THE STARTUP ACT: WHAT IT MEANS FOR YOUR TECH BUSINESS
The act is a catalyst for the development of the tech sector in Nigeria, writes Aisha Shuaibu
Technology in Nigeria is a fast-growing industry that has gained momentum in the last few years. Its prospects have led states like Nasarawa and Kaduna to prioritise the creation of technology villages in order to harness the growth potential of their tech sector. International organisations like Google have also had eyes on Nigeria and went ahead to open a Developer’s Space office in Lagos in 2020. Even the former CEO of Twitter, Jack Dorsey visited Nigeria on an African tour in 2019 to engage with stakeholders in the industry and identify areas for collaboration. Africa’s leading tech companies like Flutterwave and 54Gene have set the pace for other Nigerian-owned tech start-ups to follow suit and gradually grow from Nigeria to the world. Despite these encouraging facts, the start-up space of the country as a whole is still experiencing major setbacks, as over 60% of start-ups are still failing over the course of a decade. The Nigeria Startup Bill (NSB) was passed by the Nigerian Senate to solve some of these challenges by creating a more conducive environment for tech-based businesses in particular to succeed and on October 19th 2022, the bill was successfully signed into law.
The Startup Act serves as an engine of collaboration between the private sector and the government particularly its regulatory agencies, to ensure that the laws of the country favour the growth of its tech ecosystem. It seems the Nigerian government, with the support of the Office of the Chief of Staff and the Ministry of Communications and Digital Economy have finally seen the potential of tech in Nigeria to lead and dominate Africa’s digital economy. President Muhammadu Buhari has declared his full commitment to prioritise the creativity, and entrepreneurial spirit of Nigerian youth. He said, “our young people are our most valuable natural resource, at home and abroad.” This is indeed interesting to hear from the same leader who not long ago was calling the same Nigerian youth ‘lazy’ on center stage. As the Buhari administration comes to an end, one of his many last-minute legacies was the signing of this bill, which will be a catalyst for development in Nigerian tech by ridding start-ups of their problems, particularly ones they face in their early stages i.e. access to funding, unfavourable government policies, high cost of doing business, etc.
The Act will be in servitude to all tech-enabled start-ups incorporated under the Companies and Allied Matters Act. To be regarded as a start-up under this Act, there are set criteria to follow, such as having been registered and operational for less than 10 years with an objective to leverage existing innovative technology advances to solve a problem or provide a service. The Act will provide a start-up portal, offer regulations support, issue start-up labeling, tax breaks and incentives, give access to funding, accelerators and incubators, and offer training and capacity building. The National Council for Digital Innovation and Entrepreneurship has also been established for the purpose of centralising the regulations of MDAs that will impact the start-ups and create standing orders for its engagements. The council is made up of the President of the Federation, the Vice President, four ministers, the Central Bank governor, representatives from the Start-up Consultative Forum and the Nigerian Computer Society, and the Director-General of the National Information Technology Development Agency (NITDA).
Start-up labeling is an important factor of this Act. It is a certification or license showing that a business is tech-enabled, allowing them access to the incentives provided under the Act. The Start-Up and Engagement portal is a housing ground for start-ups to engage directly with relevant MDAs, and benefit from the Act through their services. Through this platform, start-ups will be able to access their labeling certification, easily engage with all stakeholders from the private and public sectors, access beneficial resources, enter into contracts with the federal government through public procurement, and other benefits. The Start-up Investment Seed Fund, which will be managed by the Nigeria Sovereign Investment Authority, will provide early-stage financing to labelled start-ups, and provide relief to tech labs, accelerators, incubators and hubs. For tax incentives, the Act aims to target labelled start-ups, its employees, its investors, and their external service providers. Up to 5% tax breaks will be accessible to start-ups under the Pioneer Status Incentive Scheme after applying through the Nigerian Investment Promotion Commission (NIPC). Employees of labelled start-ups will be entitled to personal income tax exemption of up to 35% for two years. Investors will get an investment tax credit equivalent to 30% of their investment. Foreign service providers will be subjected to 5% withholding tax on the income from their services to labelled start-ups.
As the general elections draw nearer, the future beneficiaries of the Startup Act have been well considered, in hopes the new administration will cooperate in seeing through consistent implementation. It is understandable that the tech space has been given precedence over other industries, granted the advancements of the global digital economy. However, the National Assembly must in the long run recognise opportunities in the start-ups space other than tech, with the potential to contribute to the economic growth and sustainable development of the country. The creative community as well as the sports industry are instances of what could easily take over being the country’s primary source of revenue generation at scale. With a predominantly youth population of over 200 million people, it is time that we examine more than one way to empower and create channels of success for the country and its people.
aishashuaibu@gmail.com
