By Adeola Osifeko, edited by Prince Osuagwu, Hi-Tech Editor

The Nigeria Start-Up Act 2022 is a transformative legislative framework designed to stimulate innovation, entrepreneurship, and economic growth in Nigeria’s tech ecosystem.

Enacted through collaboration between the government and the tech community, the Act aims to position Nigeria as a leading hub for innovation by addressing startup challenges, streamlining processes, and creating support mechanisms to enhance competitiveness in the global digital economy.

Key Provisions

A startup under the Act must be incorporated in Nigeria and not exceed ten years in existence.

Engage in developing digital technology products or innovative processes. It must be at least 51% Nigerian-owned and demonstrate scalability and revenue-generation potential.

This ensures only truly innovative businesses qualify for the Act’s benefits, making compliance essential for tech founders.

Start-Up Label Certification

The Act introduces a startup label issued by the National Information Technology Development Agency, NITDA through a digital portal. Startups meeting eligibility criteria receive certification valid for ten years.

 Labeled startups benefit from tax exemptions, investment incentives, government grants, and capacity-building opportunities. This is even when ensuring compliance with the certification process is crucial for accessing these advantages.

Tax Incentives

To encourage investment in the startup ecosystem and ease financial burdens, the Act provides tax incentives, including Tax Holidays of up to four years from the date of certification.

With the Act, expenses on R&D are deductible from taxable income, fostering innovation.

Access to Funding

The Act enhances startup funding through start-Up Investment Seed Fund. With a minimum annual allocation of NGN100 million, managed by the Nigerian Sovereign Investment Authority (NSIA), offering grants, loans, and equity investments.

Credit Guarantee Scheme: Labelled startups gain access to affordable credit, reducing lenders’ risks in financing startups.

Regulatory Flexibility

Acknowledging the regulatory hurdles startups face, the Act introduces sandbox programs that allow startups to test innovative products under relaxed regulations. This creates an enabling environment for technology-driven businesses to thrive.

The Act simplifies regulatory procedures and improves market access by establishing the Startup  a one-stop platform for registration and investor-startup interactions. The Secretariat works with regulators to facilitate compliance and ease entry into local and international markets.

Intellectual Property Protections

Recognizing IP as a critical asset for startups, the Act prioritizes IP rights through strategic provisions that enhance protection, commercialization, and global market penetration. A dedicated IP registration channel on the Startup Portal streamlines trademark and patent filings, allowing Nigerian startups to compete globally. The Secretariat plays a central role in facilitating international IP compliance.

Innovation Hubs and Incubators

NITDA is mandated to collaborate with stakeholders in establishing innovation hubs and incubators. These hubs serve as collaboration, mentorship, and networking centers, equipping startups with the necessary resources to scale their ideas.

Dispute Resolution

The Act establishes an alternative dispute resolution mechanism and a specialized Start-Up Tribunal to handle conflicts, ensuring fair and efficient resolution of disputes affecting startups.

Global Trends Impacting Startups

Despite the Act’s benefits, 2023 saw a significant decline in global startup funding. Venture capital investment and scientific output regressed to pre-pandemic levels, affecting emerging regions like Africa, including Nigeria. Several factors contributed to this downturn; they include

Economic Slowdown, foreign exchange volatility, emerging technology shifts, and declining corporate R&D among others.

Economic meltdown:  Institutional investors became more risk-averse, reducing funding for startups.

Foreign Exchange Volatility: Fluctuations in Nigeria’s forex market diminished returns on investments, deterring foreign investors.

Emerging Technology Shifts: The rise of artificial intelligence and other cutting-edge technologies redirected investments, sometimes at the expense of general startup funding.

Declining Corporate R&D: Corporate spending on R&D stagnated, mirroring broader economic trends and impacting startup innovation.

While some central banks have begun cutting interest rates, financing conditions remain tight, posing continued challenges for startups, particularly in emerging economies like Nigeria.

Although the Nigeria Start-Up Act 2022 is a landmark legislation that creates conducive environment for innovation, offering tax incentives, regulatory flexibility, and funding opportunities, to sustain growth, tech founders must, however, proactively align with its requirements while adapting to shifting investment landscapes.

Also, Nigerian startups and policymakers must prioritize local investment sources, diversify funding strategies, and integrate with global technological advancements.

*Osifeko is Managing Partner of AEO Law Practice