Nigeria: FEC approves tax relief and other incentives for startups

Nigeria’s Federal Executive Council (FEC) has approved a plan to incentivise and further harness Nigeria’s digital innovation and entrepreneurship ecosystem, during its meeting on 18th May 2022.

This was in response to Professor Isa Pantami’s memo, Minister of Communications and Digital Economy.

Based on the approval, it appears that the government is working to implement strategies to encourage the growth and development of more Innovation-Driven Enterprises. (IDEs), which could create millions of jobs.

This will allow for innovative solutions to societal issues, and help Nigerians grow and diversify their economy in line the National Digital Economy Policy and Strategy.

Confirming the development, Dr. Femi Adeluyi, Technical Assistant (Research & Development) to the Minister, said that a number of the proposed strategies resulted from recommendations that were made at an interactive forum held on 22nd February 2022, where the Pantami-led Federal Government Delegation on a working visit to the Lagos digital innovation ecosystem.

The Director-General was part of the delegation. NITDAThe Executive Vice Chairman of Nigerian Communications Commission (NCC), the Post Master General and the Managing Director of Galaxy Backbone Plc.

“The visit provided a useful platform for open and interactive discussions on the ecosystem’s pertinent challenges and interventions required from the government to enable the ecosystem achieve its full potential. The forum was attended 143 ICT- and Startup Companies.

“The delegation also paid a visit to 3 selected tech startups, namely: Flutterwave (currently valued at US$3 billion), Treepz (with current funding of US$3.1 million) and Reliance Health (with US$48.3 million in funding).

“It is worthy to that under the able administration of His Excellency, President Muhammadu Buhari, GCFR, Nigeria became home to 5 of about 8 Unicorns (startup companies valued at over US$1Billion) on the African Continent”.

Also, Nigerian startup companies attracted around 35% (estimated at US$1.4Billion), of the more than US$4Billion raised in Africa by African startups. This is the highest amount of any startup ecosystem on the continent. It has created many jobs, but that is not the most important thing.

For instance, Jumia, an e-Commerce company, provides over 3,000 direct jobs according to Jobberman’s 2020 Digital Sector Report.

The report also asserts that the Nigeria’s Digital Economy has the potential to create an average of 1.3million tech-enabled jobs across industries in 5 years (i.e. By 2025

To further strengthen the ecosystem, the Federal Executive Council approved the following recommendations,  in line with the Executive Order 003 and Presidential Order 005:

  1. Federal Ministry of Finance, Budget and National Planning and Nigerian Investment Promotion Commission (NIPC), should prioritise tax reliefs and other incentives, such as Pioneer Status Incentive (PSI), to support the technology and innovation ecosystem.
  2. The Nigerian Copyright Commission and the Trademarks Registry and the Patents and Designs Registry need to work together with the National Information Technology Development Agency, NITDA, in the development of an Intellectual Property (IP), framework for technology and innovation ecosystems within two (2) months.
  3. The Bureau of Public Procurement should collaborate with NITDA in order to create a framework to ensure that technology innovation startups are included in government procurement processes. This will encourage innovation, ideation and the design of solutions to development problems within two (2) months.

“The Nigeria Startup Bill (NSB) was earlier approved by the Federal Executive Council and forwarded to the National Assembly and the process is about 90% complete.  The Council will approve the incentives to consolidate the gains already made in the NSB Process.

“The implementation of the National Digital Economy Policy and Strategy (NDEPS) emphasises the importance of the innovation and startup ecosystem to the development of an indigenous digital economy.

“The Ministry will continue to position Nigeria to develop this ecosystem in order to transform Nigeria into a country with a sustainable and thriving digital economy”.

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