Key Provisions of the Nigeria Start-Up Act 2022 Every Tech Founder Should Know.
The Nigeria Start-Up Act 2022 (the ‘Act’) is a transformative legislative instrument designed to stimulate innovation, entrepreneurship, and economic growth within Nigeria’s startup community. Enacted as a collaborative effort between the Nigerian government and the tech community, the Act’s foremost objective is to position Nigeria as a key player in Africa’s innovation and technology industry by addressing critical challenges facing startups, streamlining processes, and establishing support mechanisms to ensure that Nigeria remains competitive in the global digital economy. The Act fundamentally creates the right incentives and ecosystem for startups to innovate and grow.
The key provisions outlined below are legal and regulatory requirements every tech founder should be familiar with, emphasizing their implications for new and existing startups.
1. Definition of a Start-Up
The Act provides a detailed definition of what constitutes a startup. According to the Act, a startup must:
a). Be a company incorporated under Nigerian law and in existence for no more than ten years;
b). Engage in the development of digital technology products, or improvement of innovative processes i.e products or services;
c). Be predominantly Nigerian-owned, with at least 51% of its shares held by Nigerians;
d). Possess the capacity to scale and generate revenue.[1]
This definition ensures that only genuinely innovative businesses qualify for the benefits provided under the Act. Tech founders are advised to align their business structures to meet these criteria where possible.
2. Start-Up Label Certification
One of the most crucial aspects of the Act is the introduction of the startup label, which is granted to eligible companies by the National Information Technology Development Agency (the ‘Secretariat’) through a digital portal. The certification process involves submitting an application via the portal, that meets the criteria outlined in the Act, subject to the standard assessment. Once these requirements are fulfilled, the company receives a start-up label, valid for 10 years.
Certified startups gain access to several benefits, including:
- Tax exemptions;
- Incentives for investment;
- Government grants and loans;
- Capacity-building opportunities.[2]
Startups should ensure that their applications are comprehensive and adhere strictly to the requirements of the Act.
3. Tax Incentives[3]
The Act prioritizes tax incentives for angel investors and venture capitalists to attract investment into the startup ecosystem for the purpose of reducing the financial burden on startups. These include:
a. Tax Holidays
Startups are entitled to tax holiday of up to four years from the date of certification under the Act.
b. Research and Development (R&D) Deductions
Expenses incurred on R&D activities are deductible from taxable income, encouraging startups to innovate and remain competitive.
4. Access to Funding[4]
The Act prioritizes access to funding, by introducing key mechanisms to ensure that startups can access funding efficiently:
a. Start-Up Investment Seed Fund
A Start-Up Investment Seed Fund is established with a minimum annual allocation of N100,000,000 managed by the Nigerian Sovereign Investment Authority (NSIA), to provide grants, loans, and equity investments to certified startups, inclusive of export-focused supports such as the Export Development Fund, Export Expansion Grant, and Export Adjustment Scheme Fund.
b. Credit Guarantee Scheme
Additionally, labelled startups can benefit from affordable credit through a dedicated Credit Guarantee Scheme to reduce risks borne by lenders when financing startups.
5. Regulatory Flexibility[5]
Startups often face significant regulatory hurdles, which can stifle growth. The Act addresses this by offering regulatory flexibility through sandbox programs, allowing startups to test innovative products and services under relaxed regulatory conditions.
6. Market Access and Regulatory Support
The Act simplifies regulatory processes and enhances market access for startups, that ensures they focus on business growth rather than navigating complex regulations. Central to this initiative is the Startup Portal, a one-stop platform for registration, prioritizing startup applications, and facilitating interactions among investors, regulators, and startups. Launched in 2023, the portal is accessible at https://startup.gov.ng.[6]
The Act also mandates the Secretariat to facilitate regulatory support for startups by collaborating with relevant regulators to ease compliance processes and foster access to local and international markets.[7]
To qualify as a startup under the Act, a business must satisfy all requirements listed in the definition section of this article.
7. Intellectual Property (IP) Protections[8]
Startups often operate in industries where intellectual property is a core asset. The Act places strategic emphasis on intellectual property (IP) rights, as highlighted in Section 31, recognizing their pivotal role in fostering innovation and entrepreneurship. The Act actively promotes the creation, protection, and commercialization of IP assets by startups, while also facilitating their penetration into global markets. This effort is anchored in partnerships with key institutions such as the Nigerian Copyright Commission and the Trademarks, Patent, and Design Registries.
A significant innovation under the Act is the inclusion of a dedicated IP registration channel within the Startup Portal, exclusively accessible to startups that have obtained the required labelling from the Secretariat. This initiative simplifies the process for registering trademarks and patents internationally, enabling Nigerian startups to compete on the global stage more effectively. The Secretariat’s active role in this process ensures that startups can navigate international IP frameworks with greater ease and efficiency.
This enhanced IP registration and protection framework is a critical step in boosting Nigeria’s startup ecosystem, empowering businesses to secure their innovations while expanding their market reach. Such progress aligns with Nigeria’s ongoing economic diversification efforts, as the Information and Communication Technology (ICT) sector contributed 19.78% to the country’s GDP in the second quarter of 2024, reflecting the nation’s shift away from reliance on oil.
8. Innovation Hubs and Incubators[9]
The Act empowers the National Information Technology Development Agency (NITDA) to collaborate with relevant stakeholders to establish hubs and incubators that will promote collaboration, mentorship, and networking. These hubs are designed to serve as centres for knowledge exchange and support, providing startups with the resources needed to develop and scale innovative ideas.
9. Dispute Resolution
The Act provides a streamlined dispute resolution mechanism to handle conflicts involving startups. It promotes the use of alternative dispute resolution mechanisms and establishes a Start-Up Tribunal to handle disputes related to its provisions[10].
Conclusion
The Nigeria Start-Up Act 2022 is a landmark legislation that substantially supports technological innovation. Its provisions on certification, funding, tax incentives, and regulatory flexibility create a conducive environment for startups to thrive.
However, it is worth noting that the year 2023 witnessed a sharp decline in global investment in startups and innovation, signaling a marked reversal from the funding boom of 2020-2022. According to the 2024 Global Innovation Index Tracker, venture capital funding and scientific output regressed to pre-pandemic levels, with the downturn hitting emerging regions like Latin America and Africa particularly hard. Nigeria’s startup ecosystem was not immune to these challenges, as the total funding received by local startups plummeted.[11]
Several factors contributed to this funding drought. The global economic slowdown has made institutional investors more cautious, particularly in high-risk areas like startup investments, where only a fraction of ventures eventually become profitable. In Nigeria, the challenges are compounded by the volatile foreign exchange (forex) market, which significantly reduces the value of returns when capital and profits are repatriated. This has deterred foreign investors, who are critical to the country’s tech ecosystem.[12]
Another significant factor is the rise of emerging technologies, particularly artificial intelligence (AI). Investors have begun to pivot their strategies, channeling funds toward innovators in AI and other emerging verticals, sometimes at the expense of broader startup ecosystems. This shift reflects a global recalibration of priorities as technological advancements reshape the landscape of innovation.[13]
The broader innovation landscape has also suffered setbacks. Corporate research and development (R&D) spending has slowed, mirroring stagnant revenue growth and recalling the post-2009 financial crisis. Although R&D investment levels remain historically high, their growth has plateaued, and international patenting activity has declined.
Looking ahead, while some central banks have started to cut interest rates, conditions for innovation financing remain tight. This environment may continue to weigh negatively on investments in startups and innovation, particularly in emerging economies like ours (Nigeria). The outlook for 2024 and 2025 remains unusually uncertain, raising concerns about how startups in these regions will navigate these financial headwinds.
For tech founders, while understanding and leveraging the Act is essential for building resilient and scalable businesses. Aligning business operations with the Act’s requirements will become more beneficial in promoting innovation in Nigeria’s digital economy, if Nigerian startups and policymakers prioritize fostering local investment sources, diversifying funding strategies, and aligning with global trends in emerging technologies to stay competitive.
Written by Adeola Osifeko LLB, LLM, ACIS, ABR
Partner, Corporate-Commercial Practice Group, AEO Law Practice
[1] Nigeria Start-Up Act 2022, s 2
[2] World Intellectual Property Office, ‘Nigeria’s Startup Act’s Impact on Innovation’ 14 March 2024 <https://www.wipo.int/en/web/global-health/w/news/2024/news_0004> Accessed on 2 December 2024
[3] Nigeria Start-Up Act 2022, s 24
[4] Nigeria Start-Up Act 2022, ss 19 and 21
[5] Nigeria Start-Up Act 2022, s 37
[6] Nigeria Start-Up Act 2022, s 13
[7] Nigeria Start-Up Act 2022, s 18
[8] WIPO (n2)
[9] Nigeria Start-Up Act 2022, s 28(1)(e)
[10] Nigeria Start-Up Act 2022, s 47-48
[11] WIPO, ‘ Global innovation Inde 2024’ September 2024 https://www.wipo.int/web-publications/global-innovation-index-2024/en/ Accessed on 3 December 2024
[12] Ibid
[13] Ibid
Published in the Vanguard Newspaper dated 5 February 2025. See Publication here: Why every tech founder must understand Nigeria start-up Act 2022 https://www.vanguardngr.com/2025/02/why-every-tech-founder-must-understand-nigeria-start-up-act-2022/