Although the Nigerian Startup Bill might not be able to solve all of our startup problems, we believe it will help. The Nigerian Startup Bill, (NSB) will be the needed hero that will transform the tech sector. The regulations that space founders have called for and that led to loan sharks’ menace, will be implemented in a common sense way.
The Startup Support and Engagement Portal allows stakeholders to communicate with those who are interested in tech regulations in Nigeria. Through the Startup Investment Seed Fund, funding for startups in their “early stage,” will be made available for young Nigerians. Although the Bill could allow progress in this space, there are real concerns regarding certain clauses.
What “startups” are protected by the NSB?
NSBIt provides a benchmark of the startups it will protect and what startups it refers. They must be registered “with the One Stop Shop Centre (OSSC) to be eligible for the incentives contained in the Bill.”
“The OSSC is made up of representatives of regulatory agencies relevant to Startups in Nigeria such as the: Corporate Affairs Commission (CAC); Central Bank of Nigeria (CBN); Securities and Exchange Commission (SEC); National Office for Technology Acquisition and Promotion (NOTAP); Trademark, Patents and Design Registry, etc,” according to the Pavestones, a law firm that represents Nigerian startups.
The bill also says that “…the company should be incorporated in Nigeria and have been in existence for not more than 10 years,” adding that “…the headquarters of the company should also be in Nigeria,” and “…involves a new technology or is technology-enabled.” among other criteria.
Society can benefit from requiring companies to set up offices in countries they operate in. However, this is only possible in certain cases, such as if the company is Facebook. However, this is not the right situation. This is because these aren’t just any company. These are startups, that haven’t existed for more than ten years. These startups must be registered in Nigeria and have their headquarters there. This is because they are less likely to receive funding from Silicon Valley-type investors.
Nigerian companies that are registered with foreign investors are not popular choices.
You can call it what you want, but many investors aren’t keen to invest their money in Nigerian companies. Maxime Bayen, who is a venture capitalist and knows a lot about investing in the tech sector, advised a group of mostly Nigerian entrepreneurs looking for investors to help them register their startups as American businesses. Flutterwave, the Nigerian unicorn worth $3 billion, has its headquarters in San Francisco in California, USA. Flutterwave could therefore be excluded from certain incentives offered by the NSB. One might ask, “Who needs foreign investors?” When you have the Startup Investment Seed Fund. You need foreign investors to invest into companies. OnePipe, for example, has raised twice as much money in a 12-month period. Funds that might not be available to the Startup Investment Seed Fund. Sure, there are Nigerian firms like Future Africa and GetEquity that could invest in these businesses but can they get the investment available and quickly to founders on a regular basis before the lights are cut out, all — according to a Statista report from last year — 144 fintech startups?
Are NSB benefits for everyone in the ecosystem?
The startup bill also proposes that for startups to be eligible “51% of its shares should be held by Nigerians.” This again can be good. What happens to Lagos, a rapidly growing tech hub? The idea of tech hubs is that they shouldn’t be for just citizens of the country. Tech hubs’ gospel is that all can come in and have access to the same opportunities. This clause is antithesis to that. NowNow, a fintech founded by Sahir Bery, an Indian tech entrepreneur, has been in existence since 2018, and is headquartered at Lagos. CBN licenses NowNow to be operational. This bill won’t recognize it for its incentives largely because there is only one Nigerian on the board. The majority of its staff, however, are Nigerians. NowNow intends to launch an ambitiously large-scale financial literacy campaign for Nigeria. If he wishes to take advantage of the NSB’s offerings, Sahir will give up 51 percent of his business, more than half his shares to Nigerians and get Nigerian citizenship. It’s good for Yaba to have people like Sahir receive all the incentives. This is good news for Nigeria’s tech sector. There are many opportunities and competition is good. It will accelerate Nigeria’s rise as a tech hub, and maybe close in on South Africa, which is poised to house the top African financial hub. For example, Canada’s government has placed systems in placeThese qualities make tech companies flourish, regardless of how many Canadians are on their boards. So much so that companies like Meta; Facebook parent, Amazon, Microsoft, Apple, and Google all have huge operations in Toronto, and not “Development Centres” a la’ Microsoft recently in Lagos. Plus, it’s not the best policy for FDI.
Start-ups and employees receive tax breaks
Recently, there was a sneak peek into how well tech bros are paid, thanks to TechCabal’s reporting on Bento Africa. However, not all tech bros receive in the region of half a billion Naira in the Nigerian tech sector. PayLab estimates that the average Nigerian who works in tech earns between 90,000.00 and 380,000 Naira a month. This is objectively a positive thing. Even young Nigerians need to be paid fairly for their labor. They might not pay their fair share of taxes if the NSB becomes law. The bill contains provisions that will allow startups to hire staff. 35 percent tax break Even though they are among the highest-paid Nigerians. Fluterwave and Bento Africa employees could receive a tax break of 35% if they meet the requirements in NSB For Startups. But that’s not all the tax breaks the bill proposes. The startups themselves will enjoy a “tax exemption on their profits as Startups for 7 years.” This means that companies like, again, Flutterwave, a unicorn that was part of the investment round that saw $3.4 million swallowed by the UK fintech, Dapio, will not pay tax for seven years if they meet the bill’s yardstick of a startup. Flutterwave will, for emphasis, only be getting ready to begin paying taxes on profits despite the valuation.
What does the NSB protect?
A large portion of Nigeria’s tech media platforms support NSB and want to say that it is ready and good to go. But the media hasn’t fully explained to the public what the startup bill is, other than this bill that is good for tech. This has led to some media outlets saying “certain things” in reports about NSB that it won’t be capable of solving.
“If the implementation of the startup bill is successful, it will provide long-awaited respite for Nigeria’s startups that have found themselves navigating sudden, aggressive regulations (like motorcycle taxi, cryptocurrency, and Twitter bans.)” Quartz I wrote about it last year.
That is not just incorrect, it’s an outright lie. As stated in the quote, NSB does not protect tech companies from government oversight. Quartz suggests. It can create, through the Startup Support and Engagement Portal (which it calls it), a path for tech companies to follow the same steps as Twitter. This will allow them to do the things the government wants, but much faster. The government could ban companies like Kwik and GoKada from operating in the country. The type of dialogue the Startup Support and Engagement Portal could facilitate was actually happening months before the notorious banning of Okada by Governor Babajide Sanwoolu in Lagos 2020. It is important to remember that the OSSC, government and other agencies can do what they wish regardless of the bill.