Why some states are not domesticating the Nigerian Startup Act

The Nigerian Startup Act has been passed into law since October 2022, but only a handful of states have made concrete efforts toward the domestication of the Act. Why is that? 

The Nigeria Startup Act (NSA) was signed into law in October 2022 after a rigorous year of deliberations by the Nigerian presidency; the minister of digital economy Isa Pantami; tech stakeholders; and officials of the National Information Technology Development Agency (NITDA). Formulated to mark a watershed phase in the growth of Nigeria’s technology ecosystem, the act was designed to be carefully domesticated across the country’s 36 states and its capital, Abuja. But six months later, no state has domesticated the act, and only a few have made concrete efforts in that direction. 

The Nigeria Startup Act was formulated to create an enabling environment for startups to thrive, align all government agencies and parastatals on the vision for Nigeria’s tech ecosystem, address the lack of local content support, and provide a clear regulatory framework for startups. The Act also provides incentives like tax breaks, protection, access to an exclusive list of public and private-led funding opportunities for local entrepreneurs, and incentives to attract local and foreign investors to Nigeria’s startups. 

One reason which necessitated the development of the Act was the shutdown or serious crises that several startups faced due to sudden regulations imposed by the government. In 2021, the Central Bank of Nigeria prohibited all banks from dealing in cryptocurrencies or facilitating payments for crypto exchanges, a decree that negatively impacted crypto companies in Nigeria. Fejiro Agbodje, CEO of crypto company Patricia, told TechCabal that his company’s growth was seriously affected by the CBN’s restriction on crypto trading. 

Similarly, several ride-hailing startups suddenly had their business models disrupted after the Lagos state government banned two-wheelers. These kinds of events paint a gory view of what running a tech-powered business looks like in Nigeria.

A focus on elections

To ensure that the Act is effective, Nigerian states have to domesticate it. Domestication is the process of adopting federal laws as state laws so that they can have the force of law in that state. But six months after the Act became law, only eight states have indicated an interest in domesticating the Act. 

Of the eight states, the Lagos state government had already announced plans to domesticate the Act in June 2022, months before it became law. TechCabal reported last week that Osun state plans to become the first state to domesticate the Nigerian Startup Act. The other states include Kaduna, Yobe, Edo, Anambra, Ekiti, and Zamfara.

Tracy Okoro Isaac, the state adoption and domestication lead for the Nigeria Startup Act, told TechCabal that the ongoing elections have diverted attention from the domestication process, as state governors prepared for elections. “There’s not a lot of momentum because of the whole election fever. But when the elections are done, the whole conversation will move back to the domestication of the bill by states,” she said. (Not all states are having gubernatorial elections during this election period, but state assembly elections are expected to take place.)

“Osun state is in the second phase of stakeholder validation. Kaduna state has a bill that we just reviewed and sent back. Anambra state is also working on theirs, and we are supposed to have an ecosystem validation session on their own bill this month. Edo state is also working on theirs,” Isaac added about the states that currently have plans in motion for domestication. 

When asked what challenges states might have in adopting the Act, she shared that most states do not have a startup ecosystem but rather a business ecosystem. Due to this, the states will have to first map out their startup ecosystem, the problems they might have, and the stakeholders in the ecosystem. She added that this has been the major setback that states have faced in trying to domesticate the Act. 

She also shared that there has been excitement from state governors because of the positive economic impact their states will get from domesticating the Act. According to Isaac, the enabling environment that the Act is trying to create is enticing to state governments, and after the elections, she expects an upward trend in the domestication of the Act.

Following a framework

In domesticating the national startup act, states are expected to work with the NSA secretariat to develop a bill that reflects the peculiarities of each state. But, so far, some states do not seem to be playing by the stipulated framework. This, according to Isaac, could lead to future problems. 

“Some states domesticating the NSA without the guidelines stipulated by the national and state secretariat run the risk of not having the bill approved. Instead of copying the national Act verbatim, each state’s bill is supposed to be unique, reflecting current realities of the state,” she said.

The concentration of startup activity in a few states like Lagos, Rivers, Oyo, and the Federal Capital Territory Abuja has left most states behind in charting their startup ecosystems. This varying maturity of tech ecosystems across the federation lends credence to the state-based approach to domesticating the bill. 

For Isaac and her team, the mandate is to ensure that the forwarded state bills are conditioned to help grow the sub local startup ecosystems. That means taking a hard stand when state governments decide to do things their own way.