Local Lottery How Nigeria loses billions of Naira yearly to foreign technology

Nigerian lotteries were immensely successful in 2016 but a big chunk of their revenue was spent on importing technology.

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Thanks to our now-infamous recession and the CBN's absurd foreign exchange policy, the biggest problem of the average Nigerian in 2016 was money.

In truth, it has been our reality for a while, but in 2016, few people could boast of a steady stream of income that put money in the bank. Those with money in the bank faced all sorts of difficulties in converting their account balances into cash, as those with cash watched it become worthless in the palms of their hands and their wallets.

From this perspective, it is little wonder that lotteries of all kinds became insanely popular in the last year. A common sight around the country is small crowds of young men with sheets of paper in hand, plotting the permutations that would bring them some free cash to fortify their finances.

play Long queues at the atm were a big part of 2016 (Press)

For the businesses, it is a welcome development. A jelly-like exchange rate has shut their customers' eyes to foreign options.  They may be making money off millions of Nigerians by selling statistics and probability but at least, the money is staying within this system. It is Nigerian money and it will remain in Nigeria.

A major player in the Nigerian lottery space thinks otherwise.

According to Niyi Adekunle, managing director and Chief Executive Officer of Lotgrand, Nigeria's lottery firms lose about 25 billion naira to foreign firms on a yearly basis.

How exactly does this happen?

Adekunle, whose company operates the Grand Lotto Yellow Terminal and promotes lotteries in Nigeria with its Machine Number Series, says the firms spend the money on acquiring, deploying and maintaining the software and hardware systems needed to run lotteries all over Nigeria.

As he explained in Lagos, "Payment for the acquisition of software licences and support services constitute 20 and 40 percent of our annual technology budget spends respectively".

play The typically red gaming system is a basic component of lotteries in Nigeria (Nigeria Today)

"I see more players in the industry spending huge on instant game inventory management systems, lottery gaming systems, retail point-of-sale technology, mobile apps, USSD platform, data and communications links and internet platforms", he added.

Translation: Nigerian lottery firms will lose money to foreign technology in 2017, and it may be way more than 25 billion.

Amidst an emerging tech scene and the success of our technology firms in 2016, it seems absurd that there are no indigenous solutions to this problem. However, the facts point to reasons why this is the case: the growth of Nigerian tech in 2016 was buoyed by the rise of fintech above anything else.

The spotlight that fell on the technology ecosystem was beamed particularly on the individuals and firms building systems that made the transfer and use of money easier for Nigerians; innovations that did not solve the problem of the lottery firms.

However, there is a case for their perceived reluctance to build the solutions that will ensure this money stays within our shores.

According to Folarin Okunola, ICT expert and Tech Guy at Pulse Nigeria, "I don't think the ecosystem is at that point yet. Look at it: How many mainstream lottery companies are there in Nigeria? Will it be profitable long-term (or short-term even) for anyone to develop the enterprise software these companies need? Are these companies willing to pay for the software/hardware they need? Our tech ecosystem is just not at that point yet. There are bigger pain points to attack."

And it is true.

play Paystack's Shola Akinlade and Ezra Olubi were at the front of fintech in 2016 but their solutions are not for the local lottery. (Forbes)

 

A major scourge that Nigerian technology firms face is the unwillingness of indigenous firms to pay good value for the solutions that they provide.

In many ways, it is a problem that all businesses in that space suffer; their work is perceived as creative above all else, so they are approached as artisans doing a trade and offered as much remuneration as their patrons believe they deserve.

Regardless, it would appear that the lottery firms have a case, however small. The local lottery market is immense, with a market base that stretches across the entire country. In the last year, a particular lottery firm paid a 500 million bonus to a single winner.

Looking forward into the new year, they have their sights on even further expansion. A good number of lottery firms are looking to explore even more technology-based initiatives to grow their businesses.

Perhaps, the most notable of them is USSD, which opens lotteries up to new users and makes it easier for inconsistent users to avail themselves of the platforms on a more frequent basis.

Adekunle challenged indigenous IT players to focus their innovations on the lottery industry and compete for a big chunk of the market share so that the local economy can reap from the hyper growth of the lottery industry.

play USSD allows users to access financial services from the most basic devices (Youtube)

 

It is with a view to this growth that players in the Nigerian lottery space believe that local tech companies should open their eyes to the possibilities that the industry presents.

Adekunle has implored indigenous technology firms to pay more attention to creating solutions for the lottery industry and make an effort to compete with the foreign firms for a bite of the market. This, he believes, will ensure that a lot more of the money stays within the local economy.

However, when one considers the true state of this local economy as well as how dependent the lottery industry is on the average person's ability to spare some cash, a lot of these predictions seem increasingly bloated.

Looking forward, demanding solutions from indigenous firms might be a big ask, and in 2017, a lot more money might be crossing our borders into foreign firms.

 

 

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