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10 strategic ways government can transform the Nigerian tech sector in 2017

January 16, 2017 · 4 min read
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On many levels, 2016 was a year of many firsts for the Nigerian tech sector — Paystack, Flutterwave, Mark Zuckerberg and YC are all some of the examples of 2016’s firsts.

Mark Zuckerberg walks the streets of Yaba, Lagos

If events in 2016 are anything to go by, 2017 is definitely on course to be one of the most remarkable years for the tech community in Nigeria. One of the conversations we should have early on in the year should be around the role of government in catapulting the Nigerian tech sector. Better put, what are some of the more strategic initiatives that government can put in place to make it easier for innovation, new businesses and talent to thrive?

I don’t have all the answers but I know that if Governor Ambode makes good his promise of steady electricity supply in the Yaba cluster, for example, that would significantly shore-up the bottom-line of many startups in that area.

Below are my thoughts

Strategically focus on building a VC industry

Venture Capitalists (VCs) are the guys that bring out the very best in startups. VCs come with a critical mass, consisting of not just capital but intelligence and a deep knowledge of specific markets and business strategy.

Nigeria needs to introduce initiatives that will make it easier for both local and foreign VCs to set up venture capital funds and for wealthy Nigerians, companies and other institutions to invest in VC and directly, in promising companies.

The Yozma Programme implemented by Israel in the early ’90s represents in my view one of the best examples of how government can strategically grow a venture capital industry.

Commission a VC report and issue a VC policy

Although, there have been a number of initiatives targeted at small businesses in Nigeria, there is yet no identifiable, coordinated policy paper or direction for the venture capital industry in Nigeria. Nigeria needs to set up a committee to understudy the workings and peculiarities of venture capital in Nigeria.

We also need to come with a report which, amongst others, will review existing supply/demand initiatives and identify the critical issues and barriers to venture capital financing across the value chain while recommending strategies for driving growth in the venture capital space. The report from this study should form the basis of a well-articulated venture capital policy which should drive legislative reform.

Review immigration policy & processes

Nigeria also has to review its immigration policy & processes to make it easier for immigrant entrepreneurs to easily settle for business in the country.

The process for obtaining immigration permits in Nigeria is needlessly cumbersome. Immigrant entrepreneurs have played a transformative role in tech capitals, all over the word, from Isreal, to the US and to the UK. From a creative standpoint, it is not difficult to understand that the individual experiences of a local and immigrant entrepreneur can be very useful in creating truly innovative solutions to local problems.

The trend globally is to use immigration as a strategy for driving technology and innovation and solving problems locally. One of the best known examples of this strategy is Canada’s Start-up Visa policy.

Review corporate and taxation laws

These laws combined, constitute the most important body of legislation for transforming the Nigerian tech sector. All major VC capitals in the world have used corporate and taxation law as a strategy for driving innovation.

Nigerian startups need to be able to issue non-voting rights to investors where they deem fit. There need not be the requirement of two shareholders or directors to form and run a company and share capital, if early-stage companies must have at all, need not be denominated in Naira.

Qualifying startups in India are exempt from income taxes for 3 years. There is no reason why we can’t implement a similar regime in Nigeria. A 2006 law in Brazil reduced taxes on income made with VC by foreign investors to zero, provided they get taxed at least by 20% in their home countries.

Here’s the key point to note here: Nigeria needs to implement an incentive regime that tracks the innovativeness of an enterprise and not the sector in which it plays.

Harmonise SME-focused programs and agencies

In 2016, there were a bunch of uncoordinated flash initiatives which did not hold the promise of sustainability — we all have a media party, and we go home.

Nigeria needs to harmonise its startup focused programs and consider a review and harmonisation of the functions of the some pertinent agencies like the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), National Board for Technology Incubation (NBTI), Federal Ministry of Science and Technology (FMST) and National Information Technology Development Agency (NITDA).

Open up government-held accelerators to private participation

If you consider the products from the tech incubators on the NBTI website, you would agree that there is still room and opportunity for more genius and innovation from these incubators.

Expedite the debate and passage of the National Research and Innovation (NRI) Bill

The NRI Bill promises a multi-billion dollar fund which is to be used to fund innovation and research in Nigeria.

Spend more of the money in the NITDA fund

NITDA sits on a multi-million Naira fund where: GSM service providers and all telecommunications companies; cyber companies and internet providers; pensions managers and pension related companies; banks and other financial institutions and insurance companies have contributed 1% of profit before tax since 2007/2008.

For context, GTB declared ₦120.7 billion in profits after tax in 2016.

Build and designate key places in Lagos and Abuja

In Lagos, I’d say, places in Yaba, Ajah & Ikeja can serve as IT parks with specific incentives for businesses operating in the parks, in line with its powers under Section 19 of the NITDA Act.

Elevate Venture Capital to the centre of government’s economic recovery policy

The Nigerian government must see technology & innovation as the solution to Nigeria’s biggest problems, including corruption. Innovation & technology really is the easiest way for government. The government’s overall objective should be to make it impossible for Nigerians not to innovate.

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About the Author: Olubunmi Abayomi-Olukunle is a Partner at Balogun Harold, where he provides legal and regulatory support for high-growth tech companies & investors on angel, venture capital and ‎private equity investments. He can be reached on olu@balogunharold.com.

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