“Tech businesses make up seven of the top ten largest corporations in the world. In comparison to the total contribution of communication and the digital economy, which was said to be 40%, ICT was reported to have contributed 18.42% of GDP this year alone”.
It's no news that the Nigerian startup act has been signed into law by the president, which was disclosed by the Minister of Communication and digital economy, Isa Pantami, on Wednesday.
Following the long period of reading it took to sign the act. It finally happened, and I couldn’t be more excited!
What does the Act mean for us as startup founders, employees, or investors?
The startup act is an excellent opportunity for startups in Nigeria to create an attractive ecosystem that will help them to start and grow their business.
Today I will highlight some benefits of this Act you need to know if you don’t already.
Now come closer.
WHAT DOES THIS MEAN FOR YOU?
* Act provides N10bn investment fund.
* Microsoft will train about 5 million Nigerians in high and in-demand skills.
But first, you have to get;
SPECIAL CERTIFICATION FOR STARTUPS.
First, without the ‘startup label,’ you can't be labeled a startup, thereby rendering you ineligible for any of the benefits provided by this Act.
You can obtain the designated STARTUP certificate from the Nigerian Startup Bill Secretariat. Still, the company has to be a Limited Liability Company for not more than ten years from the date of incorporation.
If your business is designated as a Nigerian startup, you might be eligible for tax advantages for your workers and investors.
The Nigerian Startup act represents a step toward a more balanced and improved ecosystem. Here are some notable benefits of this Act:
SEED FUNDING.
The Act sets up funds for various provisions that make it easier for startups to obtain financing. The Act created the Startup Investment Seed Fund, which will be managed by the Nigerian Sovereign Investment Authority (NSIA).
The Act set up access to grants and loans.
10M annual payment into the FUND.
This fund will contain at least 20% of the total funds in the SEED FUNDING account.
Apart from early-stage investments in Nigerian startups, the fund might offer grants, loans, and assistance to help startups grow.
In addition, it shall also be used to create a startup ecosystem by providing mentorship, training, and other services.
TAX EXEMPTIONS.
Startups are eligible for a total deduction of any expenses for research and development that are entirely expended in Nigeria and a five-year exemption from paying income tax under certain conditions.
Under this Act, startups may be eligible for a Pioneer Status Incentive.
Pioneer status label qualifies companies in crucial sectors like technology and others to be eligible for a tax cut of up to three years, with a potential two-year extension, thanks to the Pioneer incentive.
The Act also incentivizes companies to employ entry-level talent with no more than three years of post-graduation experience by giving them income tax relief on up to 5% of the profit generated.
3. AID WITH REGULATION.
The bill strengthens regulatory assistance for startups. In order to enable smooth processes for startups with labels, it offers partnerships with regulatory organizations.
This will ensure that startups can get the necessary permits and approvals to establish their business venture.
The Act also gives the Federal Ministry of Science and Technology (FMS&T) the authority to issue guidelines for startup activities, which all stakeholders can use as a guide in ensuring that a startup gets its permit or approval from relevant government agencies promptly.
4. CAPACITY BUILDING AND TRAINING.
The Act also directed the establishment of accelerator and incubator programs for startups.
This introduces promoting public-private collaborations and training programs that encourage the establishment of talent centers that create and support entrepreneurs.
Simply put, it enables the creation and management of physical and virtual innovation parks, hubs, and startup clusters in each of the Federation's states.
To sum this up...
The startup act will bring a paradigm shift to the country.
There are already several channels available in Nigeria for startup founders, yet none have adopted a comprehensive approach to law and regulation.
The Nigerian Startup Act intends to close this gap and offer a one-stop shop for anyone seeking to build companies/startups.
I hope this has been an exciting and valuable read.
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