Understanding AI Liability: Who’s Responsible When Algorithms Err? – New Technology

In 2024, a Stanford University study revealed a startling
statistic: popular AI chatbots hallucinated between 58% and 82% of
the time when responding to legal queries. Yet, despite this
alarming error rate, lawyers around the world continue to rely on
artificial intelligence to draft motions, conduct research, and
even prepare pleadings. The consequences of such reliance were laid
bare in June 2023, when New York attorneys Steven Schwartz and
Peter LoDuca were sanctioned by a federal court for submitting a
legal brief written by ChatGPT, one that confidently cited
non-existent judicial authorities and fabricated case law. Judge P.
Kevin Castel found that the lawyers had “abandoned their
responsibilities,” fining them and ordering them to notify
every judge falsely cited in their AI-generated filing.

This incident is not an isolated embarrassment; it is a
cautionary tale. From healthcare algorithms that systematically
disadvantaged Black patients in U.S. hospitals, to AI-powered
financial systems denying credit without explanation, artificial
intelligence has already proven capable of scaling both efficiency
and error at unprecedented speed. Whether in our phones, offices,
or homes, AI silently assists our daily lives, yet when it fails,
the law is often unprepared.

This brings us to a critical and timely question: Who is legally
responsible when AI gets it wrong? When an autonomous system
misdiagnoses a patient, rejects a loan application, or generates
false legal authority, does liability rest with the developer, the
data provider, the deploying institution, or the end user who
relied on the output?

In this article, we unpack the emerging doctrine of AI liability
through the lens of Nigeria’s evolving legal and technological
landscape. We will explore the existing frameworks, the gaps in
regulation, the potential parties who may bear responsibility and
most importantly, offer practical guidance for innovators, legal
practitioners and policymakers navigating a world where algorithms
now make decisions once reserved for humans.

The Rise of AI in Nigeria and the Need for Liability
Clarity

Nigeria’s tech ecosystem is thriving with over 200 million
people and a youthful population. We are seeing AI applications in
banking (think fraud detection by apps like Opay), healthcare
(AI-powered telemedicine in the country) and even governance
(predictive analytics for traffic management in megacities).
However, errors in AI systems, often called “algorithmic
errors”, can lead to financial losses, injuries or even
fatalities. Liability refers to the legal responsibility for these
harms, ensuring victims can seek redress.

In Nigeria, where trust in technology is high but legal
protections lag, understanding liability is crucial. Without it,
businesses risk lawsuits and consumers face uncompensated harms. As
of 2025, Nigeria lacks a dedicated AI law, unlike the European
Union’s AI Act, which categorises AI risks and imposes strict
liabilities. However, with Nigeria signing the Bletchley
Declaration on AI Safety in 2023, along with 27 other countries,
agreeing to address AI risks and develop risk-based policies, it
mounts pressure for reforms.

Also Read: When Machines Fail: Understanding Liability In
AI-Driven Medical Errors Within Nigeria’s Healthcare
System

Nigeria’s Current Legal Framework for AI Liability

While no specific statute governs AI in Nigeria, several laws
apply indirectly. The Nigeria Data Protection Act (NDPA) 2023 is
pivotal, as AI often relies on vast datasets. Under the NDPA,
enforced by the Nigeria Data Protection Commission (NDPC),
organisations must ensure data processing is lawful, transparent
and secure. If an AI system errs due to biased or mishandled data,
controllers could face liability for breaches, with fines up to 2%
of annual turnover. The NDPA’s General Application and
Implementation Directive (GAID) of March 2025 further guides
compliance, emphasising accountability in automated decisions.

Beyond data protection, general principles from tort, contract
and consumer protection laws fill the void:

• Tort Law (Negligence and Nuisance): Rooted in common law, as
  seen in cases like Donoghue v. Stevenson (1932),
  which influences Nigerian jurisprudence, liability arises if
  someone owes a duty of care, breaches it, and causes harm. For AI,
  if a developer fails to test an algorithm adequately, leading to
  errors, that could be negligent. Nigerian courts have applied this
  in product liability cases, such as defective goods causing
  injury.




• Contract Law: If AI is part of a service agreement, breaches
  can lead to claims. For instance, a Nigerian bank using AI for loan
  approvals must ensure it doesn’t violate contractual terms of
  fairness. The Evidence Act 2011 recognises electronic evidence,
  aiding proofs in AI-related disputes.




• Product Liability: Under the Consumer Protection Council Act
  and standards from the Standards Organisation of Nigeria (SON),
  AI-embedded products (like smart devices) are treated as goods. If
  defective, manufacturers are strictly liable, meaning no need to
  prove negligence, just that the product caused harm. This echoes
  global trends but is under-tested in AI contexts here.




• Intellectual Property and Other Laws: The Copyright Act 2022
  and Patents and Designs Act touch on AI-generated works, but
  ownership remains unclear, potentially complicating liability if AI
  “creates” infringing content.

Who Bears Responsibility? Key Parties in AI Liability

Determining fault in AI errs involves multiple actors. Here is a
breakdown relevant to Nigerian scenarios:

1. Developers and Manufacturers: Often the primary targets. If an
   AI algorithm is poorly designed (e.g., trained on biased data
   reflecting Nigeria’s diverse ethnicities), developers could be
   liable under negligence. Globally, cases like Uber’s 2018
   self-driving car fatality held the company accountable; in Nigeria,
   similar logic applies via tort law.




2. Deployers and Operators: Businesses integrating AI, such as a
   Lagos fintech using chatbots for customer service. If the AI errs
   (e.g., giving wrong financial advice), the company is vicariously
   liable for its “agent.”




3. Users and End-Consumers: In some cases, misuse by users (e.g.,
   overriding AI safety features in a drone) shifts blame. However, if
   the AI is marketed as foolproof, strict liability protects
   consumers.

Challenges in Enforcing AI Liability in Nigeria

Several hurdles exist:

• Attribution of Fault: AI’s opacity makes proving causation
  difficult. Who “caused” an error; the code, the data, or
  external factors.




• Jurisdictional Issues: With global AI firms like Google
  operating here, enforcing judgments across borders is tricky,
  though treaties like the Hague Convention help.




• Regulatory Gaps: No mandatory AI audits or risk assessments,
  unlike the EU. This leaves victims relying on slow court
  processes.

Internationally, the EU AI Act 2021 imposes high-risk AI
requirements, including transparency and human oversight, with
fines up to €35 million. The US focuses on sector-specific
rules, while Africa’s landscape varies; South Africa and Egypt
lead with strategies. Nigeria could adopt a hybrid: a national AI
policy incorporating global best practices.

Conclusively, artificial intelligence is no longer a distant
concept; in fact, it represents both the present and the future of
the global community, one in which Nigeria is certainly not left
behind. It is already shaping how Nigerians work, trade and
interact. Yet, as we embrace the benefits of AI, we must also
prepare for its legal and ethical implications. Ensuring
accountability when algorithms err is essential to maintaining
public trust and safeguarding rights in our digital age.

Recommendations for Nigerians:

• For Businesses: Conduct AI impact assessments, include
  indemnity clauses in contracts, and comply with NDPA. Train staff
  on AI risks.




• For Individuals: Read the terms of service for AI tools, report
  errors to regulators like the Nigeria Data Protection Commission,
  and seek legal advice promptly.




• For Policymakers: Enact an AI Act focusing on liability,
  drawing from the EU AI Act 2021 while suiting our context,
  emphasising affordability for startups.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.