On Wednesday, October 19, 2022, former Nigerian President Muhammadu Buhari signed the Nigerian Startup Act into law, a year after stakeholders in Nigeria’s burgeoning startup ecosystem began deliberations.
The Act, which saw Nigeria join African countries like Tunisia and Senegal in establishing startup acts, makes certain provisions aimed at stimulating the growth of startups in the country.
In the last decade, Nigerian startups have taken centre stage in the country’s economic development, creating jobs, attracting foreign investments, and facilitating the transfer of value.
But as anyone doing business in Nigeria knows, growth can often be stalled or hindered by government policies, hence the Startup Act. Despite launching to widespread acclaim, its success largely rests on statewide adoption and collaboration between federating units.
As of March 2023, only 12 of the country’s 36 states had indicated an interest in domesticating the Act. These states included Nigeria’s startup capital, Lagos, Kaduna, Kwara, Ekiti, Anambra, Imo, Niger, Nassarawa, Oyo, Rivers, Osun, and Zamfara.
Of the twelve, Kaduna State has become the first to domesticate the Act following the signing of a law for the Development of Tech-Enabled Startups in Kaduna State. The state governor, Senator Uba Sani, signed the bill on Wednesday, July 12, 2023.
Commenting on the startup act being signed into law, Shuaibu Kabir Bello, Senior Special Assistant on ICT to the Kaduna State Government, said,
"The bill is now a law in Kaduna. However, like every law, policy, or plan, government structures and institutions are needed for implementation. This is what Kaduna is doing next."
Positioning Kaduna as a leading Startup destination
By signing the law, the state hopes to position itself as a leading destination for startups and investors in the country. Much of its provisions mirror the Startup Act, with provisions for the labelling of startups, funding, and talent development.
According to a copy of the bill seen by Techpoint Africa, the bill intends to position Kaduna State’s startup ecosystem as the leading digital technology centre in Nigeria; it also hopes to provide an enabling environment for the establishment, development, and operations of startups in Kaduna State.
To achieve this goal, the Kaduna State Council for Digital Innovation and Entrepreneurship will be established to oversee the execution of the law’s objectives. The council will have twelve members, including the deputy governor and the commissioners for finance, planning and budget, business and innovation.
Other members of the council are the Head of the Directorate of Information and Communication Technology, the Managing Director of Kaduna Enterprise Development Agency, the Executive Secretary of Kaduna Investment Promotion Agency, two academicians in related fields, and three representatives from each of the three senatorial zones, one of whom must be a woman.
The Kaduna Enterprise Development Agency will serve as the Council’s secretariat. Some of its responsibilities will include labelling startups, coordinating activities between the public and private sectors, maintaining a directory of startups, and advising the Council on the implementation of the law.
To be listed in the state’s startup register, a startup must be properly labelled by the National Information Technology Development Agency (NITDA) and registered with the Kaduna Enterprise Development Agency. A minimum of 51% of the shares of eligible startups must be owned by at least one Nigerian, while 31% of their employees must be residents of Kaduna State. Furthermore, the startup’s product must either be a new technology or technology-enabled.
A certificate valid for five years will be issued to eligible startups. Meanwhile, labelled startups are expected to give an annual report on their use of the incentives provided, total assets, and turnover.
A Startups Grants and Investments Fund will also be created to provide funding for early-stage startups and will be funded from the state’s annual budget and the Sovereign Wealth Growth Fund. A minimum of ₦250 million will be allocated annually and will be reviewed every three years.
Can domesticating the Nigerian Startup Act drive a startup revolution in Kaduna State?
Deciding to domesticate the Startup Act is commendable, but simply domesticating the act is not enough.
As is frequently pointed out during policy discourses, Nigeria hardly lacks the right laws or policies. Rather, implementation has always posed a challenge, so what hope does Kaduna State have of attracting and retaining startups and investors?
Ridwan Abdullateef, a filmmaker and resident of Kaduna State, believes the law could stimulate startup growth in the state.
Explaining that there has been a steady growth of tech talent in the last five years, he argues that much of the startup activity in the state takes place in tech hubs or incubation centres. However, the government must provide certain incentives to attract founders.
“The first and the most obvious one is funding. Every startup founder needs funds. They need to be able to say, 'I have this amount in my account to run my startup for a certain number of months.”
But even with adequate funding for startups, attracting talent to the state could depend on the state’s security status. A Q1 2023 security report revealed that 214 people were killed in violent attacks, with 746 abducted, and that will be a concern for potential residents of the state.
“We have guys coming from Abuja and they say things like, ‘How do you guarantee our safety?’”
Talent development is another challenge the state will face on this journey. While the newly signed law provides for the creation of training programmes, it may be a while before it starts to see results.
“The pool of candidates we currently have in Kaduna may not be adequate for more than three startups. What we currently have is enough for the level Kaduna is at, but the onus will have to be on the startups [that come to the state] to train others.”
The lower cost of living when compared to cities like Lagos and Abuja could also attract more tech workers to the state. For example, a two-bedroom apartment in most parts of Lagos rents for ₦850,000 on average, but the same apartment in most parts of Kaduna could be gotten for half that amount.
As exciting as this could be, the government must look to examples from other states in Nigeria. In 2020, Sim Shagaya moved part of his uLesson team to Jos, the capital of Plateau State. At the time, he called it the smartest decision he had ever taken, but by December, the company had ended that experiment.
"Our ability to develop for and distribute to this African market means we have to move to a city with better regional flight connections and to which we can easier attract the talent we need," the company explained.
Similarly, despite starting out with a dream to build a tech talent pipeline from Ile-Ife, TalentQL eventually moved bases less than two years after, while the Kaduna State technology city commissioned by the previous governor has seen mixed success.
These developments show the difficulty startups that move outside Lagos often face. Even moving away from startups, digital economy plans by states have often remained plans with little progress made.
With Nominal Gross Domestic Product standing at ₦3.1 trillion as of 2020, Kaduna State is one of the largest economies in Nigeria and could be attractive to investors, but it must fix certain issues to be viewed as a credible alternative to Lagos, Abuja, or Port Harcourt.
The success of startups like Sudo Africa points to the potential of Kaduna State to support the development of tech startups. Ultimately, collaborations between the government and private sector will be crucial.