The US Trade Representative's Foreign Trade Barriers report has highlighted the operational and regulatory challenges faced by US tech investors in Nigeria and Kenya. The report cites longstanding issues around corruption, intellectual property (IP) violations, and new digital tax regimes targeting foreign firms as major obstacles to investment efforts in these African tech hubs.

According to the report, Nigeria and Kenya have failed to clamp down on corruption and enforce IP protection policies, despite assurances from both governments. In Nigeria, counterfeit software, pirated music and video content, and widespread online copyright infringement are undercutting licensed operators. The report notes that IP enforcement remains inadequate due to chronically insufficient resources for enforcement agencies, porous borders, entrenched trafficking systems that make enforcement difficult, and corruption.

US companies operating in Nigeria also experience difficulties in day-to-day operations as a result of inappropriate demands from officials for 'facilitative' payments. Political infighting and a lack of judicial capacity in the country remain hurdles to anti-corruption reform. In Kenya, while progress has been made in supporting its startup ecosystem, concerns around bribery and IP protection persist, particularly in the digital space.

More troubling for investors is the competitive disadvantage faced by US firms that abide by stricter legal and ethical standards. Many reported they routinely lose out to foreign competitors willing to bend the rules or pay bribes to secure contracts. The report states that US firms continue to report direct and indirect requests for bribes from multiple levels of the Kenyan Government.

Despite signing the World Intellectual Property Organization (WIPO) Copyright Treaty nearly 30 years ago, Kenya has yet to ratify it, creating a regulatory gap that enables widespread copyright infringement with minimal consequences. The report's findings come at a time when President Donald Trump has threatened to upend the global trade and investment climate with higher tariffs, giving countries including Nigeria and Kenya until June to eliminate barriers imposed on US goods and services.

In addition to corruption and IP violations, changing tax regimes in both countries are also a source of concern for US digital service providers like Amazon, Google, Meta, and Netflix. In December 2024, Kenya replaced its controversial digital services tax with a new "significant economic presence tax"—a 3% levy on gross revenues earned by non-resident companies through digital platforms. The law applies to foreign companies that do not maintain a permanent physical presence in the country and earn more than KES5 million ($38,800) annually from Kenyan users.

In Nigeria, the government has taken a more expansive approach, subjecting non-resident digital companies to both income and VAT taxes on services provided to Nigerian customers since 2020. The report raises concerns over rising compliance costs and the risk of regulatory overreach. As the global tech industry continues to expand into Africa, the challenges faced by US investors in Nigeria and Kenya serve as a stark reminder of the need for regulatory reforms and stronger enforcement mechanisms to protect intellectual property and promote fair competition.

The implications of these challenges are far-reaching, with potential consequences for the growth of the tech industry in Africa and the global economy at large. As the US Trade Representative's report highlights, addressing these issues will require sustained efforts from governments, investors, and stakeholders to create a more conducive business environment that supports innovation and entrepreneurship.