Nigeria’s President Muhammadu Buhari looks set to hand the country’s vibrant tech ecosystem an olive branch, following years of fraught relations with the sector.
In his New Year’s speech to the nation he stated: “In year 2022 and going forward, our administration would intentionally leverage ICT platforms to create jobs while ensuring that the diversification of our economy creates more support to other emerging sectors.
“I am proud to announce that several foreign investors are taking advantage of our ranking as one of the leading startup ecosystems in Africa to invest in our digital economy.”
This follows approval by cabinet in December of Nigeria’s Startup Bill (NSB). The fruit of a year-long collaboration between the government and startup investors, law firms, entrepreneurs, policy advocacy groups, the NSB will set in stone a new relationship between Nigeria’s regulators and startups.
The bill has now passed before Nigeria’s National Assembly for approval.
New regulatory framework
According to those working on the draft, the bill aims to create a new regulatory framework that allows emerging tech firms to thrive, by addressing challenges such as poor infrastructure, access to capital and high taxes.
As Africa’s top tech hub, Nigeria has grown four fintech unicorns – Interswitch, Flutterwave, Andela and Opay – who all achieved valuations of over $1bn.
Despite these successes, acrimony abounds between Nigeria’s tech industry and the government, with tech firms accusing Abuja of stifling growth with an operating environment considered hostile to startups and investors.
Hostile environment
Aggressive regulation on motorcycle taxis preceded Buhari banning Twitter for three months this year, after the social media giant removed a controversial post from the Nigerian president.
Laying further stumbling blocks, the Central Bank of Nigeria (CBN) asked commercial banks to stop facilitating cryptocurrency transactions in February, removing a critical financial artery at a time when the naira devaluation was biting down on the Covid-struck economy.
In August, the Nigerian Information and Technology Development Agency proposed licensing fees for tech companies, the introduction of tax levies, and also prison sentences for those who defaulted on payments.
What will the NSB do?
Yet behind the scenes, the creators of the NSB and 300 volunteers have been clearing a pathway forward.
“The bill addresses the startup labelling process,” said Isa Ali Pantami, the minister for communication and digital economy, in an event in Lagos in December. Once a company has acquired a startup label, it will be able to apply for a special government grant.
“The bill also will establish the startup investment Seed Fund, where there is going to be a dedicated fund to be provided by the federal government for our young innovators all over the country… in order to begin their own process if they need that,” Pantami said.
Alongside the seed fund, the NSB recommends tax holidays for up to four years for startups, and incentives to attract local and foreign investors.
The minister said that tech parks would be established across the country where innovators could incubate their ideas. Talent development, and university-industry collaboration also form part of the bill.
Creating an enabling environment for tech
Nigeria has over 1,200 startups according to Briter Bridges Intelligence, a London-based firm that tracks investments into Africa. This is the highest number on the continent, and the NSB’s implementation is set to ease doing business in the country, while removing the current state of regulatory confusion in which firms operate.
“The bill is being proposed to provide an enabling environment for the growth of startups and guard against different challenges faced, such as seemingly disruptive regulations, lack of regulatory certainty, and weak infrastructure like broadband, open data, and digital platforms that limit the optimisation of the many benefits of the digital economy,” says Kola Aina, Founder and General Partner of Ventures Platform Fund, and one of the contributors to the bill.
When the National Assembly passes the NSB, Nigeria will join Senegal and Tunisia in enacting legislation designed to aid startups, as Abuja tries to diversify west Africa’s biggest economy. South Africa and Kenya continue to work on their own startup bills.
Inclusive approach
The big-tent approach to getting the bill into motion has shown a willingness on behalf of the Nigerian government to work with stakeholders.
“The inclusive nature of the bill is the result of a concerted lobbying effort by Nigeria’s tech entrepreneurs, to safeguard their livelihoods and the attractiveness of the Nigerian market,” says Joachim MacEbong, a senior analyst at SBM Intelligence.
“Hopefully there are few landmines in the legislature – especially because it is a rubber stamp for the executive more or less – and the bill can pass swiftly,” he added.
When the NSB passes into law, the potential of Africa’s biggest tech ecosystem can be better harnessed. Friendly regulation, increased funding and an inviting investment climate will water the growth of the sector and help to unleash Nigeria’s full tech potential.
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