On the 19th Day of October 2022, the Nigeria Startup Act, 2022 was signed into law by the President of the Federal Republic of Nigeria.
The objectives of the Act are:
- To provide legal and institutional framework for the development of startups in Nigeria.
- To provide an enabling environment for the establishment, development and operation of startups in Nigeria
- To provide for the development and growth of technology-related talents and
- To position Nigeria’s startup ecosystem, as the leading digital technology center in Africa, having excellent innovators with cutting edge skills and exportable capacity.
Who is this Act for?
This Act applies to:
- Companies incorporated under the Companies, Allied Matters Act, and granted the startup label, in accordance with the provisions of this Act and
- Organizations and establishments, whose activities affect the creation, support and incubation of labelled startups in Nigeria.
Key components of Nigeria’s 2022 Startup Act
- The National Council for Digital Innovation and Entrepreneurship (the Act referred to as “the Council”)
- The Startup Support and Engagement portal (referred to as “the Startup Portal”)
- The Startup Labelling Process
- The Startup Investment Seed Fund
- The Tax and Fiscal Incentives
The Council
The Council shall be a body corporate with perpetual succession and a common seal. It may sue or be sued in its corporate name and may acquire, hold, purchase, mortgage, and deal with property, movable or immovable, real or personal.
The Council shall consist of:
- The President of the Federal Republic of Nigeria, who shall serve as the Chairman.
- The Vice-President of the Federal Republic of Nigeria, who shall serve as the Vice-Chairman
- The Minister responsible for Communications and Digital Economy, who shall preside over the Council in the absence of the President and the Vice-President.
- The Minister responsible for Finance, Budget, and National Planning
- The Minister responsible for Industry, Trade, and Investment
- The Minister responsible for Science, Technology, and Innovation
- The Governor of the Central Bank of Nigeria (CBN)
- Four representatives of the Startup Consultative Forum established under section 12 of this Act.
- One member to represent the Nigeria Computer Society
- One member to represent the Computer Professionals (Registration Council of Nigeria) and
- The Director-General of the National Information Technology Development Agency, who shall serve, as the Secretary of the Council.
The functions of the Council include the following:
- Formulate and provide general policy guidelines for the realization of the objectives of this Act.
- Give overall directions for the harmonization of laws and regulations that affect a startup.
- Approve the programmes of the Secretariat established under this Act.
- Ensure the monitoring and evaluation of the regulatory framework to encourage the development of startups in Nigeria.
- Monitor and ensure the implementation of policies and programmes of the Secretariat.
- Support digital technological development through grants to persons, research institutions and universities pursuing postgraduate programmes in the areas of science, technology and innovation.
The Act appoints The National Information Technology Development Agency (NITDA) the Secretariat of the Council and the Director General of NITDA shall serve as the head. As Secretariat of the Council, the agency is responsible for managing the process for labelling a startup, establishing public online platforms and other platforms to provide access to information on matters pertaining to the establishment and development of a startup and collaborating with relevant MDAs (Ministries, Departments and Agencies) and stakeholders to promote innovation in digital technology and enterprise development for a startup in Nigeria among others.
The Startup Support And Engagement Portal
With the approval of The Council, the Secretariat establishes The Startup Support and Engagement Portal (this is referred to as The Startup Portal in the Act).
* The Startup Portal and app are still under development but interested Startups can in the meantime, send in Applications by email to Info.nitda.gov.ng.
The Startup Portal shall serve as a platform through which a startup conducts registration process with relevant MDAs. The Portal will facilitate the issuance of permits and licenses required by labelled Startups. Through the Portal, labelled Startups can interface with the Federal Government, Private equity funds, venture capital funds, angel investors, accelerators, incubators and other relevant stakeholders.
With approval from the Council, the Secretariat shall appoint a Coordinator for the Startup Portal. The coordinator will have a minimum of 10 years’ experience in technology and entrepreneurship.
The function of the coordinator includes maintaining a register of labelled startups in Nigeria, keeping the relevant documents and records of labelled startups, implement the decisions of the Council on the labelling of a startup and perform all other functions as may be necessary for the implementation of the Act.
In addition to the above, a consultative body known as the Startup Consultative Forum (referred to as The Forum) shall be set up by the Secretariat upon approval from the Council. The Forum on the Startup portal will provide a platform for information sharing and collaboration in the Nigerian Startup ecosystem. The Forum shall comprise of industry stakeholders and representatives registered on the Startup Portal from labelled startups, venture capitalists, angel investors, incubators, accelerators, innovation hubs and two civil society organizations involved in the advancement of technology and information.
The Startup Labelling Process
A Startup Label is a certificate issued by the Secretariat to a startup upon fulfillment of the labelling requirements. To be eligible the startup must be:
- A registered 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.
- Its objects are innovation, development, production, improvement and commercialization of digital technology innovative product or process.
- It is a holder or repository of a product or process of digital technology or the owner or author of a registered software.
- It has at least one-third local shareholding held by one or more Nigerians as founder or co-founder of the startup.
- For sole proprietors, or unincorporated businesses that qualify under these criteria, they would be required to incorporate their businesses as limited liability companies within 3 months of acceptance as labelled Startups.
The Startup Investment Seed Fund
The Startup Investment Seed Fund is to be managed by the Nigerian Sovereign Investment Authority and will be used basically to:
- Provide labelled startup with finance.
- Provide early-stage finance for recommended labelled startups and
- Provide relief to technology laboratories, accelerators, incubators and hubs.
Tax And Fiscal Incentives
Within the Act, there are tax and fiscal incentives that target the following:
- Labelled Startups
- Investors investing in labelled startups
- Accelerators and Incubators
- External Service providers of labelled startups
- Incentives for a labelled startup under the Pioneer Status Incentive Scheme and other fiscal schemes;
A labelled startup that falls under the extant pioneer status incentives (PSI) scheme may apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of the tax relief.
Such a startup has access to export incentives and financial assistance from the Export Development Fund, Export Expansion grant and the Export Adjustment Scheme Fund.
The Startup also gains access to Government grants, loans, facilities and financial support through credit guarantee scheme.
- Incentives and reliefs for investors investing in a labelled startup:
The investors shall be entitled to an investment tax credit equivalent to 30% of the investment in the labelled startups and capital gains shall not be charged on gains that accrue from the disposal of assets by an investor with respect to a labelled startup.
- Tax incentives for external service providers.:
Foreign service providers that provide technical, management, consulting or professional services to labelled startups shall be subjected to 5% withholding tax, (instead of 10%) as final tax on income derived from the provision of services to labelled startups.
Other incentives for labelled startups in Nigeria will include ease of all regulatory compliance processes and approvals, accelerator and incubator programmes, access to startup innovation clusters, hubs, physical and virtual innovation parks in each state of the federation to enhance collaboration, innovation, capacity building, access to business resources and business opportunities between the startups and large companies and professional service providers, among others.
You can download the Startup Act 2022, here.
For more information and enquiries about the Nigeria Startup Act, 2022, please visit NITDA.GOV.NG website.