Venture Capital in Nigeria: A Comprehensive Overview of the Landscape and Legal Framework



A venture capital firm is a company or organization that invests in and mentors new, early-stage, and growth-stage companies. In order to achieve this goal, venture capital plays a pivotal role in nurturing innovation, fostering entrepreneurship, and driving economic growth in Nigeria. In recent years, venture capital has grown significantly with more e-commerce investors and start-ups entering the market.

This research provides an extensive analysis of the venture capital landscape in Nigeria, exploring its historical development, major players, challenges, and opportunities. Additionally, it delves into the legal framework governing venture capital investments, the regulatory bodies involved, tax considerations, and necessary operational considerations for venture capital firms in Nigeria.[1]


Venture capital in Nigeria refers to the practice of investing in early-stage start-ups or companies with high growth potential in exchange for equity ownership. It plays a crucial role in fostering innovation and supporting entrepreneurship in the country.

The concept of venture capital gained momentum in Nigeria during the early 2000s, with international investors seeking opportunities in the country’s burgeoning start-up ecosystem. As Nigeria’s tech-savvy population grew, innovative start-ups emerged, attracting both local and foreign venture capital firms to invest in their potential.

Nigerian venture capitalists provide funding, mentorship, and strategic guidance to start-ups, helping them grow and succeed. Factors like a large population, growing middle class, and the adoption of technology have contributed to the rise of start-ups across various sectors, including fin-tech, e-commerce, agric-tech, and health tech.

Venture capital is a catalyst for economic development in Nigeria. By providing crucial funding and support to early-stage companies, venture capital drives innovation, creates employment opportunities, and contributes to the country’s economic growth. However, challenges such as access to capital, regulatory hurdles, and infrastructure limitations still exist.


The Securities & Exchange Commission (SEC) primarily regulates venture capital and the role of the Securities and Exchange Commission to venture capital in Nigeria hinges on the Commission’s primary duty to regulate the involvement and operations of individual and corporate investors in Nigeria.

The Securities and Exchange Commission Rules and Regulations (SEC Rules) 2007 make special provisions for the authorization of venture capital funds with the commission.

In addition to the SEC Rules, an additional rule (Rule 249D) was issued and made effective on the 28th of February 2013 to regulate the activities of private equity firms with a minimum commitment of 1 (one) Billion Naira investment funds.

Rule 249D restricts private equity firms from soliciting funds from the general public but may privately source funds from qualified investors and further restricts a private equity firm from investing more than 30% of its fund assets in a single investment The rule also mandates private equity Fund managers to render quarterly returns of the fund to the SEC.

Rule 249D (3) expressly provides thus:

“A private equity fund shall not:

  1. Solicit funds from the general public but shall privately source funds from qualified investors alone;
  2. Invest more than 30% of the Fund’s assets in a single investment.”

Other key legislation and regulations include the Companies and Allied Matters Act (CAMA), the Investment and Securities Act (ISA), and the National Office for Technology Acquisition and Promotion (NOTAP) guidelines.


Venture capital is a private equity strategy and such cannot solicit funds from the general public. Unlike other private equity funds that invest their personal funds, venture capital typically derives its fund from external sources.

Most funds are sourced from institutional investors such as insurance companies, pension funds or development financial institutions. Funds may also be sourced from individuals with high net worth.

The venture capital fund is usually managed by a Venture Capital Fund Manager. This Manager must be a company incorporated under the Companies and Allied Matters Act with a minimum of N20,000,000.00 (Twenty Million Naira) paid-up capital. The Fund Manager must also be registered with the Securities and Exchange Commission.

Lastly, investors from countries that have a double taxation treaty with Nigeria will enjoy a withholding tax reduction of up to 7.5% as against the standard rate of 10%. This means that any foreign venture capital firm will ensure a reduction in tax paid on the dividends received.


1. Venture Capital (Incentives) Act:

Generally, the law seeks to encourage investments through tax reliefs in order to ensure that people are motivated towards investments in certain areas of the economy. The Venture Capital (Incentives) Act, Cap V2, Laws of the Federation of Nigeria, 2004 contains incentives geared towards encouraging venture capitalists in Nigeria. Section 4(a) of the Venture Capital (Incentives) Act, Cap V2, Laws of the Federation of Nigeria, 2004 provides thus:

“The following incentives shall accrue to venture investments-

  1. an equity investment by venture capital in a venture project company shall, for purposes of capital allowance under the Companies Income Tax Act, be treated as follows-
  2. for the first year deduct 30 per cent;
  3. for the second year deduct 30 per cent;
  4. for the third year deduct 20 per cent;
  5. for the fourth year deduct 10 per cent;
  6. for the fifth year deduct 10 per cent.

Section 4(c) further provides thus:

“The withholding tax payable on dividends declared by the Federal Inland Revenue Service in a Venture project company shall be reduced by 50 per cent of the prevailing rate of withholding tax in respect of dividend received by a Participant in the Risk Fund and venture project company within the first five years”

2. Foreign Exchange (Monitoring and Miscellaneous) Act:

Foreign venture capital firms that bring in capital through authorized dealers (usually licensed commercial banks) and obtain a Certificate of Capital Importation are entitled to unconditional and unrestricted repatriation of profits, dividends and/or interests as guaranteed under Section 15(4) of the Foreign Exchange (Monitoring and Miscellaneous)Act which provides thus:

“Foreign currency imported into Nigeria and invested in any enterprise pursuant to Subsection (a) of this section shall be guaranteed unconditional transferability of funds through an Authorized Dealer in freely convertible currency relating to:

  1. dividends or profits (net of taxes) attributable to the investment;
  2. payments in respect of loan servicing where a foreign loan has been obtained;
  3. The remittance of proceeds (net of all taxes) and other obligations in the event of sale or liquidation of the enterprise or any interest attributable to the investment.”


  1. Due Diligence: Conducting thorough due diligence on potential investee companies is crucial to mitigate risks and make informed investment decisions.
  2. Investor Relations: Building strong relationships with investors, maintaining transparent communication, and providing regular updates on investment performance are essential practices for the long-term success of a venture capital firm.
  3. Portfolio Management: Actively managing the investment portfolio, providing strategic guidance and support to investee companies, and monitoring performance are critical for maximizing returns.
  4. Exit Strategies: Venture capital firms typically aim to exit investments within a certain timeframe. Common exit strategies include initial public offerings (IPOs), mergers and acquisitions (M&A), or secondary sales.


Setting up a venture capital company in Nigeria requires careful planning, adherence to legal and regulatory requirements, and a strong understanding of the local business environment. While navigating the process may involve challenges, the rewards of supporting and benefiting from the growth of innovative start-ups make it a worthwhile endeavour.

The legal framework governing venture capital firms and investments provides stability and protection, encouraging both local and international investors to participate in Nigeria’s vibrant start-up ecosystem. By addressing challenges and leveraging opportunities, Nigeria can further strengthen its position as a leading destination for venture capital investments in Africa, contributing to the country’s long-term sustainable development.

  1. Rodrigo de Alvarenga, ‘Understanding the Venture Capital Landscape: Stakeholders, Performance, and the Rise of New Players’ (2023) <>
  2. Damilola Bamisile, ‘Venture Capital in Nigeria- An Overview’ (2021) <>

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