US tech investors are facing growing operational and regulatory challenges in Nigeria and Kenya, according to the US Trade Representative’s (USTR) Foreign Trade Barriers report. Longstanding concerns around corruption, intellectual property (IP) violations, and newly introduced digital tax regimes are complicating investment efforts in two of Africa’s largest tech hubs.
The report highlights persistent issues in both countries, noting a failure to curb corruption and strengthen IP protection despite promises from their respective governments. Jamieson L. Greer, the USTR, pointed to rampant counterfeit software, pirated content, and widespread online copyright violations undermining licensed businesses in Nigeria.
“IP enforcement remains inadequate due to chronically insufficient resources, porous borders, entrenched trafficking systems, and pervasive corruption,” Greer said.
For US firms operating in Nigeria, the report describes ongoing difficulties, citing demands from officials for “facilitative” payments, a euphemism for bribes. Political infighting and weak judicial systems are further obstacles to meaningful anti-corruption reform in the country.
Meanwhile, while Kenya has made strides in supporting its startup ecosystem, the USTR report flagged continued bribery issues and inadequate IP protections in the digital sector. US companies in Kenya, many of which adhere to stricter legal and ethical standards, often find themselves at a disadvantage. Foreign competitors, willing to bend or break the rules, frequently outbid them for contracts.
“US firms continue to report direct and indirect requests for bribes from multiple levels of the Kenyan Government,” the USTR stated.
Kenya’s failure to ratify the World Intellectual Property Organization (WIPO) Copyright Treaty, despite signing it nearly three decades ago, has created a regulatory loophole that allows rampant copyright infringement with few consequences.
In addition to corruption and IP challenges, the recent overhaul of tax policies in both countries is another source of concern for US digital service providers, including Amazon, Google, Meta, and Netflix.
Kenya, in December 2024, replaced its controversial digital services tax with a “significant economic presence tax,” levying 3% on gross revenues from foreign companies earning over KES5 million ($38,800) annually via digital platforms. While the tax applies to companies without a physical presence in Kenya, platforms like Netflix and Microsoft are now affected, raising concerns about higher compliance costs and potential overregulation.
Nigeria has adopted a more comprehensive approach since 2020, imposing both income and VAT taxes on foreign digital companies providing services to Nigerian users. These changes in tax policy further complicate the operational landscape for US firms in the region.
The USTR’s report arrives as President Donald Trump has threatened to escalate global trade tensions with higher tariffs. While he has temporarily suspended the tariffs, countries like Nigeria and Kenya have until June to remove barriers on US goods and services or face potential penalties.