Following the emergence of online betting, the Nigerian gambling industry has experienced extraordinary growth in the past few years. This also followed the legalization of some forms of gambling in the Nigerian Criminal Code Act, 1990. The industry has therefore continued to attract both local and international investors due to its huge potentials.

Gambling activities in Nigeria broadly include sports betting, lottery, gaming, casinos, lotto, etc. In order to legitimately operate any type of gambling activity in Nigeria, an operator must first obtain the appropriate licenses from the regulatory authorities. Using Lagos State as a case study, this article explains the regulatory requirements and processes involved in obtaining sports betting license in Lagos State.

Regulatory Framework

Previously, a sports betting company wishing to operate within Nigeria required both a federal license issued by the National Lottery Regulatory Commission (NLRC) and a state licence from the state in which it wishes to operate from. At the federal level, the NLRC, established under the National Lottery Act, 2005, served as the primary body overseeing gaming activities across the country. Concurrently, state governments regulated sports betting within their jurisdictions through their respective regulatory authorities. However, a recent landmark judgment in Lagos State Government & Ors v. Attorney General of Federation and Anor with suit number SC/1/2008 delivered by the Supreme Court of Nigeria in November 2024, has changed this position by nullifying the National Lottery Act, 2005 and declaring that the National Assembly lacks the jurisdiction to legislate on matters related to lotteries and games of chance, as such powers reside exclusively with state Houses of Assembly to legislate on lottery and gaming within their respective states. Thus, the import of the Supreme Court judgement is that the National Lottery Act, 2005 now applies only within the Federal Capital Territory (FCT) where the National Assembly has the legislative power to enact laws on lottery and gaming matters. Therefore, lottery and sports betting companies are now only required to obtain licenses solely from the state(s) in which they intend to operate.

In Lagos State, the regulatory body responsible for controlling and regulating sports betting activities is the Lagos State Lotteries and Gaming Authority (LSLGA). Sports betting companies must obtain the requisite license from LSLGA before commencing operations in the state.

With a large internet penetration and the rise of online betting, in practice, a sports betting company can obtain a license in one state and be accessible online in another state thereby avoiding the need to apply for licences in multiple states.

Requirements for Obtaining a Sports Betting License/Permit from Lagos State Lotteries and Gaming Authority (LSLGA):

As stated above, the regulatory body responsible for issuing sports betting license/permit in Lagos State is the Lagos State Lotteries and Gaming Authority (LSLGA). The requirements for obtaining a sports betting permit from the LSLGA include:

1. Company Incorporation: The first step towards obtaining a sports betting license from the LSLGA is the incorporation of a local company in Nigeria with the Corporate Affairs Commission (CAC) as mandated under the Companies and Allied Matters Act, 2020 (CAMA). This is a compulsory regulatory requirement for any company wishing to do any business in Nigeria.
2. Share Capital: The company must meet the minimum share capital requirement of N20,000,000.00 (Twenty Million Naira) as prescribed by the LSLGA. Please note however that the CAC now requires that any company with foreign participation must have a minimum share capital of N100,000,000 (One Hundred Million Naira). If the company being set up has foreign participation either by shareholding or directorship, the minimum share capital from a CAC point of view must therefore be N100,000,000. Also note that this amount is merely the minimum value of the company shares at the time of registration and the shares do not have to be fully paid up.
3. Financial and Technical Ability: The company must demonstrate the financial and technical ability to operate a sports betting business. The applicants must demonstrate financial stability and viability by submitting audited financial statements, proof of sufficient capital, and a detailed business plan. Regarding the technical ability, operators must invest in a robust technical infrastructure for their sports betting platform, including secure servers, data protection, and reliable payment processing systems. Compliance with international online security standards is also very essential.
4. Applicant companies cannot be wholly-owned by foreigners as Nigerians are required to hold at least fifteen percent (15%) of the shares in foreign-owned companies to fulfil local content requirement and promote local participation.
5. Payment of application and license/permit fees.

Procedures for Obtaining a Sports Betting License/Permit from LSLGA:

The procedure for obtaining a sports betting license from the LSLGA is divided into three stages as follows: the application stage, the approval in principle stage and the final or grant of license stage.

Application Stage:

At this stage, an application for a sports betting license/permit is to be submitted to LSLGA together with the following documents:

1. A letter of intent.
2. Evidence of payment of non-refundable application fee
3. Company incorporation documents issued by CAC (Certificate of Incorporation, status report showing details of directors, minimum share capital and registered address and MEMART).
4. Detailed business plan/proposal on the sports betting scheme which should provide information and documentation on the following:
   1. Business structure information such as address of the registered office, branches, outlets and planned locations, particulars, profile and relevant qualification(s) of directors and key personnel, Tax Clearance Certificate (“TCC”) of Director(s) in the last three (3) years, description of operations and management structure, a sports betting industry analysis that clearly demonstrates an understanding of the sports betting industry, marketing and distribution plans, address of planned location, branches and outlet(s). Please note that these must be lock-up shops – kiosks and mobile vendors are not allowed.
   2. Proposed sports betting operations including details of planned games, relevant sports activities, approximate odds to be used, Operator’s game rules and participants’ Code of Practice, Number and frequency of sports/games and prizes and price structure.
   3. Financial projections including management account, company’s bank statement of the preceding year to support financing plans, five years projected profit and loss account, balance sheet, cash flow analysis which should provide for the annual licence fee and monthly gaming tax, capital investments, etc.
   4. Hardware and software information including servers, routers, firewalls, operating systems and database application specification.
   5. General information on the architectural diagram clearly illustrating the technical operational flow, the proposed platform (whether self-host or cloud based) and the contact information of the hosting company if cloud based.
   6. Detailed information about the applicant’s bookmaker, betting sites and technical consultants, proposed technical topography including a schematic diagram clearly illustrating the technical operational flow.

Due diligence will be conducted on every application to determine the suitability of the applicant for the license within a period of 10 to 15 working days. The applicant will also be required to make a presentation before the LSLGA to justify the grant of the license as part of the application process. Upon the satisfactory fulfilment of the requirements of the application stage and payment of the license fee, an Approval in Principle (AIP) will be granted.

Approval-in-Principle (AIP):

After a successful presentation and upon a satisfactory fulfilment of the pre-approval requirements, the applicant must pay a license fee currently N50,000,000.00 (Fifty Million Naira). Once this payment is made, the applicant is issued an Approval in Principle (AIP). An AIP serves as a temporary licence allowing the company to operate for a period not exceeding three (3) months (90 days) during which the company will be excused from paying tax.  The AIP is typically granted with specific conditions that must be met before the issuance of a final or substantive license.

Grant of License:

Upon the expiration of the AIP and the applicant’s fulfilment of all stipulated conditions set on the AIP, a final license is issued to the applicant. This license is valid for one (1) year from the date of issuance and is renewable annually for a fee currently N10,000,000.00 (Ten Million Naira).

Post-Licensing Obligations

Following the issuance of the license and commencement of operations, licensed operators are required to fulfill certain post-license obligations, including the remittance of a monthly gaming tax of 2.5% of their sales revenue to the regulatory body. Additionally, licenses must be renewed annually upon expiration to maintain operational compliance. There are also other tax obligations for e.g. income tax, Value Added Tax (VAT), company income tax, etc. that are payable by the company either to the state revenue authority or the Federal Inland Revenue Services. The licensed operators are also required to make the filings of their annual returns with the CAC to ensure their regulatory compliance.

Conclusion

With the rise of online betting, the Nigerian gaming industry has experienced extraordinary growth in recent years. Previously, sports betting was regulated at both the federal and state levels in Nigeria. However, a recent landmark Supreme Court judgment in November 2024 clarified that sports betting companies are now only required to obtain licenses exclusively from the states where they intend to operate as the licensing and regulatory powers and oversight of the NLRC is now limited only to the Federal Capital Territory. Upon obtaining the license, operators must comply with all post-license obligations, including remittance of fees to the regulatory body, renewal of license, payment of taxes, filing of annual returns with the CAC, etc.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post Practical Tips on How to Obtain Sports Betting License in Lagos State, Nigeria first appeared on Goldsmiths Solicitors.

With Nigeria being a leading Fintech hub in Africa, we have in last few years witnessed a surge in online money lending service. The operation of money lending business in Nigeria is regulated by the Money Lenders Laws of the various states in Nigeria, the Federal Capital Territory (FCT) and the Federal Competition and Consumer Protection Commission (FCCPC). There are 36 states and a Federal Capital Territory (FCT) in Nigeria and an operator must obtain the money lenders license from the regulatory authority in the relevant state(s) in which they wish to operate or the FCT before commencing operations. It is important to note that where the money lending business is to be carried on in more than one state, a money lenders license must be obtained in each state in which the money lending business is to be carried on. It is a criminal offence to engage in the business of money lending without a money lenders license.

In Lagos State, the money lender’s license is granted by the Lagos State Ministry of Home Affairs. Using Lagos State as a case study, this article explains how to obtain the money lenders license in Lagos State and the digital money lenders registration with the FCCPC. The processes and procedures are similar in other states.

Requirements for Money Lenders License in Lagos State

The Lagos State Money Lenders Law is the principal law which regulates money lending in the state and the regulatory authority responsible for issuing licenses is the Lagos State Ministry of Home Affairs. Money lenders license can only be issued to corporate entities in Lagos state. Thus, any potential investor interested in money lending business is required to first incorporate a company in Nigeria.

The requirements for processing and obtaining a money lenders license in Lagos state are as follows:

1. Incorporation documents including company certificate of incorporation, Memorandum and Articles of Association, etc. of the applicant company issued by the Corporate Affairs Commission (CAC).
2. The minimum share capital of the applicant company is N20,000,000 (Twenty Million Naira). However, where the company has foreign participation, the minimum share capital requirement is N100,000,000 (One Hundred Million Naira).
3. Police Clearance Certificate of two directors of the applicant company.
4. Three (3) years Tax Clearance Certificate (TCC) for the company and for at least two (2) directors.
5. Reference letter from the applicant’s bankers in Nigeria.
6. Proof of payment of the application and processing fees.

The Procedure for Obtaining Money Lender’s License in Lagos State

The procedure for obtaining the money lenders license in Lagos State is initiated with an application to the Chief Magistrate of the Magistrates Court within the magisterial district where the lending company is located and ends with the issuance of a money lenders license to the applicant. The procedure for obtaining the license is highlighted below:

1. An application in the prescribed form is made to the Chief Magistrate of the Magisterial District where the applicant company is located.
2. The Chief Magistrate issues a Money Lenders Certificate (Form B) and a letter addressed to the Permanent Secretary of the Lagos State Ministry of Home Affairs to the applicant company confirming due diligence of the applicant company and recommending the issuance of a money lenders license.
3. An application is made to the Nigerian Police for the issuance of Police Clearance Certificates for two directors of the applicant company.
4. A formal application is made to the Lagos State Ministry of Home Affairs for money lender’s license accompanied with the following documents:
5. Form B and the Letter of Recommendation issued by the Chief Magistrate.
6. Incorporation documents of the applicant company.
7. Three years Tax Clearance Certificate (TCC) of the applicant company and of at least two directors.
8. Police Clearance Certificates for two directors of the applicant company.
9. A reference letter from a commercial bank being the bankers of the applicant company in Nigeria.
10. Proof of payment of the application and processing fees.
11. A physical inspection of the applicant company’s place of business will be carried out by the Lagos State Ministry of Home Affairs upon submission of the application.
12. A Money Lenders License is issued to the applicant company by the Lagos State Ministry of Home Affairs where it is satisfied that all the statutory requirements have been met and the applicant company is considered fit and proper to act as a money lender.

Validity and Renewal of Money Lender’s License in Lagos State

Money lenders license is valid in Lagos State for a period of one year and therefore subject to renewal every subsequent year. To process the renewal of the license, the licensed operator is required to obtain a new Money Lenders Certificate (Form B) from the Chief Magistrate accompanied with the expired license, updated tax clearance certificate and evidence of payment of the renewal fee. Upon being satisfied that the requirements continue to be met, a renewed license is issued.

Registration with the Federal Competition and Consumer Protection Commission (FCCPC)

In 2022, the Federal Competition and Consumer Protection Commission (FCCPC) issued the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022 (“the Guidelines”). The Guidelines require digital money lenders to register with the FCCPC before the commencement of business operations. The process of registering with the FCCPC is summarized as follows:

1. The digital money lender is to obtain an Audit Trust Mark from the Nigerian Data Protection Commission.
2. Obtain a compliance Audit Report and Privacy Impact Assessment Report from a duly registered Data Protection Compliance Organisation (DPCO).
3. Obtain and complete the requisite digital money lender’s registration form from the FCCPC. The completed form is to be accompanied with some documents which include:
4. Incorporation documents of the applicant.
5. The company’s terms of use and privacy policy
6. The company’s code of conduct
7. Brief description of the business and details of its groups, subsidiaries and affiliates.
8. Evidence of feedback and complaint resolution mechanism
9. Evidence of payment of the registration fee
10. Obtain and complete the requisite declaration form from FCCPC.

The application is to be submitted to the FCCPC together with the required documents. In practice, the FCCPC allows some flexibility in the registration process by allowing applicants to begin the digital money lender’s registration process while waiting for the Audit Trust Mark and the Compliance Report and Privacy Impact Assessment Report.

Failure to register with the FCCPC may lead to the permanent blacklisting of the digital money lender’s business and the removal of its digital apps from online platforms such as Google Play Store and Apple Store, etc. which will make the money lender unable to transact its business in Nigeria.

Conclusion

With the growth of FinTechs in Nigeria, there has been tremendous growth in the Nigerian online money lending space in the last few years. The business of money lending is regulated in Nigeria by the state governments, the FCT and the FCCPC. An operator is required to obtain a money lenders license in any of the 36 states of Nigeria in which it wishes to carry on business. Individual licenses must be obtained in every state in which an operator seeks to do business. Any company desirous of providing money lending services through any digital platform is required to register with the FCCPC before commencing business in Nigeria failing which its business and digital apps could be permanently blacklisted.

Please note that the contents of this Article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post How to Obtain Money Lenders License in Lagos State, Nigeria first appeared on Goldsmiths Solicitors.

A Payment Solution Service Providers (PSSP) licence is a financial licence within the payments system which is issued by the Central Bank of Nigeria (CBN). A PSSP licence authorizes the licensee to provide and operate payment processing gateway and portals, solution/application development, and merchant service aggregation and collections services. A  PSSP license does not provide the authorization to hold customers’ funds or create and issue wallets. PSSPs are predominantly Financial Technology (FinTech) companies that enable  and facilitate  online and offline payments solutions which include collections, check-out, biller aggregation and payout services.

The CBN is the regulatory authority that issues PSSP licenses in Nigeria. The CBN also provides constant regulatory oversight over the activities of PSSP licensees in Nigeria.

Who can Apply for a PSSP Licence in Nigeria

Only a company that is duly registered with the Corporate Affairs Commission (CAC) in Nigeria and also meets the minimum share capital requirements and other regulatory requirements of the CBN can apply for a PSSP licence in Nigeria.

The Process of Obtaining a PSSP Licence from the CBN in Nigeria

A PSSP licence is processed in two stages viz:

• Approval-in-Principle (AIP): This is the preliminary stage of obtaining a PSSP license. During this stage, an application is to be made to the CBN for the grant of the license and they are expected to give an Approval-in-Principle or reject the application. Where an AIP is given, it is only valid for a period of six months. The AIP does not authorize the applicant to commence operation but only allows the applicant to take steps towards obtaining the final licence.
• Final Licence: The applicant is required to consolidate the AIP stage by taking steps to ensure its readiness for commencement of operation, notifying the CBN of its readiness to commence operation, by paying and applying for final licence. Upon the grant of the final licence, the applicant can commence its operations.

The process of obtaining a PSSP licence from the AIP stage to the final licence stage involves the following:

1. Write an application letter for a PSSP license which is addressed to the Director, Payments Systems Management Department of the CBN.
2. The application letter is accompanied with the required documents which include:

• Certificate of incorporation of the company with the Corporate Affairs Commission (CAC), with a share capital of N100,000,000 (One Hundred Million Naira)
• Memorandum and Articles of Association of the company
• Form CAC 2A (Return of Allotment of shares)
• Form CAC 7A (Particulars of Directors)
• Tax Clearance Certificate (TCC) and Tax Identification Number (TIN) of the Company
• Company’s profile
• Details of ownership
• Board structure
• Business plan
• Information Technology policy
• Dispute resolution framework
• Necessary certifications such as Payment Card Industry Data Security Standard (PCIDSS), Payment Terminal Service Aggregator (PTSA), etc.
• Evidence of payment of the non-refundable application fee of N100,000 (One Hundred Thousand Naira).
• Evidence of the deposit of the refundable minimum capital of N100,000,000 (One Hundred Million Naira). This is required to be made in full (one lump sum) and in the name of the applicant.

3. The CBN assesses the application for the PSSP licence and the accompanying documents and if it is satisfied with the application, it proceeds to grant an Approval-in-Principle.

4. Upon obtaining AIP from the CBN, the applicant then makes payment of the licence fee of N1,000,000 (One Million Naira) to the CBN designated account and proceeds to apply for a final licence within six months of obtaining AIP.

5. The CBN inspects the registered place of business of the applicant company and its readiness to commence operation and proceeds to issue the final licence if it is satisfied with the outcome of its inspection.

Validity and Renewal of PSSP Licence

PSSP licence validity period is as determined by the CBN and renewable if the operations of the PSSP licensee is satisfactory to the CBN. Recently, CBN renewed Cellulant’s PSSP licence and this shows the satisfaction of the CBN with the services of the company in providing payment solutions in Nigeria. Thus, the renewal of a PSSP licence by the CBN is a vote of confidence on the operation of a PSSP licensee.

Conclusion

A Payment Solution Service Providers (PSSP) licence is an important licence within the Nigerian payment systems which enables the provision of financial services such as the operation of payment processing gateway and portals which is utilized by merchants to accept debit or credit card purchases from customers. A PSSP licensee provides both online and offline payment solutions. A PSSP licence is obtainable from the CBN by submitting an application to the CBN and paying the required application and license fees within the stipulated timelines.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post How to Obtain a Payment Solution Service Providers Licence in Nigeria first appeared on Goldsmiths Solicitors.

What is a Startup?

A Startup is defined in the Act as “a Company in existence for not more than 10 years, with its objectives being the creation, innovation, production, development or adoption of a unique digital technology innovative product, service or process”.

Regulatory Authorities and Structures under the Nigerian Startup Act.

The Act introduces several Authorities and structures which are responsible for the administration and development of startups in Nigeria. These established regulatory Authorities are distinct from other regulatory bodies which regulate the various sectors in which a startup may operate in Nigeria. Some of these Authorities and structures are:

• The National Council for Digital Innovation and Entrepreneurship (the ‘Council’).

The Act establishes the Council and empowers it to formulate policies for the realization of the objectives of the Act. The Council consists of about 13 members including the President and Vice President of Nigeria who are to respectively serve as Chairman and Alternate Chairman of the Council. The Council is also to appoint a Council Agent who is to submit reports on the status of programmes implemented to the Council.

• The National Information Technology Development Agency (NITDA)

The NITDA functions as Secretariat and is the operational arm of the Council. It is to be chaired by the Director General of NITDA. As part of its duties, the Secretariat is required to manage the process of startup labelling and establish a Startup Support and Engagement Portal to provide support to startups.

• The Startup Support and Engagement Portal (the ‘Portal’).

The Portal is to serve as a platform and may be described as a one-stop shop through which startups conduct their registration process with the relevant Ministries, Departments and Agencies (‘MDAs). The activities of the Startup Portal are to be administered by a Coordinator to be appointed by the Secretariat with the approval of the Council.

• The Startup Consultative Forum (the ‘Forum’).

The Forum is to be set up on the Startup Portal to provide a platform for information sharing and collaboration among startups. It is to comprise of industry stakeholders including representatives from labelled startups, venture capitalists and angel investors.

• Accelerators and Incubator and Innovation Hubs.

The Secretariat is to establish accelerator and incubator programmes for startups. An accelerator is a fixed-term cohort programme designed to provide startups with mentorship and educational assistance, while an incubator on the other hand is a company, partnership or NGO whose primary object is to support the establishment and development of startups, promotion of innovation, and related activities through the offer of dedicated physical spaces and services. The Council is also to issue a framework for the establishment and operation of startup innovation clusters, hubs, physical and virtual innovation parks in each state of the Federation. The Hub is to promote collaboration among startups and between startups and big companies.

Startup Labelling

A company, sole proprietorship or partnership may be issued a certificate by the Secretariat labelling it as a startup and thus, making it entitled to incentives provided under the Act. To be eligible for startup labelling, the following conditions must be met:

1. In the case of a company, the company ought to be in existence for not more than 10 years from the date of its incorporation;
2. Its objects ought to be that of innovation, development, production, improvement and commercialization of a digital innovative product or process;
3. It is to be a holder or repository of a digital technology product or process, or the owner or author of a registered software;
4. At least one of its founders or co-founder is to be a Nigerian who would share from the profit or revenue from the sale of shares.

It is vital to note that the provisions of the Act including the startup labelling will not apply to an organization that is a holding company or a subsidiary of a company which is not registered as a startup.

Procedure for the application for a Startup Label

A startup desirous of being so labelled is required to make an application in the prescribed form on the Startup Portal which is to be established by the Secretariat with the approval of the Council. This application is to be supported by documents and fee to be prescribed by the Secretariat.

Validity/Duration of the Startup Label

The startup label when issued is valid for 10 years from the date of issuance. Startups so labelled are expected to comply with specified obligations. Where a labelled startup fails to comply with its obligations, the Coordinator may notify the startup of its default and the startup is expected to rectify the default within 30 days of being notified. Where the startup remains in default after the 30-days period, its label may be withdrawn.

A startup whose label has been withdrawn may only re-apply to the Secretariat for re-issuance once the default has been rectified.

Obligations of Startups under the Act

Startups are to fulfil specific obligations to enable them enjoy the benefits and incentives granted under the Act. They are to:

1. Comply with extant laws governing businesses in Nigeria, such as the Companies and Allied Matters Act, 2020;
2. Comply with obligations set out by the coordinator after the issuance of the startup label;
3. Notify the Coordinator of any changes in its structure or objects within a month from the date of such change;
4. Provide information annually on the number of human resources, total assets and annual turnover achieved from the period the startup label was granted;
5. Maintain proper book of accounts in accordance with reporting obligations under extant laws and regulations;
6. Provide an annual report on incentives received and advancements made by virtue of the incentives.

Incentives provided under the Act

The Act makes provision for various tax and fiscal incentives to labelled startups. These incentives cuts across reliefs for the labelled startups, their employees, service providers and investors. They are:

1. The Pioneer Status Incentive Scheme.

Labelled startups that fall within industries provided under the list of Pioneer industries and products as provided under the List of Pioneer Industries and Products, 2017 or any subsequent law may apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of reliefs and incentives under the scheme. An example of startups that may benefit from this Scheme are companies involved in the development of ready-made software. A startup qualified to benefit from this scheme may enjoy a renewable 3-year tax holiday.

2. Four years tax holiday.

Labelled startups may be exempted from any form of income taxation for a period of four (4) years from the date of the issuance of the startup label. The Ministry of Finance is expected to provide simplified requirements for startups to benefit from this incentive.

3. 5% tax relief on assessable profits.

To benefit from this additional tax relief, the labelled startups is to have at least 10 employees of which 60% are employees without any form of work experience and who are within 3 years of graduating from school or any vocation within the assessment period. This tax relief is valid for a maximum period of five years.

4. Export incentives for labelled startups involved in exportation of products and services.

Startups deemed eligible under the Export (Incentives and Miscellaneous Provisions) Act are also entitled to export incentives and financial assistance from the Export Development Fund, Export Expansion Grant, and the Export Adjustment Scheme Fund.

5. Investment Credit Tax.

This relief is applicable to angel investors, venture capitalists, private equity fund, accelerators or incubators of a labelled startup and entitles them to tax credit equivalent to 30% of their investment.

6. Exemption from Capital Gains Tax (CGT) on disposal of assets by investors.

The Act exempts investors from taxation upon the disposal of its assets in a startup.

7. Exemption on the Personal Income Tax of employees.

The Act exempts eligible employees from remitting 35% of their personal income for a period of 2 years from the date of engagement by the labelled startup. However, the Act does not provide the requirements for eligibility but gives the Secretariat and the Joint Tax Board the responsibility of determining  the requirements for eligibility.

8. Reduction of withholding tax for foreign entities who are service providers of labelled startups.

Foreign entities that provide technical, consulting, professional or management services to a labelled startup is required to pay 5% withholding tax as opposed to the 10% withholding tax applicable to service providers. This tax shall be the final tax to be paid by the foreign entity.

Funding for Startups under the Act

Some of the funding arrangement provided under the Act are:

1. The Startup Investment Seed Fund (‘the Fund’).

The Act establishes the Fund which is to be managed by the Nigeria Sovereign Investment Authority (‘the Fund Manager’). A sum of at least N10,000,000,000 (Ten Billion Naira) is to be paid annually into the Fund which would be utilized to provide financial support to startups and reliefs to accelerators, incubators and hubs.

2. Access to Government funds and the Credit Guarantee Scheme (CGS).

The Act establishes the CGS with the primary objective of providing accessible financial support to labelled startups. The Act also directs the Secretariat to ensure that labelled startups have access to grants and loan facilities administered by the Central Bank of Nigeria (CBN) and other bodies empowered to assist MSMEs.

The Startup Portal as a One-stop Shop for Labelled Startups.

The major function of the Startup Portal to be set up by the Secretariat is to act as a one-stop shop for startups to register with the MDAs regulating some sectors in Nigeria. The Act charges the Secretariat to collaborate with some regulatory bodies in setting up sections on the startup portal for the registration and administration of the activities of labelled startups with these bodies. These regulatory bodies are the Corporate Affairs Commission (CAC), the National Office for Technology Acquisition and Promotion (NOTAP), the National Copyright Commission and the Trademark, Patent and Designs Registries, the Nigeria Export Processing Zone Authority, the Central Bank of Nigeria (CBN) and the Securities Exchange Commission (SEC). The aim of this exercise is to ensure swift and seamless registration processes for startups. For instance, the Secretariat is to work with CBN and SEC to create a section on the startup portal to ease the licensing procedure for financial technology (Fintech) companies. The Secretariat in conjunction with the NEPZA is also to establish a Technology Development Zone to spur the development of startups, accelerators and incubators.

The startup portal is also to have a section through which labelled startups who intend to participate in CBN’s sandbox or SEC’s regulatory incubator or in any other sandbox may fast track their application process. The labelled startup must however meet all the requirements to participate in the sandbox or regulatory incubator.

Repatriation of Capital and Profits.

In order to encourage foreign investments in startups, the Secretariat is to work with the CBN to ensure the repatriation of the proceeds of investments by foreign investors through an authorized dealer at the prevailing CBN rate. The repatriation is to be done on freely convertible currency of dividends or profits attributed to the foreign investor net all applicable taxed; and the proceeds in the event of sale or liquidation of the labelled startup, net all applicable taxes. To benefit from this arrangement, the investor would be required to present its Certificate of Capital Importation (CCI) as proof of injection of funds into the labelled startup.

Conclusion

The signing of the Nigerian Startup Act is no doubt a welcome development in Nigeria.  The provisions of the Act when implemented would encourage innovation and investment in the Nigerian startups especially in the FinTech space. There are many tax and fiscal incentives that are available to labeled startups including investors, foreign entities and employees. There are however concerns that this Act is yet another layer of bureaucracy in the already over regulated Nigerian business environment.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post The Nigerian Startup Act, 2022, Nigeria’s Bold Step to Encourage Innovation? first appeared on Goldsmiths Solicitors.