Nigeria’s President Muhammadu Buhari signed the Startup Bill into law on Wednesday, 19th October 2022, three months after it was passed by both legislative chambers of the National Assembly.
The bill is a collaboration with a group of Nigerian tech leaders and several government bodies to govern how startups and regulatory bodies operate and collaborate in the multi-billion-dollar tech ecosystem. Its objective is to create an enabling environment for tech-based startups in Nigeria. The Act further explains that the objectives of a startup should include innovation, development, production, improvement, and commercialization of a digital technology innovative product or process.
The start-up act comes with several requirements. One of the key requirements is that a company’s owners, founders/co-founders must obtain a Startup Label Certificate before it is recognized as a startup. This certificate will be made available on the website of the Federal Ministry of Communication and Digital Economy. The Act does not, however, specify at what cost this certificate must be obtained.
Another important requirements businesses(start-ups) in Nigeria must take note of is that, as a company, you must be a registered liability company of fewer than ten years in existence, have at least one Nigerian as a founder or co-founder of the start-up, provided that the Nigerian founder or co-founder will share from profit or revenue from the sale of shares in the company.
The Act also gives rise to the creation of a National Council for Digital Innovation and Entrepreneurship. One of the functions of the council is to formulate and provide general policy guidelines for the realization of the objectives of the Act and give overall direction for the harmonization of laws and regulations that affect a start-up.
Labelled startups with at least ten employees where 60% of the employees have no prior work experience within three years of graduation or any vocational program have access to percentage-based tax relief.
The start-up act, however, does not recognize holding companies or subsidiaries of an existing company that is not registered as a startup. Experts say this may be a tricky feature for tech companies that are registered abroad as holding companies but operate in Nigeria as subsidiaries.
Companies can confirm their eligibility for a startup label by applying on the Startup Portal. The labelled startups are eligible for a Startup Investment Seed Fund that will be managed by the Nigerian Sovereign Investment Authority.
With this new act by the FGN, do you think entrepreneurship in Nigeria is set to begin a new journey in the right direction? Well, we will continue to monitor how the act will affect businesses as we look to find answers to this question, but for now, it must be said that Nigeria has joined a league of the first few African countries like; Tunisia, Kenya, Senegal and Ethiopia to create an enabling environment for start-ups.