Ain't No Stopping Start-Ups Now? Nigeria's Start-Up Bill Takes Shape
This month, tech companies, entrepreneurs and other stakeholders within the tech ecosystem are waiting with baited-breath for the detail on public consultations for Nigeria’s Start-Up Bill. The bill is a collaborative effort between the presidency and key players within the burgeoning tech space to iron out the creases in existing legislation and bring clarity and confidence to the investment climate within tech in the country. Indeed, President Muhammadu Buhari acknowledges that “our young people are our most valuable natural resource, at home and abroad. Their ingenuity, creativity, innovation and entrepreneurial spirit is evident to all” and in that vein, the eventual passage of the bill should support entrepreneurs to “turn their passions into ideas that can be supported, groomed and scaled[1]”.
Main Findings - Stop and Start
Nigeria has the largest number of start-ups on the continent, with the vast proportion housed within fintech providing solutions for financial inclusion and having raised US$324m in the first half of 2021, close to one-third of all start-up capital deployed on the continent this year[2]. Earlier this year, the Nigerian and US-based digital payments start-up, Flutterwave, saw its valuation rise to over US$1 billion, having raised US$170m in its Series C funding round[3]. Its little black book of clients includes big name brands like Uber, Booking.com and Flywire, as aside from helping companies build customised payment solutions it also assists companies outside Africa expand on the continent. Other headlines of late include the acquisition of Nigerian payments company, Paystack for over $200 million by financial services software firm Stripe in October last year, which was Stripe’s largest start-up acquisition anywhere[4].
But in spite of these successes, the Buhari administration has been characterised by unpredictable decision-making, wherein fiat has typically been the preferred stance as opposed to a planned, consultative process. For instance, in February, the Nigerian Central Bank began regulating the transaction of cryptocurrencies through banks, a move inspired by the usage of bitcoin to support the #EndSARS movement.[5] In June, Nigeria banned Twitter after the social media platform deleted tweets from President Muhammadu Buhari’s account and the regulatory flip-flopping around bike-hailing, which had the hallmarks of a scalable, innovative solution to immobility on Lagos’ choked roads, has squeezed out innovation[6].
Outlook -The Law, and More
There’s reason to be excited by the momentum behind this bill. On the figures alone, the scale of Nigeria’s start-up ecosystem cannot be ignored and coupled with the size of the unbanked population - estimated at half of the country’s 206m population[7]- the potential transformative impact is significant. Nigeria is also not embarking on this journey as an outlier- there is precedent from other start-up laws from continental players such as Senegal and Tunisia and the collaborative stance that Nigeria seems to be adopting through the nationwide consultations and drawing in industry experts are encouraging. Furthermore, the Nigerian government will be keen to ensure the country stays out of the recession it was in last year: IMF forecasts that the fall in oil prices led to a 3.2% contraction in real GDP in Nigeria in 2020. Creating a new law which inspires confidence in the start-up tech space is strategic: big tech credit was valued at US$572bn globally in 2019[8]and the level of innovation coming out of Nigeria means the country is positioned to take big slices out of that pie. Yet this excitement must be tempered by the fact that the law alone cannot ensure that Nigeria reaches the scale of its potential. Infrastructural bottlenecks, security challenges and socio-economic inequalities need to be tackled in tandem.
*Photo credit: Taken by Songhai Advisory in Rivers State, Nigeria
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[1]https://www.startupbill.ng/?trk=public_post_share-update_update-text
[2]https://www.fdiintelligence.com/article/79638
[3]https://techcrunch.com/2021/03/09/african-payments-company-flutterwave-raises-170m-now-valued-at-over-1b/
[4]https://techcrunch.com/2020/10/15/stripe-acquires-nigerias-paystack-for-200m-to-expand-into-the-african-continent/
[5]Nigeria’s Central Bank aimes to burst the crypto bubble
[6]https://restofworld.org/2021/nigerias-war-on-wheels/
[7]https://businessday.ng/financial-inclusion/article/how-nigeria-can-bank-its-unbanked-population/
[8]https://www.imf.org/external/pubs/ft/fandd/2021/03/pdf/fd0321.pdf