US tech investors warn of corruption, tax risks in Kenya and Nigeria

US tech investors face operational and regulatory challenges in Nigeria and Kenya, as longstanding issues around corruption, intellectual property (IP) violations and new digital tax regimes targeting foreign firms frustrate investment efforts, according to the US Trade Representative’s Foreign Trade Barriers report.

The report faulted the two countries—among the top tech hubs in Africa—over failure to clamp down on corruption and enforce IP protection policies despite assurances from both governments. Jamieson L. Greer, the USTR, said counterfeit software, pirated music and video content, and widespread online copyright infringement are undercutting licensed operators in Nigeria.  

“IP enforcement remains inadequate due to chronically insufficient resources for enforcement agencies, porous borders, entrenched trafficking systems that make enforcement difficult, and corruption,” he said.

US companies operating in Nigeria “experience difficulties in day-to-day operations as a result of inappropriate demands from officials for ‘facilitative’ payments,” the report said. Political infighting and a lack of judicial capacity in the country remains hurdles to anti-corruption reform.

While Kenya has made progress in supporting its startup ecosystem, the USTR pointed out concerns around bribery and IP protection—particularly in the digital space—persist. 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

“US firms continue to report direct and indirect requests for bribes from multiple levels of the Kenyan Government,” the US Trade Representative said.

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.

Changing tax regimes

The recent changes to both countries’ tax regimes are also another 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.

Platforms like Netflix and Microsoft are now subject to the tax, raising concerns over rising compliance costs and the risk of regulatory overreach. In Nigeria, the government has taken a more expansive approach. Since 2020, non-resident digital companies have been subject to both income and VAT taxes on services provided to Nigerian customers.

The report comes when President Donald Trump has threatened to upend the global trade and investment climate with higher tariffs. Trump has paused the tariffs, giving countries including Nigeria and Kenya until June to eliminate barriers imposed on US goods and services.