As Nigeria’s Software-as-a-Service (SaaS) sector continues to surge, a growing number of startups are venturing into critical sectors like fintech, edtech, insuretech, and healthtech.
However, legal experts have warned that many of these founders may be overlooking crucial regulatory obligations that could put their businesses at risk.
Nigerian tech lawyer and startup advisor, Favour Chinaza Ibe shared her insights on how SaaS founders can avoid legal and licensing disasters that have plagued some startups in the country.
Ibe said: “Nigerian SaaS companies must realise that operating in or enabling regulated sectors makes them part of the regulatory value chain. Not understanding this could lead to compliance failures, penalties, or even shutdowns.”
With high-profile names like Flutterwave, Paystack, Termii, and Sudo Africa reshaping digital infrastructure, the temptation is high for upcoming startups to emulate their rapid growth. But Ibe says skipping legal frameworks can backfire.
She noted that many SaaS founders falsely assume they’re exempt from regulation simply because they’re not directly offering financial services.
But in reality, platforms facilitating payments, KYC processes, salary advances, or healthcare data fall under intense regulatory scrutiny by agencies such as the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), Nigeria Data Protection Commission (NDPC), and others.
“When your product enables regulated activity, you become accountable. You don’t need to be the one issuing loans or providing treatment, just powering those services is enough to trigger legal obligations,” Ibe said.
She stressed that SaaS companies must also structure their pricing and payment models to comply with Nigerian tax laws and consumer protection standards.
Misaligned models, especially those involving auto-renewals, can invite audits or penalties from bodies like the Federal Inland Revenue Service (FIRS) or the Federal Competition and Consumer Protection Commission (FCCPC).
Having consulted with numerous Nigerian startups, Ibe shared real-world examples of companies blindsided by enforcement actions due to gaps in licensing or legal documentation.
“One of my clients, a SaaS provider serving digital lenders was approached by regulators after his clients were flagged for violating lending laws,” she recounted.
“Though he wasn’t directly involved, he had to prove his platform enforced proper disclosures and data protection. The regulators didn’t care that he was ‘just the software guy.”
To avoid such setbacks, Ibe advised SaaS startups to take key steps such as understanding the regulatory landscape of their sector, aligning billing models with legal standards, securing licensing paths early, drafting contracts tailored to Nigerian laws, and investing in legal credibility as part of their growth strategy.
“In today’s environment, due diligence starts earlier and goes deeper,” she said. “Legal readiness isn’t just about avoiding trouble, it shows maturity and builds investor and client trust.”
As SaaS continues to drive digital transformation in Nigeria, Ibe’s message is clear: founders must go beyond the code and proactively embrace legal compliance to build sustainable, fundable, and future-ready businesses.
“Compliance is not a bottleneck,” Ibe concluded. “It’s your competitive advantage.”
