Regulatory Update: The Nigerian Start Up Act, 2022

Introduction

We are excited to announce that the Nigerian Start Up Bill, now the Nigerian Startup Act, has received presidential assent and has been signed into law. This brings hope that businesses within the Nigerian technology ecosystem, especially startups, will have a better chance to grow and thrive within the Nigerian business environment

The Act was passed to provide for the creation and development of an enabling environment for technology-enabled startups in Nigeria. Some of the objectives of the Act include:

1. providing for the development and growth of technology-related talents;
2. providing an enabling environment for the establishment, development, and operation of startups in Nigeria; and
3. positioning Nigeria's startup ecosystem, as the leading digital technology centre in Africa, having excellent innovators with cutting edge skills and exportable capacity.

In our previous publications, we had highlighted some of the provisions of the Nigerian Start Up Bill such as the definition and categories of Startups under the Act; the process for application by eligible companies with the One Stop Shop Centre (OSSC) in order to obtain incentives under the Act; incentives available to Startups (including funding, tax incentives and expedition of licence applications) amongst other things. In this publication, we have highlighted below more provisions of the Act which Startups in Nigeria should be aware of.

Establishment of the National Council for Digital Innovation and Entrepreneurship (the "Council")

The Act establishes the Council which shall be made up of-

1. the President of the Federal Republic of Nigeria., who shall serve as the Chairman of the Council;
2. the Vice-President who shall act as the Vice-Chairman;
3. ministers from select ministries;
4. four representatives from the Startup Consultative Forum also established under the Act;
5. one member of the Nigeria Computer Society;
6. one member of the Computer Professionals (Registration Council of Nigeria), and
7. the Director-General of the National Information Technology Development Agency (NITDA) who shall serve as the Secretary of the Council.

The Council shall have the power to-

1. support digital technological development through grants to persons, research institutions, and universities in areas of science, technology and innovation;
2. review policies and directives of Ministries, Departments and Agencies (MDAs) which may impact on the operation, establishment and investments in a startup; and
3. ensure the monitoring and evaluation of the regulatory framework to encourage the development of startups in Nigeria.

2. Establishment of the Startup Support and Engagement Portal ("Startup Portal")

The Startup Portal shall serve as a platform through which a startup conducts its registration process with the relevant MDAs. The Startup Portal will-

1. facilitate the issuance of a permit or licence to a labelled startup;
2. foster the access of startups to finance, information, innovation and the global market;
3. provide information on clearances, approvals and registration requirements by a startup;
4. Provide opportunities for a startup to enter into contracts with the federal government; and
5. Provide opportunities for a startup to participate in beneficial challenges and programmes including incubation and accelerator programmes, showcases, pitch competitions, fellowships, and other related programmes.

3. Procedure for Startup Labelling

A startup label is described by the Act as a certificate issued by NITDA (which shall serve as the Secretariat of the Council) to a startup upon the fulfillment of the requirements under the Act. Some of the requirements under the Act include-

1. registration as a limited liability company under the Companies and Allied Matters Act;
2. the startup must not have been in existence for more than 10 years;
3. the objects of the startup must include innovation, development, production, improvement and commercialisation of a digital technology innovative product or process;
4. startup must be the owner or author of a software, or holder of a product or process of digital technology;
5. startup must have at least one-third of local shareholding held by one or more Nigerians as founder or co-founder; and
6. where the startup is a sole proprietorship or partnership, it must satisfy c, d and e above

A startup that is desirous of being granted a label under the Act must submit an application on the Startup Portal. Upon satisfactory fulfillment and compliance with the requirements for labeling, the Coordinator of the Startup Portal shall enter the name of the applicant on the register of startups kept for that purpose, and then issue a startup label (certificate) to the startup. This label shall be valid for a period of 10 years from date of issuance.

Conclusion

The Act is a collaborative effort between Nigeria's tech startup stakeholders and the presidency, and it contains a plethora of provisions which if effectively implemented will ensure that the Nigerian tech ecosystem remains relevant in the global market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.