Nigeria Startup Act 2022 Review: A Two-Year Reality Check

• The Pre-2022 Startup Ecosystem

The environment that demanded the Nigeria Startup Act (NSA) 2022 was one of interesting contradictions. On the one hand, Nigeria’s technology startup ecosystem was growing at a high rate and remarkably attracting foreign capital. By 2021, Nigerian startups had secured the largest share of venture capital in Africa, attracting an impressive $1.37 billion. By early 2022, the landscape was dotted with over 481 active tech startups, collectively employing more than 19,000 people and producing the majority of the continent’s “unicorns”—startups valued at over $1 billion. This dynamism was pushed by a large, youthful, and increasingly tech-savvy population, creating a playing field for innovation in sectors like financial technology (fintech), e-commerce, and health-tech.

On the other hand, this growth occurred not because of, but despite, the regulatory and business environment, which it would seem was set out to frustrate these startups out of business. Founders and investors navigated an arduous landscape fraught with regulatory confusion amid a dearth of legislation. Even where a regulatory framework exists, it was often dangerously restrictive, volatile, inconsistent, and at times, openly hostile. Overnight policy shifts, such as the Central Bank of Nigeria’s (CBN) clampdown on cryptocurrency transactions, created significant uncertainty and operational hurdles, undermining investor confidence. Beyond policy meandering, startups contended with complex bureaucratic procedures for registration and compliance, and inadequate infrastructure.

• Then came the NSA, the Legislative intervention aimed to provide succour

It was against this backdrop of high potential constrained by high regulatory friction that the NSA was conceived. Signed into law on October 19, 2022, the Act was heralded as an upward-looking piece of legislation designed to fundamentally remodel the relationship between the state and the startup ecosystem. Its stated objectives, were clear and ambitious: to establish a comprehensive legal and institutional framework for startups; to create an enabling environment for their establishment, growth, and operation; to promote the development of technology-related talent; and to position Nigeria’s startup ecosystem strategically as the leading digital technology hub in Africa, recognised for its world-class innovators and export capability.

A defining aspect of the NSA’s development was its “co-creation” process. Unlike typical routine government legislation, the Act was the product of extensive collaboration between the Nigerian presidency, technology leaders, investors, and various ecosystem stakeholders. This inclusive approach was intended to ensure that the final legislation was not only well-intentioned but also practical, targeted, and genuinely fit-for-purpose, directly addressing the most pressing pain points identified by the community it was designed to serve. This collaborative genesis created a powerful narrative of a new social compact between the government and its most innovative citizens, setting an exceptionally high bar for the Act’s implementation and success. The failure to meet these co-created expectations would therefore not be seen as a mere policy shortcoming, but as a breach of this new, widely publicised partnership.

• The “Startup Label”: A Golden Ticket or a Bureaucratic Logjam?

At the core of the NSA is the “Startup Label,” a certificate that functions as the “master key” to unlocking all the benefits and incentives provided by the law. As stipulated in the Act, no company take advantage of the tax holidays, funding, or regulatory support without first obtaining this official designation. The process is managed by the Act’s Secretariat, NITDA, through a dedicated online “Startup Portal” where companies must apply and submit the required documentation.

The eligibility criteria for the Startup Label are specific:

The company must be registered as a limited liability company (LLC) with the Corporate Affairs Commission (CAC).
The company has been in existence for no more than 10 years from its date of incorporation.
The company’s core objectives are innovation, development, production, or commercialisation of a “digital technology innovative product or process”.
The company must have at least one Nigerian founder or co-founder holding equity in the company.

Quite straightforward, but by making every benefit contingent on a discretionary “Startup Label” issued by a single agency, the Act introduces a critical vulnerability, a centralised chokepoint. That does not operate on a rights-based system. As such, a company meeting the criteria is not automatically entitled to benefits; instead, it is subject to a privilege-based system where benefits are granted only after navigating an administrative process managed by NITDA. What this has created are bureaucratic delays, administrative hurdles, and rent-seeking opportunities that the Act was intended to eliminate.

The Incentive Structure: The fiscal incentives are the sweet spot

The potpourri of fiscal incentives offered under the NSA is arguably its most attractive feature for both startups and investors. The Act’s multi-pronged approach to tax relief should free up capital for reinvestment and growth.The primary incentives for a “Labelled Startup” include:

• Pioneer Status Incentive (PSI): Labelled startups are eligible for PSI, which grants a tax holiday from Companies Income Tax for an initial period of three years, extendable for an additional two years. This five-year potential relief is a significant boon for early-stage companies focused on scaling.
• Full R&D Deduction: Startups can claim a 100% tax deduction for expenses related to research and development, provided the activities are conducted wholly in Nigeria.
• Exemption from ITF Contributions: Labelled startups that provide in-house training for their employees are exempt from mandatory contributions to the Industrial Training Fund (ITF).

For investors, the incentives are designed to de-risk investment and encourage capital flow into the ecosystem:

• Exemption from Capital Gains Tax (CGT): Angel investors, venture capitalists, and other institutional investors are exempt from paying CGT on the profits from the disposal of their equity in a labelled startup, provided they hold the investment for at least 24 months.
• Investment Tax Credit: Investors who inject capital into a labelled startup are entitled to a tax credit equivalent to 30% of their investment, which can be used to offset future tax liabilities.

These incentives are globally competitive and directly address the high-cost environment in which Nigerian businesses operate. But are constrained by its entire dependence on the accessibility and efficiency of the Startup Labelling process.

Failure to Launch: The Startup Investment Seed Fund (SISF) and Access to Credit

It is common knowledge that access to capital is a primary constraint for startups. In came the Startup Investment Seed Fund (SISF), a government-backed fund mandated to be seeded with a minimum of ₦10 billion (₦10,000,000,000.00) annually to plug that funding gap. The fund is to be managed by the Nigeria Sovereign Investment Authority (NSIA), the country’s sovereign wealth fund, to provide early-stage financing to labelled startups, as well as grants to technology labs, accelerators, and hubs.

In addition to the SISF, the Act directs the Secretariat (NITDA) to facilitate access for labelled startups to other existing government financial facilities, such as loans and grants administered by the Central Bank of Nigeria (CBN) and the Bank of Industry (BOI). It also mandates the establishment of a Credit Guarantee Scheme to further de-risk lending to startups. This multi-layered approach to funding signals a comprehensive strategy to tackle the capital deficit at various stages of a startup’s life cycle.

• The One-Stop-Shop: The Startup Portal and Regulatory Sandboxes

To combat the notorious regulatory friction and bureaucratic red tape in Nigeria, the Act mandates the creation of two key tools: the Startup Portal and regulatory sandboxes.

The Startup Support and Engagement Portal is envisioned as a digital one-stop shop for startups. Its purpose is to serve as a single window for startups to conduct registrations with relevant Ministries, Departments, and Agencies (MDAs), apply for and receive permits and licenses, access information and resources, and interact directly with regulators. This is intended to streamline processes that are currently fragmented, time-consuming, and opaque.

Complementing the portal, the Act empowers key financial regulators, such as the CBN and the Securities and Exchange Commission (SEC), to establish regulatory sandboxes. These controlled environments allow labelled startups to test new, innovative products and services with real consumers without being subjected to the full weight of existing, and often outdated, regulatory requirements. This provision acknowledges that innovation frequently outpaces regulation and provides a formal pathway for disruptive technologies to be tested and understood by regulators before full market deployment.

• A 2-Year Reality Check

While the NSA as a hub is comprehensive on paper, its real-world value is determined by its implementation and execution. Its performance since October 2022 reveals a troubling pattern: the government has focused on promoting easily achievable but low-impact metrics while failing to deliver on the core, high-impact provisions of the law, particularly concerning labelling and funding.

Quantifiable Gains: Registration Data vs. Ecosystem Health

The Nigerian government, through NITDA, has actively promoted the registration numbers on the Startup Portal as a primary indicator of the Act’s success. As of April 2024, official figures showed that 12,948 entities had registered as startups, along with 912 venture capitalists, 1,735 angel investors, and 925 accelerators and hubs. These numbers, while seemingly impressive, are best understood as meaningless metrics. Registration on the portal is merely an initial expression of interest; it confers no legal status or tangible benefits under the Act.

When these superficial metrics are contrasted with the broader health of the ecosystem, we see a different picture. Following the Act’s passage, there has been a significant downturn in venture capital funding. After a peak in 2021-2022, funding for Nigerian startups has declined sharply. The country’s overall standing in global startup ecosystem rankings has also slipped. While global macroeconomic challenges are a major contributing factor, the Act has not insulated the Nigerian ecosystem from the downturn or catalysed the new wave of investment it promised. The high registration numbers have not translated into improved ecosystem resilience or tangible growth.

• The Funding Paradox: The Stalled SISF vs. The Emergent NSIA/JICA Fund

The most conspicuous failure in the Act’s implementation is the non-operational Startup Investment Seed Fund (SISF). The law mandates an annual fund of at least ₦10 billion from Nigerian sources to be managed by the NSIA. Yet, there is no public evidence that this fund has ever been capitalised, let alone made any disbursements to labelled startups.

Curiously, a different funding has emerged: the celebrated strategic partnership between the NSIA and the Japan International Cooperation Agency (JICA). Announced in 2025, this collaboration is a $40 million co-investment fund for early-stage startups, a $9.9 million grant to establish a startup hub in Abuja under NITDA, and a $21 million program to support social-impact startups, also implemented by the NSIA.

This development constitutes a contradiction to the initial funding model as it is fundamentally a substitution for, not a fulfilment of, the sovereign financial commitment enshrined in the Startup Act. The government has failed to deliver on the domestically funded SISF and has instead pivoted to a donor-backed initiative. This shift has implications. It changes the nature of the support from a statutory entitlement under Nigerian law to a project-based intervention dependent on a foreign partner. a different governance structure, and questions about its long-term sustainability beyond the project’s lifecycle, which is slated to run through 2030. This substitution reveals a failure of sovereign will or capacity to allocate the resources promised in its own landmark legislation.

• “Another National Council?”: The National Council for Digital Innovation and Entrepreneurship (NCDIE) in the Context of Nigerian Public Administration

From inception, I was not impressed by the governance structure of the Act, and my opinion is not unfounded. A look at the National Council for Digital Innovation and Entrepreneurship (NCDIE), its composition, and its relationship with implementing agencies reveals a pattern that appears to prioritise political oversight and bureaucratic procedure over the agility, speed, and autonomy that a dynamic startup ecosystem requires. These are not accidental flaws but coherent features of a governance model that carries significant historical baggage.

The decision to establish a “National Council” as the apex body of the Act immediately raised red flags for those familiar with Nigerian public administration. As a former civil servant who has been enmeshed in the intricacies of government bureaucracy and our history, which is replete with such councils, I am aware of a track record which, at best, is mixed and, at worst, another institutional failure worth studying. National Council on Education (NCE), National Council on Health (NCH), National Council on Agriculture and Rural Development, National Council on Works: Deals with issues related to infrastructure development and public works. National Council on Niger Delta: Focuses on the development and welfare of the Niger Delta region, National Council on Sports: Responsible for promoting sports development and policy are all high-level advisory and policy-making bodies. While they serve governmental functions, they are often perceived as being slow, opaque, and disconnected from ground realities.

The performance of some of these councils is even concerning. The National Council on Privatisation, which oversees the sale of state-owned assets, has been dogged by controversies and allegations of a lack of transparency and due process, as seen in the privatisation of entities like NITEL and the Ajaokuta Steel Mill.

This history is critical because it demonstrates that the “National Council” model in Nigeria is inherently susceptible to bureaucratisation, political capture, and inefficiency. The choice to adopt this very model for an ecosystem that thrives on speed and innovation suggests a profound disconnect between the Act’s goals and its chosen governance vehicle.

• An “Old Boys’ Club?”The Council’s Composition is unbalanced

The composition of the 14-member NCDIE seems to portray the outlook of an “old boys’ club” dominated by the political establishment rather than ecosystem practitioners. The Council is chaired by the President of Nigeria and vice-chaired by the Vice President. Its ex officio membership comprises the Minister of Communications, the Minister of Finance, the Minister of Industry, Trade and Investment, the Minister of Science and Technology, and the Governor of the Central Bank. These seven individuals represent the highest echelon of the federal government’s political and administrative structure.

In contrast, direct representation from the startup ecosystem is remarkably limited. The Act provides for only four representatives from the Startup Consultative Forum (a body of labelled startups, investors, and hubs) and two representatives from professional computing bodies. This structure creates a significant power imbalance, with political ex-officio members heavily outnumbering the actual stakeholders the Act is meant to serve. This top-heavy design, including the duration of service of the non-ex-officio members, stifles policy direction that is in the interest of the startups, risking a disconnect from the fast-evolving needs of the ecosystem.

• The apparent contradiction: the 10-Year Experience Requirement

The most glaring contradiction within the Act’s governance structure is the qualification criteria for non-ex-officio members of the Council. Section 5(3)(b) of the Act explicitly mandates that these members—the very individuals meant to represent the startup ecosystem—must “have at least 10 years cognate experience in public or private service”.

This requirement is fundamentally contradictory and demonstrates a misunderstanding of the modern startup world. The global and Nigerian tech ecosystems are defined by young, dynamic founders who often achieve monumental success and build billion-dollar companies well before accumulating a decade of traditional “service.” Founders of Nigeria’s most successful unicorns were typically in their 20s or early 30s when they started their ventures. This 10-year rule effectively disqualifies the most successful, relevant, and innovative demographic from sitting on the Council that governs their industry. Instead, it favours older, more established figures, potentially from legacy industries or the civil service, who may lack the current, ground-level experience necessary to make informed decisions about the digital economy. This provision ensures that the “voice of the ecosystem” on the Council is filtered through a lens of seniority and traditional career paths, rather than disruptive success.

• NITDA vs. CAC: A Question of Mandate

The decision was to establish its operational hub, the Secretariat, within the National Information Technology Development Agency (NITDA), rather than leveraging or expanding the mandate of the Corporate Affairs Commission (CAC). Every startup must, by law, first be incorporated as a company with the CAC under the Companies and Allied Matters Act (CAMA). The Startup Act then adds a second, separate layer of registration: applying to NITDA for the “Startup Label”.

This tier-layered registration creates a duplicative and inefficient two-step process: register with CAC, then apply to NITDA. This adds another layer of bureaucracy for founders. A more logical and efficient approach would have been to align the process with the CAC. The CAMA could have been amended to empower the CAC to create a special, streamlined registration category for “Labelled Startups.” This would have leveraged the CAC’s existing, universal registration infrastructure, avoided the creation of a new bureaucratic layer, and eliminated NITDA’s conflict of interest. 

• The Unaddressed Gaps: Who Is Left Behind? The Digital-Only Focus: Consequences of Excluding Non-Tech Startups

The Nigeria Startup Act, ambitious yet narrowly focused, defines “startup” strictly, aligning with a Silicon Valley tech model. This omits broader entrepreneurial needs, missing a key opportunity to innovate the entire Nigerian economy.

The Startup Act’s definition of a startup is limited to digital technology, requiring a “unique digital innovative product, service or process” for eligibility. This narrow scope excludes many innovative businesses, such as those in biotechnology, sustainable materials, or off-grid energy, from receiving fiscal incentives and support provided to labelled startups in the Act. This digital-only focus creates an uneven playing field, prioritising one sector while neglecting other crucial areas for Nigeria’s development, like agriculture and manufacturing, and risks fostering a disproportionately favoured “glamour sector.”

• The SME-Startup Continuum: Missed Opportunities for Broader Impact

The Startup Act’s exclusive focus on tech-enabled startups isolates them from the broader SME sector, which highlights a critical flaw. While tech startups and traditional SMEs differ in models and capital, they share an “entrepreneurial productivity spectrum” and often co-exist in a somewhat symbiotic relationship. Tech startups frequently empower SMEs, yet the Act overlooks technology’s potential to modernise and boost the larger SME sector, which historically is the biggest engine room of Nigeria’s economy and employment. Integrating a policy would have recognised the continuum between tech innovation and SME application, ensuring wider diffusion of digital economy benefits.

• Way Forward

The Nigeria Startup Act 2022 is no doubt a fine piece of legislative promissory note with a flawed implementation plan. My view is that deliberate and strategic interventions from both public and private sector stakeholders are needed to bridge this widening gap.

• For Policymakers and Regulators (The Government)

1. Depoliticise the NCDIE: The governance structure must be overhauled to better reflect the ecosystem it serves. The Act should be amended to reduce the number of ex-officio political members on the Council and to significantly increase the representation of active founders, investors, and hub managers nominated by the Startup Consultative Forum. Additionally, the 10-year experience requirement must be removed to enable the inclusion of younger and relevant ecosystem leaders.

2. Immediately Address the Funding Impasse: The government must provide a transparent and definitive update on the ₦10 billion Startup Investment Seed Fund (SISF). If the fund cannot be capitalised as mandated by law, this failure should be openly acknowledged. The government must then clarify the role, mandate, governance structure, and investment thesis of the NSIA/JICA fund, positioning it as the official, although altered, funding vehicle under the Act. Clarity on disbursement timelines and eligibility is essential.

3. Eliminate the Labelling Bottleneck: The Secretariat (NITDA) must be adequately resourced and mandated to process Startup Label applications within a legally specified timeframe, such as 60 or 90 days. To promote transparency and accountability, a public, real-time dashboard should be created on the Startup Portal, tracking the number of applications received, pending, approved, and rejected (with anonymised reasons for rejection). Stakeholders should also openly examine any duplicity in the registration process, including with the CAC.

4. Broaden the Act’s Scope: An amendment process should be initiated to expand the definition of “startup” beyond a purely digital focus. The criteria should be revised to include any company that is innovation-led, high-growth-oriented, and technology-leveraging, regardless of whether its final product is in agriculture, manufacturing, green energy, or other critical non-digital sectors.

• For Founders, Investors, and Ecosystem Enablers (The Private Sector)

The private sector must actively engage to shape the Act’s implementation and navigate the current reality:

1. Organise and Advocate Collectively: The Startup Consultative Forum, established under Section 12 of the Act, must evolve from a passive consultative body into a powerful, unified advocacy bloc. It should collectively and publicly track the government’s performance against the Act’s provisions, publish independent progress reports, and use its platform to pressure policymakers on specific failures like the labelling delays and the stalled SISF.

2. Navigate the Current Reality Strategically: While advocating for change, founders must operate within the current flawed system. They should apply for the Startup Label early, but build business models that do not depend on its timely receipt or access to government funds. The existence of the Act can still be used as a positive signal to foreign investors about Nigeria’s policy direction, even if the execution is imperfect.

3. Prioritise Private Capital and Build Resilience: Given the uncertainty surrounding public funds, the ecosystem’s primary focus must remain on building fundamentally sound, profitable, and sustainable businesses that are attractive to private capital. Ecosystem enablers should continue to focus on nurturing connections with local and international venture capitalists, angel investors, and corporate venture arms.

4. Decentralise and Explore New Frontiers: Investors, accelerators, and innovation hubs should actively look beyond the saturated Lagos market. The emergence of promising startup activity in cities like Abuja and Ilorin presents an opportunity to decentralise growth, tap into diverse talent pools, and build a more resilient, geographically distributed national ecosystem.

• Conclusion: Bridging the Chasm Between Legislative Ambition and Ground Reality

The Nigeria Startup Act 2022 was born from a rare consensus between the state and its most innovative citizens. It remains a legislative framework of immense potential, containing the necessary ingredients to catalyse growth and attract capital.

However, this analysis demonstrates that the Act currently stands as a cautionary tale of the immense difficulty in translating progressive legislation into effective action within the complex machinery of the Nigerian state. Its performance to date has been characterised by a profound implementation deficit. 

The Act’s impact has thus been marginal rather than transformative. It has provided a degree of legal clarity and a useful signalling tool for the international community, but it has not fundamentally altered the day-to-day operational or financial realities for most Nigerian startups. The Act’s future is not preordained; its success or failure now hinges on the political will to undertake bold reforms of its flawed governance architecture and the administrative discipline to execute its core provisions with the urgency and transparency they demand.