CFG Advisory on how Nigeria can harness its digital economy for growth

Nigeria's Vice President, Yemi Osinbajo, recently highlighted the significant investments that the country's tech sector received, totaling approximately $377 million between 2018 and 2019. This focus on the digital economy is seen as crucial for Nigeria's overall socio-economic well-being. However, despite the opportunities presented by the digital economy, there are also risks of being left behind, as noted by the World Bank. Tlewa Adebajo, CEO of CFG Advisory, emphasized the importance of investing in and harnessing the potential of Nigeria's digital economy during a recent interview on CNBC Africa. Adebajo highlighted the growth potential of the ICT industry in Nigeria, with its contribution of about 17% to the GDP. He stressed that the sector holds promise for employment opportunities and economic growth, particularly for the country's young demographic. Adebajo pointed out that Nigeria already has the telecom infrastructure necessary for the digital economy to flourish, with much of the country already utilizing 4G technology. Despite challenges such as the recent lockdown, the digital sector has continued to show resilience and growth, underlining its importance in driving economic development and job creation. Adebajo acknowledged that while significant investments have been made in the telecom infrastructure by companies like MTN, Airtel, and Glo, there is a need to focus on value-added services and applications to fully leverage the sector's potential. He emphasized the importance of training and education to build the capacity needed to support the growth of the digital economy. Adebajo cited the example of India, where universities play a crucial role in training individuals with specific skills demanded by the industry. He suggested that Nigerian universities should adapt their curricula to align with the needs of the digital sector, ensuring that the workforce is equipped with the necessary skills to drive innovation and growth. The issue of tax implications in the digital economy was also addressed during the interview. Adebajo highlighted the existence of the Pioneer Status law in Nigeria, which provides investors in the digital technology sector with a five-year tax holiday. This incentive aims to support the growth of companies in the sector by easing their tax burden initially, allowing them to reinvest in their operations and contribute to the formal economy. By formalizing the tax collection process and encouraging companies to register and comply with tax regulations, Nigeria can create a sustainable revenue stream from the burgeoning digital economy. Adebajo emphasized the importance of fostering a conducive tax environment that supports the growth of digital companies while ensuring compliance and transparency in revenue generation.