The Nigerian startup space has attracted quite a lot of attention in recent times, and this could be attributed to such events as micro and macro funding rounds in the space, as well as Paystack-like exits.
While the fintech startups have contributed the most to the overall startup performance, other notable categories like Health tech, Insuretech, and agrotech have also played instrumental roles in the success achieved so far.
With the influx of funding rounds and huge investment potential, it is almost impossible to rule out government interference in Nigeria’s rapidly growing startup economy.
Interestingly, the highly anticipated interference by the government is coming much later than expected, however, it is here already.
It started with the partial suspension of cryptocurrency trading using local exchanges.
Then, the FG, through the Central Bank of Nigeria (CBN), instructed Deposit Money Banks (DMB) and other financial institutions to close accounts used in trading cryptocurrency.
Although the Apex Bank faulted the risk associated with transactions in cryptocurrency as the major reason for prohibiting crypto trading, industry experts believe that the CBN move lacks proper evaluation.
In other scenarios, some experts are of the opinion that the move was rather a setback and a very poor approach to regulating the ambitious innovation.
Not only that CBN’s prohibition came at a very wrong time when investors are even more attracted to the startup space.
Regulators were also found of springing up new policies without proper evaluation or perhaps involving key stakeholders from the startup space.
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However, in order to keep the current momentum of doing business in Nigeria, especially from partners and investors alike, startup leaders are reportedly finding lasting solutions.
In the latest development, a Nigeria startup bill that will be collectively reviewed by startup founders and some key government executives is currently underway.
Although still at the conception stage, here are major things you should know about the Federal Government’s proposed bill for startups.
Functional laws (or act) introduce structure to the problems facing Nigeria startups
Apart from the obvious problem attributed to the disruptive policies often introduced by the regulatory bodies, the Nigerian startup faces a handful of other challenges.
Speaking at an ecosystem town hall event hosted by Techarewa, acting CEO of Thrive Agric, Adia Sowho listed weak infrastructure and difficulty accessing capital among Nigerian startups’ problems.
“Many of us have tried to do business with certain countries and institutions, and many of them often cite regulatory uncertainty as the reason they can’t interact with us,” Sowho lamented.
Source: CIO East Africa
Also present at the virtual event were Kola Aina, founding partner of Ventures Platform; Adaeze Sokan, Ventures Platform’s director of strategy & policy and; Iyin Aboyeji, general partner of Future Africa.
On the government’s side were Oswald Guobadia, senior special assistant to the Nigerian president on digital transformation; Ife Adebayo, special assistant to the vice president on innovation and entrepreneurship; and Jon Stever, managing director of Innovation for Policy Foundation (i4Policy), a consultancy.
Having listed the challenges, Kola said that there is an ongoing plan with the government representatives to “co-create an executive bill that will support the growth of our ecosystem.”
While Kola’s comment on a corporate regulatory plan appears to be very ambiguous, it seems to address more of the issues relating to drafting policies.
Also, going by what Sowho said, having a well-evaluated startup act could be a better approach to putting structure to the majority of the problems that that is facing Nigerian startups.
ALSO READ: Nigerian Startups Raised $219 Million In Q1 2021
Citing case studies, Techcabal who also wrote about the development cited that Tunisia and Senegal are two of the African countries to have passed startup laws under “similar rationale” in 2018 and 2019 respectively.
The media platform added that the startup act, more than ever, has become a recognised tool for policy innovation in Africa even as more investment continues to flow in.
“Nigeria startup bill must reflect current reality”
While there are countries that have led this potentially new path, Sowho echoed that it is very important to come up with a startup act to ensure that it reflects the country’s present reality.
“The last thing we want to do is overborrow from the context of other countries… We need the minutiae of this bill to be from our experience and understanding of this country of ours that is just very difficult to compare to other places,” Sowho said.
That said, the current state of Nigeria’s startup is quite complex; unlike other African countries where both local and foreign investors equally drive investment in the startup space, Nigerian startups rely heavily on foreign direct investment (FDI).
With that in place, Nigeria’s startup can be categorically said to operate within a global business environment, where market players tend to stick by international standards, ethics, and ambition.
In this kind of scenario, it is expected of the proposed Nigeria startup bill to address the need for an enabling business condition that can be compared to that of Senegal, Kenya, South Africa, and Tunisia at the very least.
Also, at a more advanced stage, the act must aim at creating such enabling conditions as that of the United States, among other advanced nations of the world.
Startup acts are not made through regular lawmaking processes
Unlike other bills that are passed in the National Assembly, the Startup Act is quite unique as it goes through a different procedure other than the regular lawmaking process.
Here, the act that will govern the operations of Nigerian startups, like other locations, stems from the typical result from entrepreneurs taking the initiative themselves.
According to Stever who presented the timeline of the SMEs and Startup act in Africa (as seen below), “startup acts are not made through regular lawmaking processes but typically result from entrepreneurs taking the initiative themselves.”
Source: Techcabal
This pattern has also played out well in some African countries, including Ghana, which led the pathway in 1980; South Africa, Morroco, Senegal, and about 15 others with the exclusion of Nigeria.
However, Stever also stated a major factor that has aided the success of the startup act in most of the countries. “In the cases where this has been really successful, there has always been a government champion that wants to listen to startups,” Stever added.
Good enough, the town hall meeting had in attendance two representatives of the government who also double as advisers for the government on the subject matter.
In addressing the matter at hand, Guobadia made reference to President Muhammadu Buhari’s new year address, about a need for “an enabling environment to turn [young people’s] passions into ideas that can be supported, groomed and scaled.”
He also made it clear that the administrative agencies have been making moves towards achieving some of the set goals, citing the involvement of the Office of ICT Innovation and Entrepreneurship (OIIE) in tech policy hackathons in Lagos and Abuja as a case study.
Another goal that Guobadia made reference to is that of the Ministry of Digital Economy’s 2020 – 2030 strategy document. According to him, the strategy document supports “ digital entrepreneurs to develop innovative solutions for local and global challenges.”
Also, the plan to come up with a bill for Nigeria startup was also announced by the Ministry of Industry, Trade, and Investment back in April. Then, the Ministry revealed that a draft National Policy on Startups was on the government’s agenda.
Currently in a virtual meeting with The Bulb Africa Partnership who are presenting a mobile money and peer-to-peer payment/market place and showing interest in setting up a tech hub/campus to support tech startups and train youth who are interested in pic.twitter.com/yqaxf9ReGY
— Otunba Niyi Adebayo (@NiyiAdebayo_) January 7, 2021
This was further buttressed by the sitting Minister, Otunba Niyi Adebayo, who claimed to have attended a series of startup-related events via various tweets on several occasions.
The use of the “big tent” approach in achieving actual results
A major point was raised by notable players in the Nigeria startup scene; Mark Essien, Hotels.ng CEO, and Lexi Novitske, a venture capitalist, complained about the government’s nonchalant approach to achieving actual results.
According to them, “We have been here before,” referring to the fact that no major success was achieved in the past when the subject matter was initially addressed.
Admitting to the subtle allegation, Guobadia said the presidency had spent time reviewing different approaches it can use to achieve better results. In his words, the Federal Government “have identified a process problem, which will be solved by a “big tent” approach.”
“We are building a fabric to knit all [relevant] agencies into this initiative. We took the effort to avoid having competing conversations,” Guobadia said.
ALSO READ: Top 5 Financial Moments Of 2020 That Shook The Nigerian Startup Space
Furthermore, Kola Aina’s presentation titled overview of Nigeria startup act process indicates that the presidency plans to introduce a “draft legislation” as soon as August.
According to Kola’s presentation, the new draft will be a collective effort of the ecosystem and the presidency, pushing and building a “big tent” together.
Source: Techcabal
Kola added that both integral parties have been in talks for a while now. “I am very aware that there is already an ongoing consultation with the Lagos state government,” he said, adding that a presidential advisory group on the proposed bill has been having meetings as well.
Optimistic about what’s visible, Iyin Aboyeji of Future Africa said that the plans are still evolving now, but he is optimistic that this time could be different.
“I think versus other times, we have grown to such a size and scale that is easy to see what the potential benefits of fixing this issue could be,” He said.
Source: Techcabal
Iyin also buttressed Sowho’s point, saying that it is of great importance for as many startups as possible to participate in order to achieve “a Nigeria startup bill that works.” “This will require sweat from all of us and we should be ready to put the work in,” Iyin added.
Other than the startups, the existing committee members have also asked interested people to volunteer towards the effort by sending an email to partners@venturesplatform.com, or provide feedback through this form.
While the government has always been perceived to be an enemy of progress for startups, this latest development might paint them in a different light, especially on the media front and even for both local and foreign investors.
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