• Home
  • The Firm
  • Expertise
  • Our People
  • Career
  • Internship
  • Library
  • Gallery
  • Contact Us
Menu
  • Home
  • The Firm
  • Expertise
  • Our People
  • Career
  • Internship
  • Library
  • Gallery
  • Contact Us
canabis illegality omplaex law firm

Nigeria Startup Bill:
A Comparative Analysis

Author: O. M. Atoyebi S.A.N

Contributor: Joannah Titus

Download PDF

Every human has the ability to think and create. There is no doubt that daily, individuals come up with innovative ideas that provide solutions to societal problems.  According to a report compiled by startup blink on startups in 2021, Nigeria was ranked the 3rd leading country in Africa after South Africa and Kenya[1], manning the entrepreneurial space.

There has been growth in technology ecosystems across Africa, particularly in Nigeria. Paystack’s acquisition by Stripe and Flutterwave’s latest valuation after their Series D capital raise, brings the Nigerian Start-Up scene into the limelight. Examples like these, show the need to provide an enabling environment for startups to flourish without insufficient funding, unfair regulatory constraints and weak infrastructure.

The Nigerian startup Bill which was introduced towards the end of 2021, is a piece of legislation that seeks to improve business efficiency and growth for startups in Nigeria. This article will examine notable provisions in the Bill. It will also compare the Start-up Bill to what is found in other jurisdictions, to stress the importance of this welcome development, in the Nigerian technology ecosystem.

Understanding Startups

Start-ups refer to young companies that are rooted in innovation. They are established to provide unique products and services, that remedy the deficiencies in existing businesses, or create a new set of products and services which disrupt the normal existing mode of a business[2].

Startups aim to be innovative by creating new modes and templates. They are more particular about a wider audience and a more convenient way of doing things.

The Nigerian Start-up Bill proposes a definition of what a startup is. According to the Bill, startups are ‘new companies or companies in existence for less than 10 years, who utilize existing technologies to create innovative products or provide innovative services, with less than 50  foreign participation and an annual profit not exceeding N120,000,000[3].

 The Nigerian Start-Up Bill

The Nigerian startup Bill, a welcome development in Nigeria was approved by the Federal Executive Council in December, 2021. The Bill aims at providing incentives, removing regulatory constraints and developing a framework for startups in the Nigerian technology system.

The Bill was propagated by a collaboration between the public sector and thriving investors in the private sector. Notable collaborators include the Presidency, the Federal Ministry of Communications and Digital Economy, the Nigerian Export and Promotion Council, and wider government bodies with almost 300 volunteers and private sector players, Future Africa and Ventures Platform, Advocacy for Policy and Innovation (API) and Innovation for Policy Foundation, and media organisations; TechCabal and Wimbart. Other collaborators included, Google Nigeria and the UK-Government, through the West Africa Research and Innovation Hub and the UK-Nigeria Tech Hub, are also backing the bill[4].

The Bill is a joint initiative spearheaded by the Presidency, to harness the potential of our digital economy through co-created regulations[5]. The Bill aims to ensure that Nigeria is a startup-friendly environment for both inventors and investors to carry out business. The Bill serves as a complement to existing laws that regulate the entrepreneurial sector of the Nigerian economy, such as the Companies and Allied Matters Act, 2020.

The Bill aims to improve the Tech ecosystem and it is particularly timely when one considers the rise of the Fintech industry. The acceleration of Fintech services in Nigeria and even Africa at large, has become an eye-catching prospect as investors are ever ready to maximize the realistic potentials in the sector. The Nigerian startup Bill proposes to create such enabling environment for every technology-enabled product or service to thrive. To understand how this will be achieved, it is necessary to consider notable provisions of the Nigerian startup Bill.

Notable Provisions Of The Start-Up Bill

The notable highlights of the Bill include;

a) Nationality of the Startup: The Bill provides that the company should be incorporated in Nigeria and have its headquarters in Nigeria.

b) Objective of the Startup: The Bill provides a wide range of objects which include innovation, development, production, improvement and commercialization of innovative products.

c) Life span: To qualify as a startup in the Bill and have access to the incentives, the company should have existed for not more than ten (10) years in Nigeria.

d) Products: The Bill targets the Tech ecosystem of Nigeria. The Bill provides that the goods and services offered by a startup company, should involve new technology or at the least, be technology-enabled.

The Bill also proposes that Ministries and Agencies of Government set a 15 per cent margin of preference for startups, when the agencies procure technology-related products.

e) Shareholding of the company: The Bill aims to promote Nigeria’s economy by encouraging Nigerian based startups. As a result, the Bill provides that at least 51 per cent of the startup shares should be held by Nigerians.

This provision does not limit foreign participation. Companies in which foreign participation exceeds 49 per cent, can still qualify as a startup where the ultimate beneficial owners of its foreign corporate shareholders are Nigerian citizens.

f) The One Stop Shop Centre (OSSC): The Bill provides that the OSSC will set up to fast track and reduce regulatory constraints on startups. The OSSC will help fast track the incorporation of companies, registration of trademarks, patents and industrial designs as the relevant regulators, such as Corporate Affairs Commission, Trademarks, patent and Design Registry, NOTAP, etc. provide these support all at a discounted rate.

To support start-ups and reduce regulatory hiccups, the Bill also proposes the creation of a portal for easy access of information on all the regulatory and registration requirements associated with startups within the country.

g) Expenses of Startup company: The Bill also provides that at least 15 per cent of the expenses of a startup company, should be attributed to research and development activities.

h) Labour: Employees are not to exceed 100 excluding casual workers, consultants and outsourced staff.

i) National council: The proposed Bill also provides for the creation of a National Council, consisting of individuals from both the private and public sectors, to advise regulators. The recommended Council would comprise of representation from various ministries and government bodies. The Council also proposes representation from two Venture Capitals or Private Equity firms and two startup hubs. Regulators within the startup space are to consult with the Council before issuing policies, directives or regulations that affect startups.

j) Funding: The Bill proposes the establishment of a Startup investment seed fund. There will be an engagement portal that enables stakeholders in the Startup ecosystem to interface, a special fund for startups aiming to scale, establish talent development programmes, and free zones for startups[6]. Additionally, there is the provision of incentives by commercial banks to provide loans to startups, and also sensitize the public and private research institutions to conduct more research on startups.

k) Tax incentives: Several tax incentives are proposed by the Bill such as tax credits for investors, tax exemptions on the profits of Startups for a specific duration and taxation of goods, and services at a reduced value-added tax rate. This is in line with international best practices, which is necessary to encourage investments in the Startup space.

It is no doubt that the provisions of the Start-up Bill are not entirely novel. In 2012, Italy was the first country to enact a Start-up Act, specifically designed to spur innovation and foster entrepreneurship[6]. In Africa, Tunisia and Senegal in 2018 and 2019 respectively, enacted their respective Start-up Acts which paved room for other African countries, to provide an enabling environment for startups and investors.

In Nigeria, with the technology sector contributing remarkably to the country’s overall GDP[7], it is necessary that the Nigerian Start-up Bill is structured in line with global and international best practices. Other African countries have also considered enacting their country’s Start-up Bill and some are still in process. Such countries include; Rwanda, Ghana and Uganda[8].

The Nigerian Startup Bill when compared to that of Senegal, Tunisia, Ethiopia and Kenya, appears to address the highest numbers of issues faced by Startups when compared to the equivalent legislations in other countries.[9]

The purpose of the Startup laws in the above countries are similar. They are all geared towards promoting innovative and tech-inclined products and services at the national level and international level. The Nigerian startup Bill and that of Ethiopia, do not expressly provide for its territorial application but the Kenya Startup Act takes a step further, to provide for its application at the ‘county’ level.  

With regards to incentives, the Startup laws in Kenya, Ethiopia, Senegal, Tunisia and the proposed bill in Nigeria make provision for tax reliefs, loans and credit facilities, investment funding from both the public and private sectors, and also the issuance of grants. Additionally, Nigeria’s Bill makes provision for a pioneer status incentive scheme on incorporation and registration of intellectual property at discounted prices.

The various Startup laws in these countries also establish a regulatory and supervisory body to aid startups. In Nigeria, such a supervisory body is the National Information Technology Development Agency (NITDA).

Another significant similarity between the Startup laws in Kenya, Ethiopia, Senegal, Tunisia and the proposed bill in Nigeria is that they promote local content. However, countries should take precautions not to limit foreign participation, as this may turn away international investors in Startups. 

In all, the Nigerian Startup Bill is a welcomed innovation that will change the tide for startups in the Nigerian legal system, and should therefore be encouraged and passed into law.

Conclusion

Nigeria’s response to the need for economic growth and promotion of innovations by the improvement of the startup ecosystem, is the introduction of the Nigerian Startup Bill.

This Bill is suited for Startups as it seeks to solve the regulatory, financial and structural constraints that have plagued the Nigerian ecosystems over the years. The Bill is set to create an enabling environment for Startups, as well as facilitate the rebuilding of the Nigerian economy on a step by step basis. In all, the view is expressed here that the Bill is indeed a welcomed innovation.

[1] Statista Research Development, ‘Startup Ecosystem Index Score in Nigeria 2021’ [2022], Statista.     <https://www.statista.com/statistics/1275775/startup-ecosystem-index-score-in-nigeria/#:~:text=In%202021%2C%20Nigeria%20obtained%201.52,after%20South%20Africa%20and%20Kenya> accessed 18 February, 2022.

[2]Rebecca Baldridge & Benjamin Curry, ‘What is a Start-Up’. [2022], Forbes Advisor < https://www.forbes.com/advisor/investing/what-is-a-startup/> accessed 19 February, 2022.

[3] The Bill is yet to be passed into law and may be revised.

[4]Vanguard, ‘Nigeria Startup Bill to Unlock Digital Potential’ [2021], Guardian < https://www.vanguardngr.com/2021/12/nigeria-startup-bill-to-unlock-digital-potential/> accessed 17 February, 2022.

[5] NSB, ‘About the start-up Bill’ [2021], Nigeria startup bill <https://startupbill.ng>  accessed 20 February, 2022.

[6] Inyene Ibanga, ‘Nigerian Startups Bill and the Regulatory Framework’ [2021], Premium times < https://www.premiumtimesng.com/opinion/495348-nigerian-startups-bill-and-the-regulatory-framework-by-inyene-ibanga.html> accessed on 19 February, 2022.

[7]Jordan Wolken, ‘Startup Acts are the Next Policy Innovation in Africa’ [2020], Atlantic Council.  <https://www.atlanticcouncil.org/blogs/africasource/startup-acts-are-the-next-form-of-policy-innovation-in-africa/ > accessed on 20 February, 2022.

[8] Samuel Akpan, ‘It’s unprecedented- FG says CT contributed 17.9% to Nigeria’s GDP in Q2 2021’ (2021) The Cable < https://www.thecable.ng/its-unprecedented-fg-says-ict-contributed-17-9-to-nigerias-gdp-in-q2-2021>  accessed on 20 February, 2022.

[9] The Nigeria startup Bill, ‘Nigeria Startup Bill Ranks Best Among Major African Startup Acts’ [2022] < https://techcabal.com/2022/01/06/nigeria-startup-bill-ranks-best-among-major-african-startup-acts/> accessed on 19 February, 2022.

[10]  Op cit., n. 9

 

Read More Articles Here.

Follow Us!

Twitter Instagram Linkedin-in Facebook
Home
The Firm
Our Expertise
Nigeria Startup Bill: A Comparative Analysis was last modified: June 27th, 2022 by Omaplex

Join Our Newsletter

©2022 Omaplex Law Firm. All rights reserved
  • Home
  • The Firm
  • Expertise
  • Our People
  • Career
  • Internship
  • Library
  • Gallery
  • Contact Us
  • Home
  • The Firm
  • Expertise
  • Our People
  • Career
  • Internship
  • Library
  • Gallery
  • Contact Us