On the 19th of September 2022, President Muhammadu Buhari assented to the Nigeria Startup Bill (NSB), which was recently passed by the two chambers of the National Assembly.
The act is meant to provide an enabling environment for the establishment, development and operation of startups in Nigeria, provide for the development and growth of technology-related talent, and position Nigeria’s startup ecosystem.
In the simplest manner possible, the law is expected to appeal to the tech ecosystem. However, it is also geared to assist any creative that hopes to create a tech startup in Nigeria to get help as often as possible.
The law was created by the Federal Government, in collaboration with 30 tech leaders including Ventures Platform founder, Kola Aina and Future Africa founder, Iyin Aboyeji, and the Minister of Digital Economy, Isa Pantami.
How it will benefit creators
The new law allows for the creation of a startup investment seed fund which will be managed by the Nigeria Sovereign Investment Authority (NSIA). Sources have estimated the seed fund to be about N10billion annually.
However, the start-up seed fund will only be applicable to startups that apply for “startup label.” According to the law, the startup label would only be issued to a firm registered as a limited liability company and has been in existence for a period of not more than 10 years from the date of incorporation. This means more than 10 years is not allowed.
The startup must own software with a Nigerian as founder or co-founder. It must also be involved in the digitalisation process of any product.
Asides from the fact that the startup bill is geared towards talent, one of the biggest benefits is the tax exemptions offered.
For instance, any of the startups are eligible for tax incentives if they are under the extant Pioneer Status Incentives(PSI) Scheme. They can use this to apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of tax relief.
Similarly, a startup with a minimum of ten employees, 60% of which are employees without any form of work experience, and within three years of graduating from school or any vocation within the assessment period, is eligible to enjoy tax relief from income tax of 5% of its assessable profits.
Investors were permitted to have a tax credit equivalent to 30% of their investment in a startup. On the other hand, employees of startups were also permitted to have personal income tax exemptions of 35% for two years.
In addition, startups are permitted to list on the Nigerian Exchange Limited (NGX) or similar exchanges and crowdfund projects. Also, there is a lot of permission to train, develop talent, run accelerators and incubator programmes to enhance the tech ecosystem.
While the innovation from this new law looks a bit techy, creators who utilise tech products or patents are also covered by some of these laws. Especially the ones that protect intellectual rights and allow the repatriation of proceeds. In essence, the act is to help grow investments that are tech-oriented for creatives who now, utilise these instruments.
