15 Things You Must Know About the Nigeria StartUp Act 2022.

In a landmark move on October 19, 2022, Nigeria ushered in a new era for its entrepreneurial landscape with the enactment of the Nigeria Startup Act of 2022. This pivotal legislation, a result of collaborative efforts between the tech startup ecosystem and national leadership, is poised to transform the nation into a digital technology hub in Africa. With its emphasis on innovation and comprehensive startup growth, the Act tackles longstanding challenges such as regulatory hurdles, high business costs, and infrastructure issues.

The Act, comprising ten parts and forty-eight sections, lays out a multifaceted framework designed to create an enabling environment for startup success. Among its notable features are streamlined regulatory processes, improved access to funding, and the establishment of incubation hubs and innovation centres. At its core, the Act reflects a commitment to fostering a conducive ecosystem for startups to thrive.

15 Takeaways from the Nigeria Startup Act: A Closer Look

1. Definition of Startup:

The Act defines a startup as a tech-based business offering a unique digital technology product, service, or process, in existence for no more than 10 years. Non-tech-based businesses are excluded from the Act’s provisions.

2. National Council for Digital Innovation and Entrepreneurship:

Establishment of a council, led by the President, to monitor and evaluate regulatory frameworks, formulate policy guidelines, and oversee the harmonization of laws for startup development in Nigeria.

3. NITDA’s Role:

The National Information Technology Development Agency (NITDA) serves as the Secretariat, with the Director-General holding dual roles as the Council’s Secretary and Head of the Secretariat.

4. Startup Support Portal:

Creation of a Startup Support and Engagement Portal for streamlined registration with various government agencies, facilitating ease of doing business within the tech ecosystem.

5. Startup Label Certificate:

Issuance of a Startup Label Certificate upon registration, subject to criteria including being a registered limited liability company operating for less than 10 years and having at least one-third local shareholding.

a. The startup needs to be officially registered as a limited liability company and should have been in operation for under a decade from its date of incorporation.

b. The Memorandum of Association for the startup must explicitly state its purpose, encompassing the innovation, development, production, enhancement, and commercialization of an innovative digital technology product or process.

c. It serves as the possessor or custodian of a digital technology product or process or is the rightful owner or creator of a registered software.

d. The startup should have a minimum of one-third of its shares locally owned by one or more Nigerians serving as the founder or co-founder.

e. If the startup operates as a sole proprietorship or partnership, it must fulfil the conditions outlined in paragraphs (b), (c), and (d) above.

6. Startup Register:

Establishment of a register listing all labelled startups, with the startup label valid for 10 years from the date of issuance.

7. Startup Investment Seed Fund:

Creation of a fund with a minimum annual allocation of N10 billion to finance labelled startups and others as seed funds, grants, or loans.

8. Trainings:

Mandate for a training and capacity-building program for startups and their employees, facilitated by the Industrial Training Fund and partnering organizations.

9. Tax and Fiscal Incentives:

Provision of tax reliefs and incentives for labelled startups, angel investors, venture capitalists, private equity funds, accelerators, and incubators, including exemptions from income tax and capital gains tax.

10. Crowdfunding:

Permission for startups to raise funds through SEC-licensed crowdfunding intermediaries on the Startup Portal.

11. Listing on Nigerian Exchange Limited:

Council assistance to labelled startups in meeting eligibility requirements for listing on the Nigerian Exchange Limited or similar exchanges.

12. Repatriation of Capital:

Guarantee of repatriation of investments in labelled startups by foreign investors at the CBN official foreign exchange rate.

13. Accelerators and Incubators:

Development and registration of accelerator and incubator programs with associated incentives, grants, and aids for research and development.

14. Technology Development Zone:

Establishment of a Technology Development Zone with incentives under the Nigeria Export Processing Zones Act for startups, accelerators, or incubators.

15. Data Protection:

Stipulation for responsible use and processing of data in compliance with existing data protection laws and regulations, overseen by NITDA.

Key Deductions: Unveiling the Nuances

1. Startup Label Eligibility: The Act stipulates that companies exceeding 10 years in operation are ineligible for startup label status. However, foreign shareholders meeting specified criteria can qualify, and holding companies and subsidiaries must register as startups. Sole proprietorships or partnerships have a preliminary label status for six months.
2. Fiscal Incentives: Labeled startups enjoy a spectrum of benefits, including exemption from the Industrial Training Fund, export incentives, financial assistance from various funds, and access to loan facilities administered by relevant bodies like the CBN.

As Nigeria embarks on this transformative journey with the Nigeria Startup Act, the nation stands poised for unparalleled growth in technological innovation, economic development, and global prominence in the tech arena. The Act’s provisions signal a commitment to creating a vibrant startup ecosystem, attracting investments, fostering job creation, and positioning Nigeria as a key player in the global tech landscape.

Author: Kay D’ Ryta

(Content Writer)