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The Nigeria Startup Bill is attributed to multiple factors, including high costs, regulatory bottlenecks, aggressive government policies, and funding challenges. So what is this act and how is it going to benefit the Nigerian Startups?
As of 2021, Nigeria has the largest volume of startups in Africa. But unfortunately, the startup failure is significantly high, at 61% in 2020. This, unfortunately, means that only a few startups survive.
It is attributed to multiple factors, including high costs, regulatory bottlenecks, aggressive government policies, and funding challenges. So, authorities must take action to reduce the failure of tech-enabled businesses, which is why the government of Nigeria passed the Startup Act.
The information below provides a detailed analysis of the Act, why the president passed it, and the expected results.
Stakeholders canvased the Nigeria Startup Bill. And on October 19th, 2022, H.E. President Muhammadu Buhari signed the bill into law which is now the Nigerian Startup Act.
The Act is a joint initiative by the presidency and Nigeria's tech startup ecosystem. The bill seeks to harness the potential of Nigeria's digital economy. It also ensures that the country's laws and regulations work for the tech ecosystem.
Both parties expect growth in the ecosystem with this Act. Parties also expect the Act to address the issue of attracting and protecting investments in tech startups.
Section three of the Act establishes the National Council for Digital Innovation and Entrepreneurship. The council is a corporate body responsible for formulating and providing policy guidelines for the realization of the objectives of the Act.
The council will approve programs and scrutinize the execution of its policies and programs. In addition, it will support individuals, universities, and research institutions that carry out postgraduate research in science, technology, and innovation.
Additionally, the council can appoint an Agent to carry out specific or general directions. The agent can also provide the council with quarterly or annual monitoring reports concerning the program being implemented according to the Act.
The council will consist of the President, Vice-President, Minister of Communications and Digital Economy, Minister of Finance, Budget, and National Planning, among others. The president will chair the council, while the communications And Digital Economy Minister will preside over the council in the absence of the president and vice president.
The Nigerian Startup Act applies to all organizations and companies under the Companies and Allied Matters Act and those granted the startup label. It also applies to establishments whose processes affect the development, support, and incubation of labelled startups in Nigeria. The Act will:
● Provide a legal and institutional structure for the growth of startups in Nigeria.
● provide a favourable environment for establishing, developing, and operating startups in Nigeria.
● Provide the evolution and growth of technology-related skills.
● Place Nigeria's startup ecosystem as Africa's leading digital technology centre.
With the Act, the parties expect a spur of growth in the ecosystem, not just in Lagos and major cities but other places within the country. Parties hope it will ensure nationwide capital distribution and opportunities for all talent.
Startups in Nigeria will need certification from the Startup Bill Secretariat.
Certification is only granted to those eligible. Eligibility demands the company be registered as a Limited Liability Company, running for a maximum of 10 years, not more. Additionally, the company needs to use tech to solve a problem in Nigeria and have at least one Nigerian co-founder.
With the startup label in place, the company will have to make annual reports on the number of employees, the turnover achieved, plus total assets. The information should also cover the received incentives and any advances made from said incentives.
The Act will provide a Startup Investment Seed fund managed by the Nigeria Sovereign Investment Authority (NSIA). The body will supply early-stage funding and give relief to technology labs, accelerators, incubators, and hubs.
The Act will provide tax relief to companies, employees, and investors. The company may be exempted from paying taxes for up to four years after getting the startup label. The Act also encourages organizations to employ entry-level workers with less than three years of postgraduate experience by offering them a tax relief of up to 5% of generated profits.
Start-up employees can get tax relief of 35% of their income for two years after employment. This is personal income tax relief. And finally, accelerators, angel investors, and venture capitalists are eligible for tax credits of up to 30% of their investment in a startup.
The Act will help startups assess training and capacity-building workshops. The Act's council will head this process while collaborating with educational institutions to train students on starting and running startups.
Startup Acts are the future of African countries. If so, Nigeria establishes itself as one of the nations with an innovative policy that has proven beneficial for other countries. Since the Act is still new, there is no clear way to tell if it will prove helpful to the tech sector of Nigeria.
However, expectations are high, and it could be a policy that will transform Nigeria into one of the leading digital technology centres in Africa.
If you plan to take advantage of the Startup Act, reach out to Workpay for assistance in compiling reports and maintaining your status as a startup.
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