The Start-up and Entrepreneurial Ecosystem has received a landmark boost with the enactment of the Nigeria Start-up Act 2022 (“the Act”).

This enactment elevates Nigeria to the class of countries that have “seen the light” and are focused on creating an enabling environment for start-ups to thrive. Nigeria now joins other countries like Italy, Tunisia, Kenya, and Senegal which have enacted their start-up laws.

One interesting thing about the Nigeria Start-up Act is that it will cement Nigeria’s position as Africa’s leading digital economy, the Act will also provide an enabling environment for the growth of start-ups, guard against different growth challenges faced by start-ups, and most importantly ensure adequate harmonisation of the statutory obligations and regulations of start-ups in Nigeria; putting an end to the seemingly disruptive regulations and lack of regulatory certainty and support that start-ups are presently faced with.

*Some notable provisions of the Act include:

1. Establishment of the National Council for Digital Innovation and Entrepreneurship (The Council)

The Council is established as a corporate body with the right to sue and be sued. It will be headed by the President but also has a strong coalition of the Ministers of Communication and digital economy, Finance, Industry and Trade, and Science and Technology, the Governor of the Central Bank of Nigeria (CBN), representatives from the Start-up Consultative Forum, Nigeria Computer Society, representatives of the Computer Professionals (Registration Council of Nigeria) and the Director-General of the National Information Technology Development Agency (NITDA) who will serve as Secretary to the Council.

The functions of the Council are among others to:

 Formulate and provide general policy guidelines for the realisation of the objectives of this Act,

 Give overall direction for the harmonisation of laws and regulations that affect a start-up

 Ensure the monitoring and evaluation of the regulatory framework to encourage the development of start-ups.

2. Establishment of the Start-up Support and Engagement Portal
The Act provides that the portal setup by the secretariat will facilitate the issuance of a permit or licence to a labelled start-up, and create a platform for interaction between start-ups and the Federal Government, private institutions, angel investors, venture capitalists, incubators, accelerators, and other relevant institutions.

The Portal will also create opportunities for start-ups to participate in beneficial challenges and programs including, incubation and accelerator programs, showcases, pitch competitions, fellowships, and other related programs while also enhancing information between various stakeholders in the Nigerian start-up ecosystem. It will also provide access to finance, information, innovation, and the global market and serve as a platform for the announcement and application of various schemes and incentives granted to a start-up by the Federal Government.

3. Start-up Labelling
To access the incentives under the Act and be availed of the benefit of the Portal, a start-up can apply to obtain the start-up label (“the Label”) – a certificate issued by the secretariat to a start-up. To be labelled, a start-up registered as a company (within 10 years of incorporation), sole proprietorship, or partnership, must fulfil the following conditions:

▪ The objects of the entity should be innovation, development, production, improvement, and commercialisation of a digital technology innovative product or process.

▪ It must be a holder or repository of a product or process of digital technology or the owner or author of registered software.

▪ It must have at least one-third local shareholding held by one or more Nigerians as founder or Co-founder of the start-up.

The label will not be granted to any organisation that is a holding company or subsidiary of an existing company that is not registered as a start-up.

4. Establishment of the Start-up Investment Seed Fund

The Act sets up the Start-up Investment Seed Fund (“the Fund”) to be managed by the Nigeria Sovereign Investment Authority (‘’the Fund Manager”) which will be funded from sources to be approved by the Council. The fund will be utilized to:
▪ provide a labelled start-up with finance.

▪ provide early-stage finance for a labelled start-up on the recommendation of the Fund Manager subject to the approval of the Council; and

▪ provide relief to technology laboratories, accelerators, incubators, and hubs.

5. Tax and Fiscal Incentives for the development of Start-ups

The Act provides for various incentives to aid the growth and development of start-ups in Nigeria including:

 Pioneer Status Incentive Scheme
The Act provides that start-ups may apply under the extant Pioneer Status Incentives (PSI) Scheme to the Nigerian Investment Promotion Commission (NIPC) for the grant of tax reliefs and incentives under the scheme. It also provides for the expeditious Approval of the grant for start-ups that qualify for the reliefs and incentives under the PSI Scheme.

 Exemption from payment of Income tax for a labelled start-up

A labelled start-up may be entitled to exemption from the payment of income tax or any other tax chargeable on its income or revenue for three years and an additional period of two years if it still falls within the period of a labelled start-up, this is in line with the provisions of the Industrial Development (Income Tax Relief) Act.

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 Incentives and reliefs for investors investing in a labelled start-up

Under the Act, an angel investor, venture capitalist, private equity fund, accelerator, or incubator who invests in labelled start-ups shall be entitled to an investment tax credit equivalent to 30 per cent of the investment in the labelled start-up provided that such credit is applied on any gains on investment which are subject to tax.

The Act also empowers the Federal Ministry for Finance and relevant MDAs to develop and implement a national policy for incentives for investors in a labelled start-up or the start-up ecosystem.

* Crowdfunding
The Act allows for Start-ups to raise funds through crowdfunding intermediaries and commodities investment platforms that are duly licensed by the Securities and Exchange Commission (SEC) and it also provides for mechanisms to ensure that SEC considers these rules and ensures that they are fast-tracked for labelled start-ups.

 Establishment of a Credit Guarantee Scheme
Under the Act, a Credit Guarantee Scheme is established to provide accessible financial support for labelled start-ups and also provide financial management capacity-building programmes for start-ups.

6. Protection of Intellectual Property Rights

Commendably, the Act reinforces the importance of intellectual property protection and the need to protect the intellectual property rights of start-ups to ensure those holders of these rights are encouraged to exploit them and also internationalise and commercialise these rights.

7. Establishment of Technology development zones
The Act empowers the secretariat to collaborate with the Nigeria Export Processing Zones Authority to establish a technology Development Zone to spur the growth and development of start-ups, accelerators, and incubators.

*The Nigeria Start-up Act vis-a-vis other jurisdictions
The Nigeria Start-up Act complies with the best standards and compared to that of Senegal, Tunisia, Ethiopia, and Kenya, it decisively addresses a majority of the issues faced by start-ups in one legislation. Also, compared to other laws, the Act contains comprehensive provisions regarding tax reliefs, loans and credit facilities, investment funding from both the public and private sectors, and grant issuance. Indeed the Act is not just a game changer for start-ups in Nigeria, it sets the pace for others to take a cue from.

*Implementation
For the first time, Nigerians will see a law that is a product of a collaborative effort between the government and industry stakeholders. This collaboration will be more pronounced in its implementation as stakeholders will be actively involved in the implementation process.

The Secretariat established under the Act, will be managed by the National Information Technology Development Agency (NITDA) while the Council will oversee the implementation of the provisions of the Act.

The Act however goes ahead of the other jurisdictions to create the Start-up Consultative Forum. This underscores the need to ensure a collaborative implementation of the Act.

The consultative body known as the Start-up Consultative Forum will provide a platform for information sharing and collaboration in the Nigerian start-up ecosystem concerning the relevant incentives that apply to start-ups, information on available local capabilities, and nomination of ecosystem representatives to the Council.

This forum will comprise industry stakeholders and representatives of labelled start-ups, venture capitalists, angel investors, incubation, accelerators, innovation hubs, and civil society organisations involved in the advancement of technology and innovation.

*Next step– state adoption

While we celebrate the enactment of this landmark Act, it is not yet Uhuru, there is a need for states to adopt the Act to help contextualize the benefits of the Act for Start-ups in their states There are incentives and provisions of the Act that can only be available to states that have adopted and implemented the Act, states must see the Act as an opportunity to support and empower start-ups in their states.

The implementation of the Act is as important as the Act itself, so all hands must be on deck to ensure that the Act is adopted and its benefit brought home to start-ups.

*Conclusion

The Nigeria Start-up Act is crucial for the next phase of growth and advancement of the Nigerian economy. It makes a strong statement that start-ups are pivotal to our economic stability as a Nation and must therefore be given a practical and meaningful platform to thrive in an environment that enables their growth and propels the right contribution necessary for the betterment of the Nigerian economy. Indeed, it’s a new dawn.

Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, and Ecosystem Advisor at the Nigerian Start-up Project. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. His firm can be reached by email at [email protected].