Introduction
Nigeria has rapidly emerged as a vibrant hub for startups, particularly in the tech sector. The last few years were significant for the startup ecosystem, with many Nigerian startups rising to prominence and relevance domestically, in Africa, and internationally.1 For example, in 2023, Nigeria became the first African country to access Starlink's satellite broadband service, significantly enhancing internet speed across the nation.2 In 2023, Nigerian startups raised almost $400 million in funding3.
In the past few years, startups in Nigeria have continued to grow exponentially despite the struggling economy.4 This is fueled by a huge population with access to technology and the new import of startup support systems in the ecosystem.5 As the number of internet users seeking digital solutions continues to rise, startups in Nigeria have capitalized on the opportunity to transform traditional industries and establish new markets. Ranging from Fintech and e-commerce to Agri-Tech and Health-Tech, a wide array of sectors are experiencing exponential growth, contributing to economic development and societal progress.6
These advancements in various sectors are key contributors to an improved standard of living for many Nigerians, addressing challenges that have impeded the country's development for a long time. However, the Nigerian startup ecosystem is not without its challenges. Startup entrepreneurs have had to scale their startups while navigating infrastructure gaps, limited access to funding, and regulatory complexities.
This article aims to provide an analysis of the Nigeria Startup Act, 2022 (the "Act") in the context of its impact in the startup environment and its role in supporting the growth of startups in Nigeria.
An Overview of the Startup Act
Recognizing the immense potential of startups in driving the country's economic transformation the Federal Government enacted the Act to empower entrepreneurs and the growth of Nigerian startups. This landmark legislation creates a robust legal framework for key regulatory bodies to provide an enabling environment and support to startups in Nigeria. With the enactment of the Act, Nigeria became the third country in Africa to enact a startup law, following Tunisia and Senegal7 . The Act serves as the primary regulatory framework for startups in Nigeria and some of its key provisions will be discussed below.
Under the Act, startups are officially recognized through the grant of a certificate called a "Startup Label"8 upon the fulfillment of the labelling requirements under the Act.9 In essence, startups can obtain a "Startup Label" from the National Information Technology Development Agency ("the Secretariat"), which is granted to companies meeting certain criteria. The Secretariat is also required to ensure that the National Digital Innovation, Entrepreneurship and Startup Policy (NDIESP) of the Secretariat is implemented for the development of the startup ecosystem.10
The Act provides that the Secretariat shall enter into partnerships with local and international business incubators, accelerators, and digital innovation hubs to promote the establishment and growth of a startup in Nigeria.11 Through these partnerships, startups would be able to benefit from the guidance of experienced entrepreneurs and industry experts as well as access to training programs and workshops. This would also increase funding and investment opportunities and facilitate partnerships and collaborations that can lead to new business opportunities and market expansion.
The Act further establishes the National Council for Digital Innovation and Entrepreneurship (the "Council").12 The Council's main responsibility is to create and implement policies that promote and achieve the goals of the Act.13 Some other responsibilities include overseeing the activities of startups to ensure compliance with the regulations and standards set out in the Act; creating and managing programs that facilitate access to funding for startups; and facilitating the development of digital infrastructure that supports innovation and the growth of startups.14 The Council also has the power to appoint an agent to carry out its instructions and provide quarterly and annual reports on the progress of the programs.15
The Council is also tasked with creating a framework for the establishment and operation of startup innovation clusters, hubs, and physical and virtual innovation parks in each state of the Federation.16 However, this responsibility should not rest solely on the Council. States and private organizations should establish additional tech hubs, incubators, and accelerators across various regions and not just in major cities to provide comprehensive support to startups nationwide.
The Act also establishes a Startup Investment Seed Fund (the "Fund") to provide financing for startups. The Council is expected to establish the Fund, which will be managed by the Nigeria Sovereign Investment Authority.17 The Fund on the approval of the Council would annually be financed with at least N10 billion from sources approved by the Council.18 The Fund can provide startups with muchneeded capital to help them grow and develop. This funding can be used to cover a range of expenses including hiring employees, purchasing equipment and materials, and developing new products or services.
On March 14, 2023, the Nigerian government, in the closing days of the Buhari administration, launched a $617.7 million tech fund for young investors through the Investment in Digital and Creative Enterprises ("i-DICE") program. i-DICE aims to boost investments in information and communications technology and creative industries, fostering inclusive and sustainable job opportunities.19
The program, endorsed by the Tinubu administration, includes measures like enhancing regulatory policies, establishing an i-DICE Fund with an independently managed venture capital fund, and mobilizing over $617 million in investment capital. The fund is made to cover the digital area, the creative area, and the entertainment area, especially the areas that the youth are interested in.20
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