In previous years, reports have shown that Startups in Nigeria have a high failure rate which can be attributed to the unfavourable government policies, regulatory bottlenecks, lack of funding opportunities and the high cost of doing business in Nigeria etc. To alter this narrative, it was imperative that a highly effective institutional and legal framework is put in place to strengthen and equip Startups. To this end, the introduction and enactment of the Nigeria Startup Act 2022, has heralded a new dawn for Startups and the tech ecosystem.
Some of the main objectives of the Act include:
1. Provide an enabling environment for the development and operation of Startups in Nigeria.
2. Foster the development and growth of Technology-related talents in the Nigeria.
3. Position Nigeria’s Tech Ecosystem as the leading Technology Hub in Africa.
To achieve the above listed objectives, the Act makes provisions for the following:
1. The Council for Digital Innovation and Entrepreneurship.
2. The Startup Support and Engagement Portal.
3. Startup labelling.
4. Startup Investment Seed Fund.
5. Training, capacity building and talent development.
6. Tax and Fiscal Incentives.
7. Regulations Support.
8. Accelerators & Incubations.
9. Clusters, Hubs, Innovation Park and Technology Development Zones.
EXAMININING SOME OF THE SALIENT PROVISIONS IN THE NIGERIA STARTUP ACT, 2022:
1. The Council for Digital Innovation and Entrepreneurship: The Act makes provision for the establishment of a Corporate Body whose main duty is to formulate guidelines and policy for the attainment of the objectives of the Act. The Body comprises of individuals from different spheres ranging from Trade and Investments, Central Bank of Nigeria, Ministry of Science and Technology, Nigeria Computer Society and also a member from the Computer Professionals etc. The Membership of the Council as provided under the Act is commendable and thoughtful. The inclusion would allow the members give valuable and diversified professional inputs with regards to issues and challenges that affect Startups in Nigeria.
2. The Startup Support and Engagement Portal: The Startup Portal is an innovation under the Act established by the Council to easily facilitate registrations of Startups with appropriate Ministries and Departments. This Portal aims to remove the unnecessary bureaucracy and delays associated with interactions between Startups, the Federal Government, private institutions, angel investors, venture capitalists, incubators, accelerators and other relevant authorities
3. Startup Labelling/Access to funding for Startups: By virtue of the provisions of the Act, Startups can now easily access funding and loans from the Central Bank of Nigeria. To benefit from this innovative incentive, Startup founders must ensure that their Startups are labelled under the Act as Startups in Nigeria. Startup labelling under the Act is the issuance of a certificate by the Secretariat to a Startup after meeting certain stipulated requirements. A Startup under the Act is defined 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.
What are the Criteria for Startup Labelling?
To be labelled as a Startup, the following criteria provided under the Nigeria Startup Act of 2022 must be met:
a) Startup must be registered as a Limited Liability Company under the Companies and Allied Matters Act and has been in existence for a period not more than 10 years from the date of incorporation;
b) The objects of the Startup must be innovation, development, production, improvement, and commercialization of a digital technology innovative product or process;
c) It is a holder or repository of a product or process of digital technology, or the owner or author of a registered software;
d) It has at least one-third local shareholding held by one or more Nigerians as founder or co-founder of the Startup
e) Businesses registered as sole proprietorship or partnership as the case may be, are not left out. However, for a sole proprietorship or partnership to be labelled as a Startup, it must satisfy the preceding conditions highlighted above.
Flowing from the above, Startups who meet the requirements and are eligible to be labelled are required to apply for the Startup label on the Startup Portal and pay the requisite fees by following the procedures as laid down under the Act.
4. Training capacity Building: Another innovation under the Act is the promotion and development of technology related talents in the Country. This will be achieved through collaboration by the government with both the public and private sectors. The Act also directs the Secretariat to liaise with the Industrial Training Fund (ITF) to facilitate training programs for Startup entrepreneurs and their employees. The Act also provides that the Secretariat shall establish various centres for the acquisition of digital technology in the six geopolitical zones of Nigeria for the promotion of digital technology utilisation, strengthening of digital technology management capability and information systems.
5. Tax and Other Incentives: The Nigeria Startup Act 2022 provides for tax and other incentives which shall be beneficial to Startups. The significance of these provisions under the Act cannot be overemphasized; as Startups can now conveniently carryon business in a more business friendly and growth enabling ecosystem. All labelled Startups that fall under industries captured under the extant Pioneer Status Incentives (PSI) Scheme can apply through the Secretariat and receive expeditious approval from the Nigerian Investment Promotion Commission (NIPC) for the grant of the tax reliefs and incentives under the PSI Scheme as well as their Investors. Some of such incentives are:
a) Pioneer status Incentive
b) Export Incentive
c) Industrial Training Fund Exemption
d) Research and Development Relief.
e) Access to Credit Guarantee Schemes.
These incentives will help reduce the cost and burdens of doing business by Startups in Nigeria as well as encourage more Start-ups and Investors to venture into the Tech Ecosystem.
6. Protection of Intellectual property Rights: The Act makes provisions for ease of registration of Intellectual Property Rights both local and international for Startups. Also, the secretariat has a duty to ensure that the Intellectual Property Rights of Start-ups are not infringed. This would ensure that the Start-up benefit from the commercialization of their intellectual works and encourage more start-up to invent other technological ideas.
REFERENCE
1. https://nigeriastartupact.ng
2. Quartz Africa, "Nigeria has the most Startups in Africa but falls short on other critical metrics"
3. Section 3 of the Nigeria Startup Act, 2022
4. Section 14 of the Nigeria Startup Act, 2022
5. Section 21 of the Nigeria Startup Act, 2022
6. Section 22(2) of the Nigeria Startup Act, 2022
7. Section 24-25 of the Nigeria Startup Act, 2022
