By 
Nigeria and Kenya—two of Africa’s leading technology hubs—are facing renewed scrutiny from U.S. tech investors over persistent governance and regulatory challenges that are undermining investment potential. According to the latest Foreign Trade Barriers report from the U.S. Trade Representative (USTR), major concerns include entrenched corruption, weak intellectual property (IP) enforcement, and complex digital tax regimes targeting foreign digital service providers.
Despite policy commitments by both governments, the report criticizes the lack of progress in stamping out corruption and establishing robust IP protection frameworks. In Nigeria, widespread software piracy, counterfeit media content, and online copyright violations continue to undermine legitimate operators. The USTR’s Jamieson L. Greer noted that “IP enforcement remains inadequate due to insufficient resources, porous borders, organized trafficking systems, and corruption.”
U.S. companies operating in Nigeria also report frequent demands for unofficial “facilitative” payments, which complicate daily operations and raise regulatory risk exposure. Judicial bottlenecks and political gridlock further weaken the enforcement of anti-corruption and compliance frameworks.
In Kenya, while the startup ecosystem has seen notable growth, structural issues such as bribery and weak digital IP safeguards remain significant obstacles. The report highlights that U.S. firms often find themselves at a competitive disadvantage, losing out to rivals willing to engage in unethical practices, including bribery, to secure contracts. “U.S. firms continue to report direct and indirect requests for bribes from multiple levels of the Kenyan Government,” the USTR stated.
A critical gap in Kenya’s regulatory landscape is its failure to ratify the WIPO Copyright Treaty, despite signing it nearly three decades ago. This leaves IP enforcement in a legal gray zone, allowing digital copyright infringement to flourish unchecked.
Digital Tax Regimes Compounding Regulatory Risk
Adding to investor concerns are the recent overhauls of digital taxation policies in both countries. In December 2024, Kenya replaced its contentious digital services tax with a Significant Economic Presence Tax, which imposes a 3% levy on gross revenues earned by non-resident digital platforms with annual earnings exceeding KES 5 million (approx. $38,800) from Kenyan users. This affects major platforms such as Netflix, Microsoft, Amazon, and Google, all of which must now navigate increased compliance costs and regulatory monitoring burdens.
Nigeria, meanwhile, has adopted a broader framework since 2020 that subjects non-resident digital companies to both income tax and value-added tax (VAT) on services rendered to local consumers. These dual obligations raise concerns over regulatory overreach and the lack of harmonized enforcement protocols.
The USTR report surfaces at a time of heightened trade tensions, with former U.S. President Donald Trump threatening to impose steep tariffs unless trade barriers against U.S. goods and services are lifted. Nigeria and Kenya have until June to respond and make regulatory adjustments that could influence broader trade and investment relations.
Towards a More Predictable Regulatory Environment
The issues outlined in the USTR report underscore the urgent need for both Nigeria and Kenya to strengthen their regulatory compliance frameworks, invest in IP enforcement infrastructure, and create predictable, transparent tax policies to attract sustained foreign direct investment in their digital economies.
As the RegTech industry evolves, solutions such as compliance automation, regulatory intelligence, and risk mitigation tools could play a pivotal role in helping governments and businesses close enforcement gaps while safeguarding investor confidence in Africa’s growing tech sectors.
Comments