanding Taxation for Ecommerce in Nigeria: VAT, Income Tax, and Other Considerations
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| Pixabay |
Taxation of ecommerce businesses in Nigeria is imperative as the world is going digital and e-commerce has come to stay. E-commerce platforms play a crucial role in ensuring compliance with tax regulations and providing a seamless shopping experience for users.
The ecommerce business has a lot of prospects for the nation’s economy. But it will be asking too much if we say that the prospects ecommerce has will skyrocket the economy.
However, it still does not rule out the laws binding ecommerce taxation. Let’s get to understand ecommerce business tax regulations in Nigeria, focusing on VAT, income tax, and others.
1. Value Added Tax (VAT)
According to Premium Times Nigeria’s press release on June 5, 2023, VAT is a consumption tax charged on the supply of goods and services other than those listed as exempt in the first schedule to the VAT Act.
VAT is usually borne by the final consumer because it is included in the price paid for a good. In Nigeria, the value-added tax on all goods and services is 7.5%.
It was increased from 5% to 7.5% in 2020. It is handled by the Federal Inland Revenue Service (FIRS). It is the agency established by the country to oversee everything going on.
Every business in Nigeria, including ecommerce businesses, is required to register for VAT, after which a tax identification number will be given. On all goods and services transactions, the business must remit the VAT on all the sales.
Slot Systems Limited, a prominent player in the Nigerian e-commerce market, complies with these VAT regulations, contributing significantly to market growth through strategies like mergers & acquisitions, partnerships, and collaborations.
Ecommerce businesses must comply with the obligations of the Act. Failure to comply comes with appropriate penalties. Timely payments must be made as well.
It is expedient to know that there are still some breaches of the VAT rules. This is because there are no proper mechanisms put in place to prevent tax evasion, especially for online purchases.
There is a loss of tax revenue generation due to some online businesses who have a way to evade payment. In cases like this, e-taxation is implemented.
2. Income Tax
This is another type of tax payment. It works this way: with the income generated by business owners, the government then imposes on it.
However, it must be in their jurisdiction. That is, the state, as well as other local bodies, can levy their taxes. Ecommerce businesses are not exempt from this. Their earnings, too, are subject to income tax. The Nigeria E-commerce Market significantly contributes to tax revenue, highlighting the importance of compliance with income tax regulations.
Gross revenue is calculated, that is, the revenue generated from the business before any expenses. From there, “allowable” expenses are deducted. These are the costs of goods, utilities, marketing costs, etc.
The taxable profit is derived from this. It is on this that the income tax is based. The income tax to be paid now depends on the type of business. Individual or company.
Other consideration
3. Import duties and customs charges
The ecommerce business is vast. A lot of businesses transact online. Some of these ecommerce businesses import goods into Nigeria. They cannot just do it their way. There are rules guiding the importation and exportation of goods in the nation.
Import duty is a tax collected by authorities in a particular country on imports and exports. Most times, the value of the goods will determine how much import duty will be paid.
Also, the country from which the goods are coming is considered. Countries have made efforts to reduce the amount paid to encourage free trade.
However, it is still being paid. Therefore, ecommerce businesses importing goods to Nigeria must comply with the regulations regarding imports. Addressing these legal challenges is crucial to support the growth of online retail. All applicable duties must be paid.
Challenges Facing The Legal Landscape of the Nigerian E Commerce Market
1. Lack of a dedicated ecommerce law
There are no codified laws guiding ecommerce businesses. The existing laws are only patchwork. There are various fragmented approaches to the law.
With the increasing use of mobile devices to access e-commerce platforms, it is crucial to have flexible laws that keep up with technological advancements.
This lack does not make it easy for online business owners to comply with the existing laws.
Consumers, too, are at risk of being vulnerable to cybercrimes. A clear legal framework should be put in place.
2. Rapid technological advancement
Technology is moving at a fast pace. New developments occur daily. We could say it is running faster than the law.
If a law is enacted today for a particular kind of technology, before it becomes implemented, a new technology is in vogue. It proves difficult to keep up with updating the law.
What is best is to be flexible with the law so that they can easily blend when new technology comes in.
How do social media platforms contribute to e-commerce growth?
Social media platforms have evolved into powerful tools for commerce. Businesses leverage these platforms for marketing and direct selling, driving significant sales through social commerce.
Frequently Asked Questions on The Legal Landscape of Online Shopping in Nigeria: Regulations and Compliance
Is eCommerce profitable in Nigeria?
The Nigeria Ecommerce Industry is accelerating and expected to grow by 7% by 2025, making it the 38th largest Ecommerce Industry globally. The market is expected to grow at an annual growth rate of 11.3% from 2023 to 2027. 2024.
What is the top 3 e-commerce in Nigeria?
Top online retailers in Nigeria In 2018 Nigeria will boast three online stores, and in 2023 these sites have been identified as: Jumias.com.ng, Slot.ng, Ajebomarket.com.
Does e-commerce work in Nigeria?
The Nigerian ecommerce market saw a huge growth over the past decade thanks to increased internet and mobile access and growing technology-savvy middle class. Here are the major features for online retailers valued at 14bn by 2020. It has a forecast of $34.4B by 2024.
How big is Nigeria e-commerce?
The Nigerian E-commerce Market is projected to grow by 11.82% between 2024 and 2029. 26 Jan 2024.
Who can sell online?
Anyone can sell online. As long as you have a value you want to give, be it a physical good or a service.
What is the most popular platform for e-commerce in Nigeria?
Jumia.ng. They generate a lot of revenue over the year.
What are the benefits of e-commerce?
Easy transaction, quick accessibility, no stress in the market promotion.
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| Pixabay |
Conclusion on Ecommerce in Nigeria: Navigating the Legal Landscape – Regulations and Compliance
Ecommerce business is one that Nigeria has a lot to gain from if the needed legal framework is put in place. Business owners and consumers are to stay informed.
The Nigeria E-commerce Market plays a crucial role in the overall growth of the e-commerce industry, driven by increasing internet penetration and strategic initiatives by key players to enhance their market share and competitive edge.