AN OVERVIEW OF THE NIGERIA STARTUP ACT 2022

President Muhammadu Buhari recently assented to the Nigeria Startup Bill (now Act) 2022. The Act seeks to tackle three main challenges for Nigerian start-ups: lack of an enabling environment, unclear regulatory framework, and inadequate local content support. The Act seeks to provide a legal and institutional framework for the development of startups in Nigeria, provide an enabling environment for the establishment, development, and operation of startups in Nigeria; provide for the development and growth of technology-related talent; and position Nigeria's startup ecosystem, as the leading digital technology center in Africa, having excellent innovators with cutting edge skills and exportable capacity. This post, therefore, intends to make a brief overview of the Act.

 

 INNOVATIONS OF THE NEW ACT

 In order not to bore you with an in-depth analysis I will head straight to innovations of the new Act and what tech startups can expect from the Act. To qualify for any incentive or relief under the new Act a company must be registered with the Corporate Affairs Commission and must earn the startup label which is a certificate issued to a startup upon the fulfillment of the labeling requirements under the Act. Some of the requirements apart from registration as provided in section 13 of the Act include; a startup must be in operation for at least 10 years; the objects of the company must be related to digital technology; it has at least one Nigerian as a founder or Co-founder of the startup, provided that the Nigerian founder or co-founder will share from profit or revenue from the sale of share. Upon fulfillment of these requirements, a startup label will be issued to the startup which will be valid for a period of 10 years. Section 19 of the Act established a fund which shall be known as Startup Investment Seed Fund to be managed by the Nigeria Sovereign Investment Authority. The Fund shall be applied to provide a labeled startup with finance and provide relief to technology laboratories, accelerators, incubators, and hubs. 

 TAX RELIEFS AND FISCAL INCENTIVES

 Upon receipt of the Nigerian startup label, a company, employees, and investors may be entitled to tax breaks. This Pioneer incentive gives companies in critical industries like technology, agriculture, and others, a tax break of up to three years, and a possible two-year extension. A company may be entitled to benefit from the tax relief for a maximum period of five years. Employees of labeled startups may be entitled to Personal Income Tax relief of 35% of their income for two years from the date of engagement with the labeled startup. While investors, accelerators, and venture capitalists can enjoy tax credits of up to 30% of their investment in a startup.

 REGULATORY SUPPORT 

 The new Act provides for regulatory support with government agencies such as the Corporate Affairs Commission to label startups by designating a separate section on the Startup Portal to ease the processes for labeled startups that conduct transactions at the Commission. A similar gesture is extended to other agencies such as the Central Bank of Nigeria and the Securities and Exchange Commission. Since a major pain point for fintech startups are the challenges with securing licenses from relevant agencies like the CBN, and the SEC, aspiring fintech operators will have the opportunity to liaise with these agencies and ease their registration process.

 

 CREDIT GUARANTEE AND FUNDRAISING

 Section 29(2) of the Act provides for the Credit Guarantee Scheme established to provide accessible financial support to a labeled startup; create a framework for credit guarantee for a labeled startup; provide financial and credit information to startups, and provide financial management capacity building programs to startups. Startups may raise funds through crowdfunding intermediaries and commodities investment platforms duly licensed by the Securities and Exchange Commission (SEC) that would have their platforms available for use by startups on the Startup Portal. The Council shall provide recommendations and proposals to SEC and collaborate towards ensuring that SEC considers rules that fast-track crowdfunding processes for labeled startups. 

 CONCLUSION

 Like many extant laws in Nigeria, the Nigeria Startup Act have covered the field, what is left to be seen however is the implementation of the provisions of the Act to enable Startups to benefit and boost digital technology innovations in Nigeria. 

 Abdulwahab Dahiru, Esq, ACArb. 07062694989