What is the NSB (Nigeria Startup Bill), and what went wrong?

Beyond the realms of sarcasm, jokes, and general ridiculousness, the country is really a hard place to live due to the deep-rooted socio-political issues and of course, the difficulty of doing business in it. Statistically speaking, Nigeria was ranked 131 out of 190 when it came to difficulties in doing business (in 2019).”

But you only need statistics if you haven’t felt the brunt yourself. For example, in 2020, motorcycle-hailing companies were thrown into limbo when the government abruptly (and indefinitely) stopped their operations. Then in early 2021, the government repeated such impromptu act of dropping the hammer on unsuspecting businesses when it placed a ban on the trading of cryptocurrencies through banks. And most recently, it banned twitter – much to the shock and enragement of concerned citizens; particularly the social media community. If there is one thing these acts have accomplished, it is dramatically flushing the business model of several companies, startups, and small businesses down the drain (along with their effort, time, and of course, money).

Pulling our heads out of the struggle within the country, another formidable challenge stares down at business owners (especially startups), and it is the problem of “regulatory uncertainty”. 

In case you don’t know, when foreign companies cite “Regulatory Uncertainty” as an issue (when considering doing business with you), they are simply saying “we don’t want to run into any legal issues doing business with you because we do not know your laws – the requirements; red-lines, benefits, or disadvantages of doing business with you. You confuse us. We don’t want any of those headaches. Not now, not ever. Goodbye!”.

It is a terrible position to find oneself. It feels pretty much like how a competent individual gets rejected because they do not have a certificate, or come from a different tribe, race, or even locality.

Note: For the sake of this article, we would solely focus on the challenges that NSB pose to “Startups”. To this end, we would first define Startups, diving deep into what NSB is all about, and finally what went wrong.

What is a Startup?

Unlike other businesses that grow their revenue in proportion to how well they grow their workforce and customer base over a long period of time (bringing about increased expenses as revenue increase), Startups are new companies that have the “weird” capacity to exponentially and “speedily” grow their customer base and revenue whilst keeping their cost (of running the business) relatively “insignificant”. This weird capacity is called the ability to “Scale”.

But Start ups aren’t always easy to launch and are more difficult to scale. Due to their very nature (of being disruptive or novel) these companies require substantial funding in their infancy. That is to say, Startups are very promising businesses that are yet to hit their full potentials. They are high risk, and most times leverage viral marketing and technology to fly. 

That is to say, a company like Paystack (in its earliest years) that can have a team of 2-10 persons running it, whilst growing its customer base on a wild scale (i.e. having millions of customers) and generating several hundreds of millions yearly, can be considered a startup. But a local salon which can be started by one individual with one client, would need more workers to cater to more clients, and can’t possibly reach millions of customers annually can’t be considered a Startup – it is a small business.

Startups In Nigeria:

In spite of the regulatory uncertainties, and other challenges – such as poor Broadband among other infrastructural deficits, Policies and Open Data concerns – relentless entrepreneurs within (and without) Nigeria have gone on to establish/bring two juggernauts (Flutterwave and Jumia), and one incredibly successful startup – Interswitch. All those successful Startups, and other thousands of promising ones, had drawn the attention of foreign investors to the country; but then the issues…

As expected, the Government “decided” to look into the state of things. On his New Year address, the President – Muhammadu Buhari – stated that the government would help create “an enabling environment to turn [young people’s] passions into ideas that can be supported, groomed and scaled.”

It sounded promising, needless to say, it was inviting. 

Consequently, several Startup leaders approached the Government in hopes of getting the solution to the myriad of pressing challenges they were facing. They were welcomed, and discussions ensued. 

The NSB (Nigeria Startup Bill)

When complaints about weak infrastructures, regulatory uncertainties, and difficulty accessing capitals were presented, and the approaches adopted by other African nations considered, the agreement that was intuitively reached was that Nigeria needed a Startup Bill – i.e. the Nigeria Startup Bill (NSB).

The Startup bill was meant to smoothen operations and give Startups oomph! so as to bring about further growth and development. It was what was hoped for, and what was promised. But it was not what was leaked;

Yes, the bill, though yet to be completed, or enacted, was leaked; and the findings were rather concerning.

The Leaked Nigeria Startup Bill

Though the findings remain unofficial, the responses have been pure panic, rage, and disappointment. So much so that Leaders in the Startup industry were/are beginning to consider lobbying the legislator. Some expressing further concerns that the Legislator isn’t “lobbyable”. 

So, what was in this leaked startup bill?

• Well, Section 6 of the bill gave unquestionable authority to an agency known as the “National Information Technology Development Agency” (NITDA) to fix licensing and authorization charges, issue contraventions notices and non-compliance, and also collect fees and penalties. This means all Startups must be subject to the dictates of the NITDA once the Bill is passed.
• This agency (NITDA) also wields the right/power to “enter premises, inspect, seize, seal, detain and impose administrative sanctions on erring persons and companies who contravene any provision of the Act,”
• And the agency would generate funds for its projects/objectives by charging payments and levies from the Tech companies (it was meant to support); of course, it promises to use these funds to assist the Startups (but considering what has been done, or not done, with the funds generated – in the past 14 years – from the Telecommunication companies, Banks, Pension Funds, and Insurance companies, a lot of leaders in the Startup industry consider this a hoax – a ploy – to extort money, nothing more).
• In fact, the Leaked bill stated that companies making a yearly turnover of 100 million Naira and above, would have to pay a LEVY of 1% of their entire profit…this would be paid before tax of course.
• And yes, “Any person or corporate body who operates an information technology or digital economy service, product, or platform contrary to the provisions of this Act, commits an offense,”
• The penalty for the offense? 1-2 years imprisonment, plus a heavy, jaw-dropping fee of whooping 3 Million Naira for individuals, and 30 Million Naira for corporate bodies. Of course, this is not all sinister; they intend to use the money to fund “Projects”, remember?

…right?

So, What Went Wrong With The NSB (Nigeria Startup Bill)?

I know the Government has our best interests at heart; and that is why it earlier stated that it was going to follow a “big tent” approach, by involving agencies, which are supposedly going to play a “major” role in establishing the startup bill.

But when you hear the Startup leaders and tech companies insinuating that trying lobby or persuade the legislators is a “dead-end”, you begin to wonder if they really had a say in the whole thing.

If the contents in the Leaked Startup bill are true, it implies that rather than being the thrusters the Startups and tech companies needed behind them, and hoped for, the government has essentially established themselves as the gatekeepers and bottlenecks – taking a cut in all the billions that would come pouring in – suffocating the proper and effective functioning of the companies with overbearing redlines, bureaucracy, fees, fines, and control. 

With Startups and Tech companies being particularly disruptive, unconventional, and spontaneous in nature, having to go through a bottleneck might just be the last stroke that breaks the back of the camel…

Startup companies needed support, and regulations to back them up; but it would seem they got quite the contrary…according to the leaked startup bill of course. 

So where does that leave us? 

Again you got it right: Right back where we started – Nigeria being a difficult place to live and do business.