The Nigeria Start-up Act: Why It Matters to Start-up Ventures -By Pelumi Abdul
By definition, start-ups are young businesses or companies founded for the purpose of creating an unparalleled product or service and bringing the same to the market. Recently, start-ups in Africa are contributing positively to their communities’ growth. And Nigerian start-ups alone have a portion of 1.37 billion out of Africa’s 4 billion US dollars funding as at 2021. This could be attributed to the fact that the country has the highest number of start-ups in the continent.
Nevertheless, unfavorable government policies, lack of capital, stringent administrative bottlenecks and over saturation of start-up ventures in the country among others are creating a high rate of failure for these start-ups. For instance, within 2010 and 2018 over 61% start-ups in the country could not survive the business environment. As a result, there is a need to spur development and motivate prospective participants to engage successfully in the start-ups venture ecosystem. Thus, led to the enactment of the Nigeria Start-up Act 2022 to create an enabling environment for start-up ventures and rectify setbacks witnessed in past years.
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The Nigeria Start-up Act 2022
The Nigerian presidency alongside 30 tech leaders -including Kola Aina, founder of Ventures Platform- and Isa Patami, the Nigerian minister of digital economy created and drafted out the Nigeria Start-up Bill.
The first draft of the Nigeria Start-up Bill was first submitted to the Nigerian Federal Executive Council (FEC) and the council approved it in December 2021. Early February 2022, the bill was sent by the President to the Nigerian National Assembly and the Bill passed its third reading at the national house of assembly by July this year. On the 19th of October, 2022, President Muhammad Buhari signed the bill into law as the Nigerian Start-up Act, 2022.
The act was created to strengthen the country’s start-up ecosystem with primary goals of creating an enabling environment for start-up ventures, bridging the gap by providing a clear regulatory framework and adequate local content support in the start-up ecosystem.
Why the Nigeria Start-up Act Matters to Start-up Ventures
To begin with, the enactment of the Nigeria Start-up Act would largely promote entrepreneurship, provide jobs and unleash the inherent economic potential in the country’s citizens particularly the youths. With the Act, the country might soon become a major economic force to reckon with globally. Thus, the need to identify the key innovations in the Act as they matter to the growth and development of Start-up ventures in the country.
Some of the Key Highlights of the Nigeria Start-up Act
For any company to be recognized as a start-up under the Act, such company must obtain a label certificate. Only a company that has been less than 10 years in existence from incorporation date among other requirements is qualified to be given the label certificate. The Act applies only to tech-enabled start-ups and the label is to make startups qualified for incentives provided in the Act. Moreover, the Act creates a legal framework for start-ups as they can be registered as a company and uncertainties as to the legal status of start-up ventures are erased.
Another key provision in the Act is that of seed funding. That is there shall be funding for start-ups at an early stage by the Nigeria Sovereign Investment Authority (NSIA). The Start-up Investment Seed Funding is to aid growth in the start-up ecosystem.
Also, start-ups are entitled to tax incentives and relief. Although certain conditions must be fulfilled, start-ups can enjoy 5 year’s tax free from the date of labeling and access loans from the CBN or other financial institutions with minimal or interest free.
Another provision in the Act that matters to start-ups is the creation of the National Council for Digital Innovation and Entrepreneurship, with the power to formulate policies, evaluate regulatory frameworks, encourage start-ups’ development and exercise institutional powers over start-ups from other functions.
The Act further supports the creation of start-up hubs, physical and virtual innovation parks and clusters in each state in Nigeria to prevent over concentration of start-ups in Lagos and Abuja alone. Also, provisions are made for talent’s training and development to empower the concerned persons with the necessary and competitive skills to thrive in the Nigerian start-up ecosystem.
It is clear, glare and beyond the need of microscopic scrutiny that the Nigeria Start-up Act would provide the enabling environment for start-ups to thrive in the country and would be an investment ground for foreign investors to invest in start-up ventures and thus contribute to economic growth of the country. Thus, the Act matters a lot to start-ups in the country.