The advancement of the tech industry in Nigeria has made a significant contribution to the development of the Nigerian economy. According to the 2022 Q2 GDP report by the National Bureau of Statistics, the tech industry has surpassed the oil sector by contributing 18.66% to the country’s gross domestic product (GDP). This massive growth started in 2020 when the industry contributed 15 percent to the country’s GDP. In 2021, Nigerian start-ups raised 1.37 billion dollars of the four billion dollars raised by startups in Africa. However, this immense development added to the growing call to regulate this sector by providing a legal and institutional framework to eradicate the legal hurdles that have trailed the tech startup industry in the past years. To address these complexities and bridge the interaction gap between startups and regulators, the Nigeria Startup Bill draft was created in 2021. The bill was recently approved in July 2022 by the Nigerian Senate and is currently at the House of Representatives to pass through the third reading. If the House of Representatives approves the Bill, the Bill will be sent to the President for his assent and will thus become law. Below is a breakdown of some major provisions in the Startup Bill.

MAJOR PROVISIONS IN THE NIGERIA STARTUP BILL

1. Establishment of an Institutional Framework The Bill establishes the National Council for Digital Innovation and Entrepreneurship (The Council), which shall consist of 12 members to be headed by the President of the Federal Republic of Nigeria who shall be the Chairman of the Council. The Council is to be saddled with the responsibility of formulation and evaluation of general policy, and guidelines supporting startup programmes through grants and incentives which will enhance the development of digital technology and provide an enabling environment for startups, investors, incubators, and accelerators in Nigeria.

2. Establishment of the Secretariat of the Council The Secretariat of the Council has a vital role in the realization of the intent of the Bill and in settling an enabling environment for startups in Nigeria. The Bill establishes the Secretariat of the Council, and the Nigeria Information Technology Development Agency (NITDA) shall serve as the Secretariat of the Council. Some of the major responsibilities of the Council shall include:

a. manage the process of labeling a startup.

b. establish public online platforms and other platforms to provide access to information on matters pertaining to the establishment and development of a startup, incubation, acceleration, and venture building programmes, and access to fiscal and non-fiscal support.

3. Establishment of Startup Support and Engagement Portal The Startup Support and Engagement Portal (“the portal”) shall be a public online platform to provide access to information on matters pertaining to the establishment, development, and labeling of a startup; incubation and acceleration programmes; and facilitating and providing startups with access to angel investors and VCs through collaboration with the federal government. Furthermore, the portal shall facilitate access to federal government incentives and grants; fiscal and non-fiscal support; and several other opportunities.

4. Startup Consultative Forum For ease of collaboration and partnership among industry stakeholders within the Nigerian tech startup ecosystem, the Bill provides for the creation of a startup forum by the Secretariat subject to the approval of the Council. The Forum shall be a consultative body to be set up on the Startup portal to provide information sharing on available local capabilities, companies that qualify to be labeled as a startup, relevant incentives that apply to a startup, and policy proposals that may be relevant to the Nigerian startup ecosystem. The Forum shall consist of industry stakeholders and representatives registered on the Startup Portal.

5. Labelling of a Startup The Bill defined a startup as a company in existence for not more than 10 years, with its objectives being the creation, innovation, production, development, or adoption of a unique digital technology innovative product, service, or process. This means that a limited liability tech company registered under CAMA that has been in existence for a period of not more than 10 years with an objective to innovate, develop, produce, improve, and commercialize innovative products or processes can apply for a startup label. In addition to the eligibility for grant of a startup label, there must be at least one Nigerian as a founder or Co-founder of the startup, provided that the Nigerian founder or co-founder will share from profit or revenue from the sale of shares. A qualified startup will be issued a labeling certificate by the Secretariat and the startup label shall be valid for 10 years from the date of issuance.

Benefits of a labeled Startup.

a. Access to finance, information, innovation, and the global market.

b. Opportunity to participate in beneficial challenges and programs including, incubation and accelerator programs, showcases, pitch competitions, fellowships, and other related programs.

c. Opportunity to access and apply for various contracts, schemes, incentives, grants, and loans granted to startups by the Federal Government.

d. Access to tools and resources and the opportunity to interact and foster relations with angel investors, venture capitalists, incubators, and accelerators.

e. A labelled startup shall benefit from tax reliefs and other fiscal incentives.

f. A labelled startup shall benefit from fast-track procedure on any transactions, registration or obtaining of licenses from regulators like Securities and Exchange Commission (SEC), Corporate Affairs Commission (CAC), National Office for Technology Acquisition and Promotion (NOTAP), Nigerian Copyright Commission and the Trademarks, Patent and Design Registries. This fast-track and support procedure shall be put in place by the Secretariat through collaborations with the aforementioned regulators.

6. Establishment of Startup Investment seed Fund The Bill provides for the establishment of the Startup Investment Seed fund (“the Fund”) which is to be managed by the Nigerian Sovereign Investment Authority. The Fund shall apply to labeled startups, technology laboratories, accelerators, incubators, and hubs. This seed Fund will enable access to finance and tech relief for startups to easily grow their business, thereby making it easy for startups to fund their operations by leveraging on grants and loans to be made available to them.

7. Training, Capacity Building, and Talent Development The Bill introduces training and capacity-building programmes for tech startups. This will enable startups and their employees to have access to trainings facilitated by the Industrial Training Fund and any organization that partners with the Secretariat. In addition, the Bill provides for Talent Development and Academic Research Institutions’ support in collaboration with the Nigeria University Commission, Universities, and Polytechnics within Nigeria to develop modules, programmes, and hold workshops. The implication of this is that startups and their employees will have access to educational programs that will empower them with the right skill set and enhance their competitiveness in the Tech Ecosystem.

8. Tax and Fiscal Incentives The Bill further introduces various tax reliefs and incentives for labeled startups, employees of a labeled startup, investors investing in a labeled startup, incubators, and accelerators. The tax reliefs and incentives that the Bill stipulates are as follows:

a. A labeled startup captured under the extant Pioneer Status Incentives (PSI) can apply to Nigerian Investment Promotion Commission (NIPC) for grant of incentives and tax reliefs captured under the PSI Scheme.rivate network (VPN) to enhance your online privacy and encrypt your internet connection.

b. A labeled startup may be entitled to additional exemption from the payment of income tax or any other tax chargeable on its income or revenue.

c. Labelled startups with at least ten employees where 60% of the employees have no prior work experience within three years of graduation or any vocational program shall have access to percentage-based tax relief.

d. National policy shall be developed by the FG to enable angel investors, venture capitalists, private equity funds, accelerators, or incubators that invest in a labeled startup to be entitled to an investment tax credit equivalent to 30% of the investment in the labeled startup.

e. An eligible employee of a labeled startup shall be entitled to a personal income tax exemption of 35% on the income of the employee for a period of two years from the date of engagement by a labeled startup.

9. Support with Regulators. The bill enhances regulatory support for startups. It provides for collaboration with regulatory bodies to facilitate seamless processes for labelled startups. A labelled startup shall benefit from fast-track procedures on any transactions, registrations, or obtaining of licenses from regulatory bodies like SEC, CAC, NOTAP, Nigerian Copyright Commission, and the Trademarks, Patent, and Design Registries. This fast-track procedure will be implemented by the Secretariat in collaboration with the aforementioned regulators.

10. Establishment of Incubation program The Bill also provides for accelerator and incubator programmes that will grow the startup ecosystem. The Bill stipulates that national accelerator and incubator policies are to be developed by the Council for the establishment and development of accelerators and incubators. These incubators will help startups solve operations that they are bound to face in running their business, provide workspace at little or no cost, and serve as breeding hubs for the startups.

Conclusion

The major objective of this Startup Bill is to position the Nigerian tech ecosystem strategically, to enhance and foster digital technology innovation entrepreneurship in Nigeria, and to position Nigeria’s startup ecosystem as the leading digital technology center in Africa. When the Bill receives presidential assent and is passed into law, it will provide an enabling environment for investors, incubators, and accelerators (both local and international), enhance the establishment, development, and operation of startups in Nigeria, and position Nigeria as a hub of excellent innovators with cutting-edge skills and exportable capacity.