Understanding the Provisions of the Nigerian Startup Act and its Impact on Businesses

Introduction

The Nigeria startup and technology development space has seen significant growth in recent years. According to the Nigerian Startup Ecosystem Report 2022 from Disrupt Africa, Nigeria has approximately 481 tech startups that employ 19,000 people . In another report, the Nigerian startup ecosystem has been ranked 61st globally and second in Africa . According to Disrupt Africa between 2017 and 2022, the startup industry attracted around $2,068,709,465 in funding and investment sums into Nigeria.

The Nigeria Startup Act (the Startup Act, the Act), which was signed into law on October 19, 2022, signals the government's commitment to the development and growth of Nigeria's startup sector. The Act has been widely praised for its efforts to promote innovation and entrepreneurship in Nigeria. It is expected to have a positive impact on businesses captured under this law by providing them with the necessary support, funding, and resources to grow and develop. Some of the key provisions of the Act include tax incentives, access to funding, and support for research and development.

The Startup Act is deemed to be a positive step forward for the country's startup ecosystem, and it is expected to have a significant impact on businesses in the technology and innovation space. This article highlights and discusses the Startup Act and its expected impact on businesses.

What is a Startup?

To be labelled a startup under the Act the business must be a limited liability company that has been in existence for not more than 10 years and has at least one-third of its shareholding owned by a Nigerian as a founder or co-founders with the objective of creating, innovating, producing, developing or adopting a unique digital technology innovative product, service or process. Additionally, it may be a holder or repository of a digital product or process or an author of a registered software. A sole proprietorship or partnership may qualify if they possess the technological requirements above but will be given a pre-label status which expires after 6 months to enable it to incorporate as a limited liability company.