The Nigeria startup space has experienced tremendous growth. With growing opportunities and better infrastructure in sight, companies in fintech, edutech, healthtech, and agrictech have emerged. This has attracted investment opportunities both nationally and internationally.
According to a news report by McKinsey, new startups in Nigeria and other African countries have increased threefold between 2020 and 2021. Also, a report by Statista disclosed an estimated amount of 3,300 tech startups in Nigeria for 2021. The report reveals further that half of the startups were from the fintech space.
The Nigeria startup bill was officially passed as an act on the 19th of October by the president of the Federal Republic of Nigeria, President Muhammadu Buhari.
What does this mean?
This means that the bill has officially become law in Nigeria and startups in Nigeria would need to abide by everything stated in the bill.
What is the tech startup bill?
The tech startup bill is a project that was initiated by the startup industry and stakeholders to harness the potential of the digital economy. Also, the tech startup bill, which is now a law, aims to provide clear and planned laws and regulations for all tech startups in Nigeria.
It is one of the laws that have seen the collaboration between the public and private sectors to create a policy that guides the ecosystem.
Why does the startup bill matter?
Before the outbreak of the Covid-19 pandemic, the startup space in Nigeria wasn’t doing well. However, in 2020 and during the pandemic lockdowns began a startup launch boom in the country. The startups began attracting investment opportunities worldwide.
Moreso, the tech ecosystem has been critical to the development of the country. In 2020, only the fintech space in Nigeria recorded an estimated revenue of between $4bn and $6bn. And the fintech space keeps expanding, disrupting the presence of traditional banks.
Meanwhile, note that the Nigerian tech startup ecosystem has been engulfed in legal uncertainties as stakeholders pointed out that the executive bill is a duplication and encroachment on other existing laws in the land.
The country’s tech startup industry also faces a lack of basic amenities such as constant power supply and limited funding. It also faced many regulatory hurdles.
Also, there were issues with the over-saturation of startups, high startup death, aggressive government policies, funding challenges, high cost of doing business and others.
Following the challenges, Nigeria’s startup tech ecosystem lacked the needed policy to drive development and growth.
Consequently, there became a need for an alignment between tech startups and government policies to promote growth and development in the ecosystem.
Therefore, the startup ecosystem needed to be protected, hence the creation of the startup bill.
So, the startup bill matters because it would catalyze growth in the Nigerian tech startup ecosystem.
How the journey started:
The presidency introduced the tech startup bill in 2021.
The first draft was officially validated in July 2021 by the ecosystem leaders, stakeholders and presidential groups.
In August 2021, a meeting was hosted by the presidency for consultation and validation of the second draft of the startup bill.
In September of the same year, the final draft of the startup bill was produced.
The bill was sent to the president in October 2021, which then submitted the statement to the national assembly.
The national assembly received the bill in 2021 and in June 2022, there was a national assembly public hearing of the bill.
In July, the bill was officially passed.
And in October 2022, the bill was signed as law.
Who is covered by the startup bill?
The startup bill applies to all companies that are incorporated under the Companies and Allied Matters Act. It also applies to companies and organisations that label themselves as a startup and their actions affect the ecosystem of startups in Nigeria.
Benefits of the startup bill
- The bill will provide a legal and institutional framework for the development of startups in Nigeria.
- Also, it will provide an enabling environment for the establishment, development, and operation of startups in Nigeria.
- It will foster the development and growth of technology-related talent.
- And it will position Nigeria’s startup ecosystem as the leading digital technology centre in Africa.
Implications for the Nigeria tech startup ecosystem
It is with no doubt that the startup bill will be a catalyst for growth in the tech ecosystem.
The law covers all the key areas which drive the growth and scalability of a startup in Nigeria.
Areas like incentives, startup portals and regulatory support from the likes of NITDA.
Also, with its aim to create an enabling environment, it would boost the rise in local innovation, leading to job opportunities in the country.
There will also be early-stage growth for startups, they will have access to necessary resources like seed funds, incentives and even relevant taxes.
An enabling environment will attract more foreign investors to the tech ecosystem in Nigeria.
The new bill will help with better collaboration between industries in the country, and even with the public and private sectors.
Also, the new bill will mean new products and services from startups and enhanced productivity.
The digitalisation of the Nigerian economy will be affected by the bill. There will be an expansion of the digital economy, creating more social and economic opportunities.
In addition, it will bring more young people into developing innovative ideas and building their startups.
Other implications include;
- Cultivating an inventive youth generation that uses innovation to address and resolve both African and global problems, would promote innovation in Nigeria.
- The startup law will ensure wage stability, particularly for today’s tech-savvy and creative young.
- This bill will enhance and sustain youth income, which will strengthen the economy of the nation, the continent, and the entire world.
- It also becomes the case because policies that encourage innovation, creativity, and the growth of the entrepreneurial spirit will tremendously empower many Gen Zs and Millennials. The measure also includes provisions for talent development and training inside Nigeria’s startup ecosystem.
- Startups can benefit from training and capacity-building programs through this, which will help them scale.
- Furthermore, startup founders will receive the essential professional mentoring they need as well as education on how to run and build a startup into a unicorn.
- In addition to providing seed money to help firms grow, the bill will connect them with investors.
- Government funds are available to startups, and they can also use credit guarantee programs for financial support.
- Nigerian entrepreneurs can now receive tax incentives from the government thanks to the startup bill, which would aid in their sustainability.
Regulatory supports: National council, NITDA and Council agent
The national council and National Information Technology Development Agency (NITDA) serves are supporting bodies to the new act.
With the multiple agencies set up in Nigeria, it will become a challenge, to set up a new agency. Hence, drafters of the Act considered this and administered the roles.
The national council is in charge of administering the provision of the act. Their role includes the following;
- Formulating and providing general policy guidelines for the realisation of the objectives of the Act
- Giving overall direction for the harmonisation of laws and regulations that affect startups
- And they will ensure the monitoring and evaluation of the regulatory framework to encourage the development of startups in Nigeria.
The national council will include 4 members of the startup ecosystem alongside the following;
- President of the Federal Republic of Nigeria;
- The Vice-President of the Federal Republic of Nigeria;
- Minister for Communications and Digital Economy;
- The Minister responsible for Finance, Budget and National Planning;
- Minister responsible for Industry, Trade and Investment;
- The Minister for Science, Technology and Innovation;
- Governor of the Central Bank of Nigeria;
- The Director-General of NITDA;
- A representative of the Nigeria Computer Society;
- And a representative of the Computer Professionals (Registration Council of Nigeria)
While NITDA is serving as the Secretariat to the Council, the role of NITDA is a very important one especially as it already plays an existing role in developing programs and policies that drive the growth of technology and tech-enabled businesses in Nigeria.
NITDA’s responsibility as secretariat is to implement the provision of the Act. Also, it will collaborate with other MDAS bodies to ensure that startups get the incentives provided for them under the Act.
Key points from the Act
According to the Act, before a company can label as a startup, it has to be in existence for not more than 10 years from the date of its incorporation.
Its objective should be the creation, innovation, production, improvement, and commercialization of a digital technology innovative product or process
Also, before a company can be labelled a startup, it must obtain a startup certificate from the Federal Ministry of Communications and Digital Economy’s portal. And it must be registered as a limited liability company and 51% of its shares should be held by Nigerians.
The startups will have access to incentives that aim at providing relief for them.
Also, the startup should have at least 10 workers, 60% of them with work experience. Those within 3 years of graduating from school are entitled to tax breaks and incentives.
To reduce the cost of running a business, the Act introduced various tax incentives. Startups in certain circumstances may be exempted from the payment of income tax.
Also, to encourage more local and international investment, the Act introduced incentives. It included incentives that allow tax credits of up to 30% of investment and free repatriation of funds for foreign investors.
The Act includes several provisions designed to encourage startups’ access to capital.
Also, the Act established the Nigeria Sovereign Investment Authority’s Startup Investment Seed Fund14 (Fund) (NSIA).
Each year, the Fund must receive at least N10,000,000,000 (ten billion Naira) in contributions. The Fund will be used to support technological hubs, accelerators, incubators, and early-stage entrepreneurs by financing their operations.
The Act also established a Credit Guarantee Scheme and contains provisions that ensure access to grants and lending facilities managed by the Central Bank of Nigeria (CBN), the Bank of Industry, and other organizations with legal authority to support SMEs and business owners.
Interestingly, the Nigeria startup bill joins other countries like Tunisia, Keyan, and Senegal to protect and promote development for startups in their country.
There is a need for continuity of the implementation of the Act. And this can only be possible when the tech ecosystem participates and engage in areas that bring it to life.
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