As a means of deepening the technology ecosystem in Nigeria, and providing a regulatory framework for the existence, development, and activities of Startup companies in Nigeria, the Nigeria Startup Bill was passed on the 19th of October, 2022 into law.
The Nigeria Startup Act ("the Act") is intended to revamp the startup ecosystem in Nigeria and position it as the leading Technology hub in Africa while prioritizing the development and growth of technological advancements in Nigeria. As portrayed later in this article, the act regulates companies incorporated under the Companies and Allied Matters Act of 2020 that have been granted the startup label. This means that not every company can be called a startup, and there are conditions precedent to the attainment of a startup label by a company.
HIGHLIGHTS OF THE ACT
The Startup Act, being an Act geared towards the development of technology-related talents, and towards the provision of an enabling environment for the establishment, development, and operation of startups in Nigeria, contains quite a number of features, benefits, and regulations that see to the smooth operation of startups in Nigeria.
The National Council for Digital Innovation and Entrepreneurship, in conjunction with The National Information Technology Development Agency, are two major bodies that are responsible for the regulation and the provision of guidelines that achieve the realization of the objectives of the Startup Act, while giving direction for the harmonization of laws and regulations which affect a startup.
MAJOR BENEFITS THE ACT PROVIDES
1. STARTUP SUPPORT AND ENGAGEMENT PORTAL
The Act provides that the National Information Technology Development Agency (NITDA), which serves as the secretariat, will on the approval of the National Council for Digital Innovation and Entrepreneurship, create a startup engagement portal that will be a platform through which startups can conduct their registration process with relevant Ministries, Departments and Agencies.
This platform is intended to be an interaction mechanism between Startup companies and the Federal Government, Private Institutions, Angel Investors, Venture Capitalists, Incubators, Accelerators, and other institutions that are relevant to the industries and sectors of these startup companies. Through this platform, startups can participate in incubator and accelerator programs, fellowships, and financing programs. The Startup Portal is also intended to contain a Startup Consultative Forum for the purpose of information sharing between Startups and The Federal Government with its respective ministries, and industry stakeholders like Venture Capitalists, Angel Investors, the Nigeria Computer Society, Incubators, Accelerators, and Innovation Hubs.
2. THE STARTUP INVESTMENT SEED FUND
This is equally an initiative by the act to ensure the growth of startups. The Startup Investment Seed Fund is intended to be managed by the Nigerian Sovereign Investment Authority, and the funds will be applied to Companies that are labeled as Startups in the form of early-stage finance, and other subsequent funding priced rounds.
It is also intended that these funds provide relief to technology laboratories, accelerators, incubators, and innovation hubs.
3. TRAINING AND TALENT DEVELOPMENT
The Act provides for the training and talent and capacity development of startups in Nigeria. It is intended that NITDA establishes centres for the acquisition of digital technology in different parts of Nigeria, and equally provides that NITDA partners with Universities, Polytechnics, and other institutions of learning in Nigeria for the infusion of technology and startup development-based modules for students.
It is also provided that NITDA, which is the secretariat to the National Council for Digital Innovation and Entrepreneurship supports Academic Research Institutions towards the development of Startups along the lines of Academic Research.
4. TAX AND FISCAL INCENTIVES
The Act highlights numerous tax incentives that will accrue to Companies that are labeled as Startups. Under the Pioneer status incentive scheme, Startups which fall under that industry are eligible to apply to the National Investment Promotion Commission. Some startups which meet some requirements can enjoy up to 60% tax reliefs by virtue of the act, with access to export facilities, grants and loans by the government, and Credit Guarantee Schemes from the Government.
Employees of Startups may also enjoy up to 35% Personal Income Tax based on some criteria set out by the Act. External Service Providers (Foreign entities) that provide technical or professional services to startups are also eligible for some tax incentives.
5. SUPPORT FROM REGULATORY BODIES
Regulatory bodies will offer support to Companies that are labeled as Startups. Regulatory Bodies like the Corporate Affairs Commission (CAC), Federal Ministry of Trade and Investment (Intellectual Property Regulation), and the National Office for Technology Acquisition and Promotion (NOTAP) will designate a separate section on the Startup Portal to ease the processes for labeled startups that conduct transactions at the Commission. This is to make the liaising between Startup and Regulatory bodies seamless and expedited.
Through Crowdfunding intermediaries duly licensed by the Securities and Exchange Commission, Startups will be able to raise funds easily. Financial Technology startups will gain access to information about the regulatory framework of their industry through constant interactions with the Central Bank of Nigeria and the Securities and Exchange Commission.
Other noteworthy benefits include the participation of startups in regulatory sandboxes, the listing of startups (that intend to do so) on the Nigerian Stock Exchange, and the repatriation of foreign investments and profits.
6. INCUBATOR/ACCELERATOR PROGRAMS AND THE CREATION OF INNOVATION HUBS
The Act provides for the creation of incubation and accelerator programs for Startup companies and further provides incentives that will accrue to these incubators and accelerators. Also, innovation clusters, parks, hubs, and development zones are intended to be created.
This is a very important part of the Act, as not every Company can be qualified to be a Startup. The Act stipulates some conditions to be met before a Company can be called a Startup. Upon fulfillment of those requirements, a certificate will be issued to the company, labeling it as a Startup.
The Startup label benefit is applicable to Startup companies that are registered under the Companies and Allied Act of 2020, and must not have been in existence more than 10 years from the date of incorporation. The objects of such a company must be tilted toward the innovation, development, and commercialization of a digital product or process, and such must be evidenced by the ownership of a registered software. There must be one Nigerian as a founder or co-founder of such a company.
There are other requirements for labeling a Company as a startup, and procedures for obtaining the certificate, which can be done through expert advice or guidance.
The numerous provisions and benefits found in the startup Act are a testament to the fact that the technology ecosystem in Nigeria is set to deepen and be positioned as the leading technology hub in Africa.
The Act generally makes the operations of intending startups a seamless one, especially in the realms of regulation. Now, Startup companies can be abreast of the regulations that apply to their respective industries through constant interactions with regulatory bodies. Tax and Fiscal incentives are also available to Companies that are labeled as Startups, alongside the Startup Seed Funding scheme that will invariably make for the smooth economic scaling of these Startups. Poor access to finance is a major factor that stifles the growth of startups, and this problem is being addressed by the Act. Once Companies comply with the labeling process and are subsequently designated as Startups, they will be eligible to qualify for the benefits
This development is very beneficial to all the players to all players in the technology ecosystem in Nigeria including Startup Founders, Lawyers, and all other stakeholders.
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