Exploring the Current Landscape of Nigeria's Gaming Industry
The number of gamers in sub-Saharan Africa has jumped from 77 million to 186 million since 2015– what does that mean for the potential of the gaming industry?
by Menna Shanab, media writer
In the past, Nigerians had limited access to video games, with the PS1 and PS2 consoles in public spaces being the easiest means of playing. Many individuals in Africa were excluded from the gaming ecosystem due to financial barriers to access, lack of infrastructure and limited internet connectivity. The mobile gaming market has emerged as the largest point of interest in Nigerian gaming due to better compatibility with slower internet connections and lower cost devices. Gaming has emerged as a new way to employ some of the youthful population grappling with high levels of unemployment at around 53.40%
Nigeria is one of the largest gaming markets in Africa, with the majority of gamers aged between 18 and 35. With a population of over 200 million, it is the most populous country in Africa, boasting the largest population of youth in the world, which makes it an attractive market for gaming companies. The number of gamers in sub-Saharan Africa has risen from 77 million people in 2015 to 186 million in 2021 with lockdowns during the COVID pandemic also contributing to this growth.
Today, with increasing internet penetration and smartphone use, internet-based mobile games have become popular in the country. Revenue in the mobile games segment is projected to reach US$57.37m in 2023, growing steadily at an annual growth rate (CAGR 2023-2027) of 7.63%. This growth is expected to result in a projected market volume of US$77.00m by 2027. Additionally, the number of users in the Mobile Games segment is estimated to reach 104.9m users by 2027, with user penetration starting at 36% in 2023 and increasing to 42.8% by 2027.
In terms of video gaming, the industry is currently valued at over $176 million and is expected to grow significantly in the coming years. By 2027, the number of users is projected to reach 100.8 million, and revenue is expected to reach US$445.80 million in 2023 and US$625.30 million by 2027, showing an annual growth rate (CAGR 2023-2027) of 8.83%. The tech-savvy youth in Nigeria, who have some of the highest levels of crypto adoption, combined with a large proportion of the population who games, creates a favorable environment for Web3 gaming growth.
Crypto and Blockchain Regulatory Environment
The regulatory environment is a significant challenge facing web3 gaming in Nigeria. While the Central Bank of Nigeria (CBN) has taken steps to regulate the use of cryptocurrencies in the country, these regulations have been met with criticism from many in the crypto community. The lack of clear regulations around the use of blockchain technology and cryptocurrencies in the gaming industry has made it difficult for companies to develop and market web3 games in Nigeria, which has limited investment in the development of local web3 gaming projects.
However, there are efforts being made to address these challenges. The Nigerian government has shown a willingness to adopt digital assets, as evidenced by the launch of the eNaira. In November 2022, the Chairman of the House of Representatives Committee on Capital Market and Institutions, Babangida Ibrahim, disclosed that they will soon pass a law to allow the Securities and Exchange Commission (SEC) to recognize cryptocurrency and other digital funds as capital for investment. The proposed law will also define the regulatory roles of the CBN and SEC regarding digital currency.
While the government's cautious approach to digital assets could pose a challenge to blockchain gaming development in Nigeria, it is also possible that the government could create a regulatory framework that facilitates the development of blockchain gaming while still maintaining oversight. If this were to happen, it could provide a much-needed boost to the industry and encourage more companies to enter the market.
The Shift Towards Social Gaming
The gaming industry in Nigeria has been experiencing a significant shift towards social gaming and the free-to-play revenue model with downstream in-game purchases. This trend has gained popularity among gamers in the country and is bringing in millions of dollars in revenue per year for all categories of video games, including mobile, PC, Xbox, and PS. As a result, Nigeria is expected to contribute substantially to the entire African market.
The lack of job opportunities for young Nigerians has resulted in them seeking alternative ways to make money, which has led to the widespread adoption of cryptocurrency. Play to earn (P2E) games, which only require downloading the game to one's mobile phone and connecting to the internet, provide a viable option for these individuals. However, most of these games are Pay to Play, meaning players need to purchase certain assets to gain access. This is a challenge, as most Nigerians earn less than ₦200,000 or about $438 per year and only 3.1 million can spend more than $10 daily.
To tackle this, innovative business models like P2E Guilds are being implemented. These guilds provide members with resources, information and tips to win, as well as pre-purchasing characters to lend out to vetted gamers. Payments are made in crypto which can be subject to market fluctuations and speculative activity, meaning earnings may not always be sustainable.
As such, more Nigerians are turning to alternative income streams such as competitive gaming and streaming, which have seen big name brands sponsoring players and teams. Guilds are also playing a role in this pivot, providing skilled talent for gaming competitions and creating a training ground for individuals who can become professional gamers.
Play-to-earn has been attributed to being a major driver for the growth of the industry. Before this new model emerged, gamers had limited options to make money from playing games. Free-to-play games like Candy Crush and freemium console games such as Call of Duty: Warzone and Fortnite were available, but offered little financial gain. Pay-to-play options were also available, but gamers had to pay for additional content on mobile or console games. Findings from a March 2022 survey showed that 16% of Nigerians say they have played blockchain P2E games and 17% say they plan to play.
Previously, making money from playing games required becoming a live streamer with a substantial online following, which was capital intensive and difficult for the average person to achieve. However, platforms like Gamic Guild have changed the game with their P2E scholarship model. By offering a decentralized platform with a wide range of NFT games, gamers can now earn money without needing expensive equipment, sponsorships, or a large online following.
The earnings of a player are directly affected by their skill, the time invested in playing the game, and the number of times they win. This does not account for the fluctuations of the crypto market, the impact of speculative activity, and the action of rent-seekers. All of these can significantly decrease a player's income. As the game becomes more popular, the entry price will increase, as well as the potential earnings.
According to Chike Okonkwo, co-founder and business development lead at Gamic, the Nigeria-based Web3 social communications platform is a guild that focuses on providing users with a wide range of games powered by blockchain technology. Additionally, they offer a means for gamers to earn income through investment and aggregation of play-to-earn Non-Fungible Tokens (NFTs) gaming assets. These assets are then made available to players, enabling them to generate income for themselves and the group.
“People still play games in silos, even with the advent of platforms like Discord. However, some people complain that they don't understand it, leading us to create our own platform which looks like Discord, but with simplified features and tools like wallets specifically designed for Web3 games. The Gamic guild community has grown to over 25,000 people, many of them from Africa and Nigeria and they’ve been hosting tournaments to bring people together and help them understand how web cloud gaming works,” says Chike. While progress is being made, there is still a lot of work to be done to get people to embrace the guild and community gaming scene.
With the P2E model employed by platforms like Gamic Guild and Metaverse Magna, an average gamer with just a mobile phone can earn an income without having to worry about fancy equipment, sponsorships, or a huge online following. They offer gamers a decentralized platform with a diverse catalog of NFT games to play, which provides an alternative source of revenue for game developers and investors. This model represents not just a lifeline but a new model of employment for the 37% unemployment rate in Nigeria.
Other notable platforms using this model include Metaverse Magna (MVM), the largest crypto-gaming community in Africa that allows people to earn up to $1000 a month playing crypto games. With this new model, it is no wonder that the video games market in Nigeria, formerly valued at $67 million in 2018, is estimated to reach $176 million by 2023.
Opportunities for Growth: Expanding Internet and Mobile Penetration
The Nigerian gaming market presents several opportunities for expansion, with the increasing internet and mobile penetration being a key factor. As of January 2022, Nigeria had the highest number of internet users in Africa, estimated at 109 million people. This has led to a surge in the number of gamers, making mobile gaming the most popular gaming platform in Nigeria, with a market size of $122 million in 2020.
Improved mobile penetration has aided the growth of the Nigerian gaming market, with the mobile penetration rate increasing to 55.4% in 2023, thanks to aggressive expansion and marketing by operators and technological improvements in payment platforms. The industry is currently fragmented, with various small market players. However, as user behavior changes and spending needs increase, consolidation is expected.
The total number of active internet subscriptions in Nigeria stood at around 152.71 million in October 2022, with the vast majority being mobile GSM connections. Moreover, user numbers are projected to triple in the next five to six years, with an estimated growth of more than 140 million smartphone users by 2025. The launch and availability of 5G networks provide a large market opportunity for mobile gaming companies to offer a wide range of games to players.
Nigeria is also home to the most lucrative telecoms market in Africa, growing at twice the African average. The success of foreign companies such as South Africa’s MTN demonstrates the potential of the Nigerian market. Overall, the Nigerian gaming market offers numerous opportunities for expansion and growth, with the increasing internet and mobile penetration, expanding user base, and a growing telecoms market.
The growth recorded in the accessibility of smartphones in Nigeria is a reason for the popularity of smartphone gaming according to Chike, “Africa is a mobile-first gaming ecosystem because of the way mobile phones came to us very rapidly. Not everybody can afford a PC but we know that mobile phones, a lot of people can afford the smallest of mobile phones that can play some very good games. So you realize that in more remote areas, people are playing more mobile games. When it comes to the urban areas, you see a lot of people who play more console games.”
Attractive Tax Incentives
The Nigerian government has put in place a comprehensive package of investment incentives to stimulate private sector investment from within and outside the country. Among them are the Companies Income Tax Act which has been amended to encourage investors and entrepreneurs, Pioneer status gives industries a five-year tax holiday, and tax relief is provided for research and development.
Unlocking the Potential of Web3 Gaming in Nigeria
Nigerians have shown an affinity for crypto and blockchain, leading the world in crypto adoption, with 1 in 3 persons using or owning crypto as of 2020.
Blockchain and crypto also have the potential to play a significant role in the Nigerian gaming market. These technologies can offer decentralized and trustless gaming experiences on mobile devices, giving players more ownership over their in-game assets and identity. “When it comes to digital assets, it’s no news that Africans have embraced blockchain and when it comes to cryptocurrencies, they have a very high consumption of assets. Nigeria leads the way on that.” Chike acknowledges that Nigerians have embraced blockchain and cryptocurrencies, and there is tremendous potential for these technologies to revolutionize the gaming industry in the country.
However, the reception of Web3 gaming is still met with mixed reactions due to the fact that players must purchase NFTs in order to play. To ensure players have a good user experience, Okonkwo believes it’s in the hands of the gaming companies. “One thing I know is that there is a lot of work for the gaming companies to do. It revolves around the gaming companies, not trying to choke NFTs down the throat of gamers. Because it begins to seem like they’re just after people buying their NFTS. You need to also make sure that your game has a very good user experience. It needs to be interesting. It’s about having fun. And if I'm playing a game where I have to buy anything, it should be interesting and fun also to go with it. So a lot of times they don't really pay so much attention to that.”
Furthermore, decentralized finance (DeFi) integration presents another opportunity for Web3 gaming companies to engage with Nigeria's large unbanked population. By integrating DeFi solutions into their games, players can earn cryptocurrencies or other rewards that can be used outside of the game environment and can be used in other DeFi applications such as lending and borrowing.
The Nigerian gaming market has a lot of potential for people looking for investments to support their projects. To help these people, Chike says: “Investment firms and mentors are essential to provide guidance and resources. Providing hands-on support to young entrepreneurs is vital as many lack the experience in the industry to be successful. Funding is also a huge part of the equation for success. Companies such as AWS, Major League Gaming and other Nigerian gaming companies are currently investing in the gaming industry, but there are also many other companies offering support.”
The gaming industry in Nigeria has experienced significant growth in recent years, driven by the rise of mobile gaming and the country's large youth population. Despite challenges such as limited infrastructure and regulatory issues, the industry is projected to continue growing, particularly in the areas of web3 gaming and play-to-earn models. The shift towards social gaming and free-to-play revenue models has also contributed to this growth. As more Nigerians turn to gaming as a potential income source, the industry is creating new job opportunities and attracting increased investment.