TechCabal Daily – In this race, it’s Regulation vs Innovation

On Thursday, a circular by the Securities and Exchange Commission (SEC) asked investment-tech startups to stop offering foreign stocks to Nigerian investors. That circular made the rounds and took over much of my timeline for the next 24 hours.

The reactions – anger and indignation- were predictable, with people accusing the SEC of trying to kill innovation.

Many of those takes were not without basis in Nigeria where regulatory risk is high up there on the list of things you need to watch out for. Yet, this was one of those situations where I thought a little nuance would advance the conversation.

Under existing SEC regulation, startups cannot offer foreign stocks to Nigerian investors. Rules like this are to protect investors but innovation often moves faster than the rules that govern them.

So where are we now: An insider at the SEC told me that the directive isn’t the death knell we think it is and that a few startups have started the registration process with the commission.

That assertion has been difficult to verify but there are other important questions like, is there a new licencing category that will allow startups to sell stock to Nigerian investors? And, what will the licencing requirements look like?

There are no clear answers yet but I analyzed the issues and the context around it here.

“Every action has a consequence, and each consequence has another consequence. These are called Second-Order Effects.”

In December 2020, Nigeria’s Communications Commission told telcos in the country that they would not be allowed to sell and register new SIM cards until they register the existing customers on their network register with a National Identity Number.

Nigeria’s National Identity Number (NIN) has become a recent obsession after years of failing to get people onto any sort of central database. Less than 40% of Nigerians have any sort of identification at all.

Yet, with security concerns in mind, the NCC insisted that the over 90 million unique mobile subscribers in Nigeria should connect their NIN to their telephone numbers. It backed up that target with a threat to disconnect anyone who didn’t do the linking within one month.

For telcos, that meant they had to register almost 50 million subscribers in four weeks; an impossible task in the best of times. But the deadline has been shifted twice but what has remained unchanged is the suspension of the sales of new SIM cards.

The second order effects of that seemingly simple decision have been devastating. My friend, Femi, hasn’t been able to expand his business to Abuja as a result. Some 2 million people, according to one organization, are now out of their jobs as SIM registration subcontractors.

It’s a real study in second order effects so read about it here.

Twitter has been cracking down on manipulation for the last three years, especially with how influencers sometimes manipulate their algorithm. In 2018, Twitter prevented Tweetdeck users from performing actions – like tweeting a hashtag – through multiple accounts.

But people who make their living off social media have stayed as creative and in Nigeria particularly, influencers found themselves on the wrong side of Twitter’s regulations last week.

A few accounts with large followerships got suspended and soon we found out it was about Alex Saab. Saab is a Colombian businessperson whom a Florida court charged with money laundering in 2019.

It turns out that quite a few Nigerian accounts took contracts to amplify conversations about Saab and I think this is an important opportunity to talk about what standards influencing should have in Nigeria.

I’m chasing that story this week but right now, here’s a super background to read.

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