On Wednesday, 27 July 2022, the House of Representatives passed the Bill to establish the National Council for Digital Innovation and Entrepreneurship a.k.a the “Nigeria Start-up Bill”, bringing the bill’s legislative journey to a successful end. One week earlier, on Thursday, 21st July 2022 the Senate had passed the same bill, which will now be transmitted to the President for Assent.
The bill was transmitted by the President, Muhammadu Buhari to the two chambers of the National Assembly in March 2022. Being an Executive bill, it benefitted from a fast-tracked legislative process with a gestation period of four months from its introduction to passage by the two Chambers. It is reported that the inclusive approach in the drafting of the bill and its strong backing by the Presidency, the Minister of Digital Economy, Isa Pantami and major Nigerian tech sector leaders facilitated its quick legislative journey.
In a nutshell, the bill aims to provide clear guidelines and regulations for Nigeria’s tech ecosystem, and spells out tax and fiscal incentives and Intellectual Property (IP) protections targeted at promoting tech-enabled ventures.
According to the outlined objectives in Section 1 of the bill, it provides a legal and institutional framework for the development of Start-ups in Nigeria, an enabling environment for their establishment and operation, the development of digital technology-related talents and aims to position Nigeria’s Start-up ecosystem, as the leading digital technology centre in Africa, having excellent innovators with cutting edge skills and exportable capacity.
Particularly, it proposes the establishment of a National Council for Digital Innovation and Entrepreneurship, with the National Information Technology Development Agency (NITDA) as Secretariat to manage the process of labelling start-ups in Nigeria in addition to other outlined functions in section 9. Additional functions of the Secretariat would include facilitating Start-ups’ engagement with regulators such as the Corporate Affairs Commission (CAC), Nigerian Copyright Commission and the Trademarks, Patent and Design Registry, among others.
The Council is to be chaired by the President with the Vice President acting as vice-chair. Members include Ministers in charge of relevant ministries, as well as non-ex officio members such as a representative of the Nigeria Computer Society and a forum of Start-ups to be set up.
According to section 13 of the bill, companies qualify as Start-ups if they:
- aim to produce or improve digital technology innovative products or processes,
- are registered under the Companies and Allied Matters Act 2020,
- have been in existence for less than 10 years,
- hold a digital technology product or process or own registered software,
- have at least one-third local shareholding held by one or more Nigerians as founder or co-founder of the startup.
Sole-proprietorship or partnerships can also be labelled as Start-ups under the bill. With this clear definition, it would be easy to identify companies that fall into this category in order to enable them access the Investment Seed Fund which is an innovation in the Bill. The Seed Fund is to be managed by the Nigeria Sovereign Investment Authority and must have not less than N10, 000,000,000 (ten billion Naira) paid into the fund annually from sources approved by the Council.
The bill in section 10 further provides for a Start-up Support and Engagement Portal a.k.a “Start-up Portal” which is set up as a form of clearing house as it would be a platform for registration of Start-ups with relevant Ministries, Departments and Agencies (MDAs) and issue of relevant permits and licenses. Among its many functions is the receipt of complaints and recommendations from industry stakeholders, as well as the public. A Coordinator to be appointed to manage the portal is required to have at least 10 years of experience in technology and entrepreneurship.
A Start-up Consultative Forum is also set up in section 12 as an engagement and information sharing platform between startups and regulators. The forum is expected to among others, share information such as relevant incentives that apply to Start-ups and policy proposals relevant to the Nigerian startup ecosystem. The composition of this Council includes stakeholders and representatives registered on the Start-up Portal from labelled Start-ups, angel investors, incubation, accelerators and innovation hubs, and civil society organisations involved in the advancement of technology and innovation, etc. It is commendable that four representatives from this forum will be part of the members of the Council as a way of promoting inclusion of industry stakeholders in decision making.
The bill proposes that Start-ups which fall within industries captured under the extant Pioneer Status Incentives (PSI) Scheme may equally apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of tax reliefs and incentives under the PSI Scheme. Also, loans and tax reliefs have also been incorporated in the bill to support and encourage the activities of start-ups.
In an earlier write up about this bill, concern was raised about the legislative habit of creating new structures instead of enhancing existing ones and ensuring they work optimally. This was in light of the existence of laws and government schemes set up to support small businesses and tech companies. Perhaps, this informed the situation of the Secretariat of the Council at the National Information Technology Development Agency (NITDA). The point had been made by Start-ups that existing multiple legal regimes or policies are not administered in a harmonised or consistent manner, and that similar Start-up Acts have worked in other African countries. Furthermore, the majority of opinion by stakeholders during a public hearing on the bill was that it has great potential and falls in line with international best practices in the tech sector.
The numbers also make a case for investment in the sector. According to the Nigerian Bureau of Statistics, the ICT sector made a 16.20% contribution to the Nigerian GDP in the first quarter of 2022 alone outperforming the agricultural and manufacturing sectors. It was also reported that start-ups in Nigeria raised about $1.5 billion in 2021.
Nevertheless, time will tell if there would be a significant improvement from what exists following the signing of the law. With the President, Vice President and a number of government functionaries comprising the majority of the membership of the Council, and the President retaining power to give general or specific directives on matters of policy (a common provision in establishment laws), it is apparent that the government remains the major decision maker in the proposed Council. The bill is also silent on consequences for non-implementation. What this means is that it would ultimately rely on the commitment and political will of the succeeding administration (the current one is on its way out) to see that the vision of the makers of the bill come to light and yield positive outcomes for Nigerian Start-ups. It has also been noted that States would need to domesticate the law after it is signed by the President.