Is starting a betting company still a good bet?
The sports betting market in Nigeria is growing. Part of the larger gaming scene, sports betting has left the fringes to become a billion-dollar industry, now involving regulation from the state and federal government. But what is driving this appeal? Many Nigerians are fanatical about sports, particularly football, and betting presents an opportunity to turn their passion into earnings. Internet accessibility has attracted young Nigerians to online betting sites with promise of huge payouts and bonuses.
The failing economy is one to consider, breeding unemployment and poverty. With betting, many have found economic empowerment as licensed agents who get a commission percentage. Private sector participation is also on the rise, collaborating with betting brands to provide better services and innovative solutions. For example, fin-tech companies have partnered with betting companies for payment integration services.
The Nigerian sports betting market has a different economic nuance, and not everything is what it seems from the outside.
Market viability
Compared to other parts of the world, the Nigerian sports betting industry is still emerging. Estimated 60 million Nigerians between the ages of 18 and 40 are involved in active sports betting. Almost $5.5 million (N2 billion) is spent on sports daily. This translates to over $2billion (N730 billion) yearly with over 14 million bet stakes and payments each day.
This data signals a heavy inclination Nigerians have towards sports betting. There are over 40 licensed betting brands in Nigeria, with 22 licensed trading names in Lagos. Despite its outward status as a profitable venture, starting a sports betting business in Nigeria is capital-intensive. In Lagos, for example, the Lagos State Lottery Board (LSLB) presides over issuing an Online Sporting License (OSB) to prospective gaming operators. From application fee (N500,000), license fee (N50,000,000), annual renewal license fee (N10,000,000) and having a minimum share capital of N20,000,000, the cost of establishing a sports betting company drums up a lot of capital.
Brick-and-mortar vs Online
Local lotto franchise, Baba Ijebu, laid the foundation for the brick-and-mortar strategy that has taken over the betting market landscape. Established in 2001, Baba Ijebu penetrated street corners with kiosks and its famous red lottery machines. With technological innovation, the premier lottery brand has pivoted online to meet the growing appetite towards virtual betting.
‘’A lot of the focus has got to be online. Most Nigerian bettors now bet online, especially on mobile devices,’’ sports betting expert, Leye Akindoju, says, ‘’But for a new company, having physical betting shops is a great idea, particularly for brand visibility and top of the mind awareness. And of course, there are still people who bet in these shops. So yes, I would encourage a new site to set up physical shops in strategic locations.’’
Adeyemi Olufemi, another sports gaming expert, agrees, ‘’The retail seems the best approach till date because a bulk of punters still prefer to take their tickets to know agent bet shop to place their games because of the integrity of the owner. Depending on whichever model works so companies like Bet9ja and BetKing adopts the business partner model, a system whereby the potential agent gets a space and all needed materials like PC, laptop, thermal printer, generator internet services, TV for virtual games and they register as an agent of the company (officially licensed to operate). This saves them cost whereas the likes of NairaBet run company-owned shops/outlets in different states.’’
Although Bet9Ja have taken a larger percentage of the market share, brands like 1xBet, Betwinner and Betway are operating basically in the online space. Major features like fast payout, high odds, market options, welcome sign up bonus amongst others are unique selling points.
Hurdles of taxation
As a whole, the gambling industry in Nigeria used to be unrecognized and unregulated. Now, state and federal players have jumped into the mix, setting up laws and frameworks to regulate the promising sector. While many sports and gaming operators are grateful for the semblance of structure the different tiers of government have given the industry, the grievance is that there too many levies and tax to pay, so much so that these fees are attempting to strangulate their business.
At a Zoom-assisted conference in Lagos hosted by the National Lottery Regulatory Commission (NLRC) and titled ‘Repositioning the Nigerian Gaming Industry for Better Performance and Revenue Enhancement for Stakeholders in the 21st industry,’ many issues affecting the industry were raised. The issue of taxation, included. This was addressed as multiple taxation by a gaming operator: ‘’We are taxed as if we are a trading and manufacturing company. The casino tax they are using to tax us is already outdated and doesn’t conform to the reality on ground. The challenges are the state collects tax from us, the local too. We pay subscription fee for state and local government and to federal.’’
Other times, taxation from the government is done arbitrarily based on how seemingly well a betting company is doing.
Placing your bet
The Nigerian betting market is becoming competitive with many players vying for brand influence. But there are definitely opportunities for new betting companies. New players are going to need massive marketing and promotional campaigns to force their way into the market. Quality of service can be improved, including user experience, live betting, robust market options, increased last-minute gambling, new gaming trends like E-sport tournaments (Quarantine League during COVID-19), player tracking, user friendly payment platforms or automation.
The market is potentially huge, with a market flux towards online sites. Digital is the battlefield with the growth of internet users, about $2 billion market size and 60 million audience. But other players can also take the advantage of branding themselves physically.
Featured image credit: Financial Times