Startups have the potential to play a very important role in the development of developing countries, especially because of their ability to create wealth by their potentials to receive foreign direct investment and also, their chances of appealing to the younger demography which constitutes a significant percentage of the country’s population.

They also have the chances to reduce unemployment by creating more job opportunities and further improve the standard of living in their respective countries through innovation.

In spite of the ability to bring immense benefits to the country, the widespread view among Nigerian startups is that the business geology and regulation offers many barriers to reach their full potentials. These include high cost of doing business, lack of infrastructure, unpredictable taxes and regulatory scrutiny.

Innovative startups in Nigeria have a range of incentives to encourage their early stage growth. Despite the availability of these incentives, a lot of Nigerian Startups miss out on these benefits majorly due to lack of knowledge of existence of the benefits.

Some of these incentives are as follows:

1. Tax rate reduction for investors: Various incentives are provided under the Venture Capital Incentives Act of Nigeria to investors and startups involved in venture capital projects. These includes:

• up to 30% capital allocations for eligible startups in equity investments by venture capital firms.
• up to 100% tax exemption on capital gains that venture capital investors receive after disposing off their properties.

2. Opportunities for Startups in Government Projects: One manner the Nigerian authorities has attempted to inspire the boom of Startups is through mandating corporations to have interaction Startups in initiatives concerning the Federal Government or any of its corporations wherein the gross fee of the mission agreement is 500 million naira or above.

3. Exemption from corporate income tax: Small businesses with an annual turnover of less than N25 million are exempt from corporate tax. A decrease business enterprise profits tax charge of 20% is likewise supplied for organizations whose every year turnover is among 25 million to a hundred million Startups might also additionally discover this helpful in their early stages.

4. Up to 5 years of Tax Holiday: Startups that qualify to become pioneers in Nigeria can benefit from the tax exemption for an initial period of 3 years from their first year of incorporation, renewable for an additional 2 years as established under the Nigerian Industrial Development (income Tax Relief) Act. Startups in sectors such as e-commerce, waste management, electricity and agriculture may be eligible for pioneer status incentives.

5. Tax exemption for new enterprises in the field of agriculture: Eligible small or medium-sized corporations within the Agricultural region with an annual gross turnover of 25 million to a hundred million naira, can also additionally practice for tax exemption for four years and an additional 2 years. This incentive is created under the Finance Act, 2020 which amended the former provision under the Industrial Development (Income Tax Relief) Act.

6. Establishment of the Nigeria Startup Act 2022: This Act signed into law by President Muhammadu Buhari was established to help startups access funds, incentives, create structure and also create enabling environment for startups to thrive. With this act, infrastructure and regulations needed for startups to succeed are put in place by the Nigerian Government to aid the booming startup market.

In conclusion

Many startups and investors are unaware of the incentives available to them in Nigeria due to the lack of a comprehensive platform or document that highlights all the incentives and relevant regulations. Without the assistance of professionals, a search by startups for such incentives can be as tedious as searching for a needle in a haystack. Although the Nigerian Startup Act did a good job in ensuring that the stress to access this information, regulation and benefit is reduced to the barest minimum, it is important that a Startup founder discuss and liaise with an appropriate legal practitioner or law firm to advise on the foregoing. This may help Startups save tons in revenue and taxes which may be ploughed back into the business to help it survive. It may also help Startup founders create a solid structure for their startup which is a requisite tool to attract foreign direct investment.

Nwaogwuwgwu Abiola Glory

Startups that want to operate with ease need to avoid fines and sanctions from regulators. Several startups in different jurisdictions have suffered reputational damage and have also missed out on benefits essential to their growth due to their failure to understand the regulation and ensure compliance accordingly.

Regulatory compliance is key for the following reasons:

1. Non-compliance is more expensive. Businesses that avoid compliance are at risk of fines and sanctions which cost a lot of money to regularize. In the past year. They end up paying the requisite fees, charges or pay cost of compliance at a higher price which could have been avoided if done at the right time.
2. The regulatory landscape is constantly changing. Regulatory compliance will not sort itself out. The more it changes, the more risk of ability to comply. Laws are constantly changing and these changes impact the way businesses are being done. Staying on top of regulatory compliance helps companies stay ahead of competitors and potential fines that may apply.
3. Employees whose daily routine requires compliance need to be kept updated about every change in how they do their work. This may be the game changer for companies. It may make or mar a company therefore it’s important to keep your employees informed.
4. Regulatory compliance protects companies, employees and the consumer. Regulatory Compliance does not only exist as means to check businesses, it also helps protect businesses and all stakeholders. It helps businesses from making preventable errors that could cost them a fortune or endanger their employees.

Following the above, we have compiled a preliminary compliance checklist below for startups operating in Nigeria.

It is important to note that certain licenses and permits are required to successfully commence operations in specific industries. A few of these are set out below.

1. Some licenses required to operate in the Fintech sector include: switching and processing license, mobile money operator license, digital crowdfunding intermediary license, digital banking license etc.
2. Some licenses required to operate in the Insurtech sector include: Web aggregators license, micro insurers license; life insurers license; general insurers license etc.

Conclusion

The outcomes of non-compliance with stipulated rules in Nigeria can be alternatively severe, as it can preclude the easy operations and increase of a startup.

It is crucial that startups apprehend the regulatory terrain it needs to perform in, take important measures to make sure compliance and engage the services of a legal professional.

1. Certificate of Occupancy (C of O)
2. Governor’s Consent
3. Excision
4. Gazette
5. Survey Plan

Now let’s discuss these titles one after the other but please note that a survey plan is NOT a title document.

1. C of O: Certificate of Occupancy is a Government lease granted to the first legal title holder of a property. Remember that all lands belong to the government therefore if you have an unregistered land, it means the first title you will process on the land is a C of O. Please note that a C of O is only granted once on a piece of land therefore you cannot have two C of O’s on a land. A C of O is granted for a maximum period of 99 years for a defined purpose i.e., housing, education, farming, e.t.c,. Title reverts to the Government after 99 years if the lease is not renewed.
2. Governors Consent: It is simply explained as a title granted to a purchaser who has furnished consideration for a piece of land owned by a holder of a C of O. Recall your vendor was granted 99 years on his c of o, your vendor assigns his unexpired term out of the 99 years to you through an instrument called a deed of assignment. The instrument will undergo the perfection procedure where the Governor will be required to give his consent to the transaction between you and your vendor. This implies that the Government is now aware that the lease granted to your vendor has been transferred to you. Once you have obtained consent on your Deed of Assignment, the title you hold is called a Governor’s Consent.
3. Excision: The word excise means to remove a part from a whole. When the Government acquires a large expanse of land belonging to a village or community and the Government ‘gives’ back a faction of the land to the village, it means the Government has excised the concerned area to the village so what you have is an excision. For example, the Government acquires 20 hectares from a village and excise 10 hectares, the villagers will have excision on the 10 hectares only. Excision details are generally documented in the Government’s official gazette. If a family cannot show you their excision details in any gazette, then do not bother yourself on further enquiries on the land.
4. Gazette: You might have heard people say they have a Gazette on a particular property and wonder what it is. A gazette is a record book of the Government where some kinds of information are documented. A gazette usually shows details of excision already granted to a village or community. Such details include the name of the village, volume of hectares or acres, coordinates of the land and other info. A gazette is an evidence that an excision has been granted to a particular village or community. If a vendor claims his title is an excision, get the coordinates of the land and get a copy of the gazette, if the coordinates does not fall within the coordinates quoted in the gazette then you may most likely be looking at a fraudster.
5. Survey: A survey plan is a document showing the area of interest in a land transaction. It comprises of the name of the vendor, size of the land, beacon numbers, address of the land, boundaries e.t.c,. A survey can either be registered or provisional. A survey is NOT a title document so do not rely on it as an instrument of transfer.