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TAX BREAKS & MORE: WHAT THE NIGERIAN STARTUP ACT OFFERS

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

Introduction

The Nigerian Startup Act 2022 (NSA) is a significant piece of legislation, designed to foster innovation, attract investment, and create a favourable business climate for tech-enabled startups in Nigeria. It aims to position Nigeria as a leading hub for digital entrepreneurship in Africa by removing regulatory barriers and offering targeted incentives.

This newsletter explores key incentives available under the NSA and what they mean for startups and investors.

The Startup Label: A Gateway to Incentives

The NSA introduces the Startup Label, issued by the National Information Technology Development Agency (NITDA) which is a prerequisite for enjoying the incentives available under the NSA. To qualify, a startup must:

  • Be registered as a limited liability company with the CAC, and in operation for less than 10 years.
  • Have its objects focused on innovation, development, production, or improvement of a digital product, service or process
  • Have at least 33% of its shares held by a Nigerian founder or co-founder
  • Be certified by NITDA via the Startup Portal

Only Labelled startups may benefit from the incentives discussed below.

  1. TAX AND FISCAL INCENTIVES

One of the most attractive features of the NSA is its suite of tax incentives designed to encourage startup formation and sustainability:

  1. Pioneer Status Incentive (PSI) – The NSA allows for a Labelled startup to apply for PSI which grants an initial three-year tax holiday, extendable for an additional two years. This exemption from Companies Income Tax is a critical incentive for early-stage businesses as it allows them to reinvest significantly in their growth.
  2. Exemption from Capital Gains Tax – To encourage long-term investment, the NSA provides that angel investors, venture capitalists, private equity firms, and other institutional investors who invest in Labelled startups and hold their equity for a minimum of two years are exempted from paying Capital Gains Tax on the disposal of such investments.
  3. Tax deductions for Investments in Research & Development (R&D) – To encourage investment and innovation in R&D, Labelled startups may claim tax deductions for expenses on R&D which are wholly incurred in Nigeria and restrictions placed by the Companies Income Tax Act shall not apply.
  4. Access to the Startup Investment Seed Fund – The NSA establishes the Startup Investment Seed Fund, to be managed by the Nigeria Sovereign Investment Authority (NSIA). The fund is intended to provide early-stage finance to Labelled Startups, support for technology development, and grants for research and innovation.
  1. REGULATORY SUPPORT AND EASE OF DOING BUSINESS

The NSA introduces measures to reduce regulatory friction:

  1. Regulatory Sandboxes – The NSA empowers regulatory authorities (such as the Naional Insurance Commission (NAICOM), CBN or SEC)  to introduce sandbox programs that allow Labelled Startups to test innovative products or services in a controlled environment without the full burden of regulatory compliance.
  2. Fast-Tracked Approvals and Support – Labelled startups may request expedited approvals, waivers, or forbearances from regulators where traditional compliance requirements are unduly burdensome or incompatible with digital innovation. The NSA requires regulators to consider such requests and respond promptly through designated innovation desks.
  3. Single Window Platform – the NSA mandates the creation of a single platform to streamline startup registration, compliance, and access to government programs which help reduce bureaucratic delays.
  1. CAPACITY DEVELOPMENT AND TALENT SUPPORT

The NSA mandates collaboration between the Federal Government, academic institutions, and the private sector to promote digital training programs, tech-focused curriculum, and upskilling in areas like AI, cybersecurity, and blockchain. Labelled startups may benefit from access to trained talent pools at lower cost.

  1. INTELLECTUAL PROPERTY AND COMMERCIALISATION SUPPORT

The NSA encourages simplified processes for IP registration. Labelled Startups are eligible for reduced fees and technical support in registering trademarks, patents, and copyrights with the National Office for Technology Acquisition and Promotion and the Trademarks, Patents and Designs Registry.

Conclusion

The NSA is a forward-thinking legislative framework that provides critical incentives to drive innovation and entrepreneurship. However, these incentives are contingent on obtaining the Startup Label and remaining compliant with the NSA’s requirements. As the implementation of the NSA continues, stakeholders are encouraged to engage actively with the Startup Portal, monitor new guidelines from NITDA and NSIA, and seek legal advice to ensure eligibility and access to full benefits.

Financing Technology Infrastructure Projects in Nigeria: Legal and Regulatory Considerations

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BY ADERONKE ALEX-ADEDIPE AND PROMISE ITAH

Technology infrastructure is the backbone of digital transformation and economic advancement. In Nigeria, there is a rapidly growing demand for robust infrastructure—such as broadband networks, data centers, cloud platforms, and smart grids. Financing these projects could however present distinct challenges and opportunities to developers and project sponsors.

In this newsletter, we highlight some financing options, as well as the key legal and regulatory considerations for successfully executing technology infrastructure projects in Nigeria.

1.     What is Technology Infrastructure?

Technology infrastructure refers to the core physical and digital systems that support modern connectivity and digital services. This includes assets like fiberoptic cables, telecom towers, base stations, and data centers, cloud platforms, enterprise software, and electronic payment systems.

These systems are essential to a wide range of sectors, including telecommunications (such as broadband rollout and ICT backbone development), power (like smart grids), public services (including e-Government and digital identity platforms), and emerging areas such as the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain technology.

2.     Financing Models for Technology Infrastructure Projects

a.     Grants

Grants are financial contributions provided by government or private institutions to support specific projects, typically without the expectation of repayment. They are a valuable funding option for technology infrastructure projects, especially in emerging markets. Examples of such grants include the Bank of Industry (BoI) Grant and the Lagos State Science Research and Innovation Council (LASRIC) Grant. To access these funds, project sponsors and developers must meet the eligibility criteria established by each institution.

b.     Public-Private Partnerships (PPPs)

Given the capital-intensive nature of infrastructure projects, Public-Private Partnerships (PPPs) offer a valuable opportunity for collaboration between the government and private sector. Federal-level PPPs are regulated by the Infrastructure Concession Regulatory Commission (ICRC) Act, while state-level projects are governed by respective state laws. As certain technology services, like broadband provision, are increasingly viewed as essential public utilities, governments are more open to partnering with the private sector to deliver these projects.

There are several PPP models, including Build-Operate-Transfer (BOT), Design-Build-Finance-Operate (DBFO), concessions, and joint ventures, which outline how projects will be delivered, who assumes the risks, and how returns are shared. These models are tailored to suit the specific needs and structure of each project, ensuring a flexible and effective approach to technology infrastructure development.

c.      Project Finance

To manage project risks and facilitate external funding, developers often adopt the use of Special Purpose Vehicles (SPVs). These structures allow sponsors to access debt financing—typically from development finance institutions (DFIs), commercial banks, or international lenders—on a limited-recourse basis. This means that liabilities are largely kept off the sponsor’s balance sheet and vest in the SPV.

This financing approach uses long-term loans that align with the lifespan of the project, with repayments made directly from the income the project generates. For example, in data center projects, the developer can enter into long-term agreements with users, where the service fees are structured to cover loan repayments. This allows sponsors to deliver large-scale technology infrastructure without the need to fund the entire project upfront—apart from their equity contribution.

d.     Crowdfunding

Crowdfunding is a popular financing method where funds can be raised from a large pool of contributors, typically through online platforms. It offers two main models: reward-based crowdfunding, where backers receive non-financial rewards or early access to products, and equity crowdfunding, where investors receive ownership shares in the entity. Crowdfunding can be effective in technology infrastructure projects. Project sponsors and developers should however seek crowdfunding through duly registered and licensed intermediaries and platforms in accordance with the Securities and Exchange Commission (SEC) Rules on Crowdfunding.

e.     Blended Finance and Development Funding

Blended finance combines public funds with private investment to reduce risks and make projects more appealing to investors. By using tools like grants, low-interest loans, and guarantees, it helps attract private capital for projects that might otherwise struggle to secure funding.

This approach is especially useful for large-scale technology infrastructure projects in Nigeria, such as broadband networks and establishment of data centers. To access blended finance, project developers need to present a solid business case, show clear social or economic benefits, and engage with development finance institutions (DFIs) like the African Development Bank, International Finance Corporation, and BoI early in the process. Developers must also demonstrate how the project will be financially sustainable and meet both commercial and developmental goals.

3.     Regulatory Landscape and Compliance Considerations

a.     Licensing Regimes

Depending on the nature and scope of the technology infrastructure project, developers may require specific licenses or authorizations from regulatory bodies before development of infrastructure projects. For instance, telecommunications and broadband service providers must obtain operating licenses under the Nigerian Communications Commission (NCC) licensing framework, which includes categories such as the Unified Access Service Licence, Internet Service Provider (ISP) Licence, and Infrastructure Company (InfraCo) Licence.

b.     Sustainable Development and Regulatory Alignment

As investors increasingly prioritize environmental, social, and governance (ESG) standards when evaluating projects, developers and sponsors must ensure that their technology infrastructure projects meet these requirements. This is essential not only for attracting investment but also for demonstrating a commitment to sustainable and responsible development.

In line with these ESG expectations, technology projects involving physical infrastructure —such as towers, cables, and data centers—must comply with environmental and land use regulations. Developers are required to conduct an Environmental Impact Assessment (EIA) to evaluate potential environmental effects and outline necessary mitigation measures. Additionally, they must adhere to the provisions of the Land Use Act and local urban planning laws to ensure that the infrastructure is properly sited and aligned with responsible development practices.

c.      Local Content and Technology Transfer

Developers must demonstrate compliance with local content laws that prioritize the use of local labour, materials, and expertise. Technology transfer, which encourages the sharing of knowledge and skills with local businesses, is also a key factor in ensuring project sustainability and fostering innovation. Both aspects are crucial for increasing a project’s appeal to financiers, especially public sector investors.

Conclusion

As Nigeria’s demand for digital infrastructure grows, it is essential for sponsors and developers to understand the financing options and legal considerations that support successful project delivery. Models such as PPPs, project finance, crowdfunding, and blended finance offer viable pathways, particularly when aligned with regulatory requirements and ESG standards. While this newsletter provides key insights, it is not exhaustive. We advise seeking tailored legal and financial guidance to effectively navigate the complexities of financing and developing technology infrastructure in Nigeria.

CBN REGULATORY OVERSIGHT; APPOINTMENT AND REMOVAL OF DIRECTORS OF FINANCIAL INSTITUTIONS UNDER NIGERIAN LAW

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By Aderonke Alex-Adedipe and Eustace Aroh

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Introduction

On April 29, 2021, the Central Bank of Nigeria (CBN), as the apex regulator of all banks and other financial institutions in Nigeria, announced the removal of all the directors of First Bank Limited, a licensed commercial bank and financial services company, and FBN Holdings PLC, its holding company. The CBN also went a step further to appoint a new board of directors for the two companies.

In this article, we analyse the regulatory powers of the CBN to make decisions in relation to the constitution of the board of directors of financial institutions in Nigeria.

 

Provisions of the Companies and Allied Matters Act 2020[i]

The affairs of companies, including financial institutions, are generally guided by the provisions of the Companies and Allied Matters Act 2020 (“CAMA 2020”) which also provides for the general procedure for the appointment and removal of directors of a company.

Appointment – The first directors of a company are appointed by the subscribers during incorporation[ii] and subsequent directors are appointed at the annual general meeting by the shareholders.[iii] Where a vacancy is created by death, removal, retirement or resignation, a replacement director may be appointed by the board of directors to fill the vacancy until the next annual general meeting.[iv]

Removal – For a director to be removed under the CAMA 2020, a meeting of the shareholders must be convened and a decision to remove the shareholder passed at the meeting.[v] Prior to the meeting, the shareholder proposing the removal of the director is required to send a special notice to the company. The company will, in turn, send the special notice to the director proposed to be removed who will, if he wishes, make his representation in writing. The Company shall send the representation of the director alongside the notice of the meeting to all shareholders.[vi]

 

Provisions of the Bank and Other Financial Institution Act 2020

In addition to the CAMA 2020, banks and other financial services companies are also regulated by the Central Bank of Nigeria Act 2007 (CBN Act), Bank and Other Financial Institution Act 2020 (“BOFIA”) and the CBN’s various codes of corporate governance.

Under the BOFIA, before a company can carry on the business of banking, it must be licensed by the CBN.[vii] The CBN which was created under the CBN Act with the task of promoting a sound financial system in Nigeria[viii] was also granted regulatory powers under the BOFIA over all Nigerian banks. Sequel to its regulatory powers, banks are not to enter into any arrangement that will change the control (which includes appointment and removal of directors) or significant shareholding of the bank without seeking the prior written consent of the CBN.[ix]

 

Powers of the CBN to appoint and remove Directors

The powers of the CBN to remove and appoint a director can be deduced from the combined reading of sections 33 and 34(1)(2) of the BOFIA. Essentially, the CBN, under section 33, has the power to investigate the affairs of a bank where:

  • a director, shareholder, creditor or depositor applies to the CBN;
  • the bank is carrying on business in a way that is detrimental to the interest of the depositors or creditors;
  • the bank does not have sufficient assets to cover its liabilities to the public;
  • the bank has contravened any provision of the BOFIA or a relevant law; or
  • where it is in the interest of the public to do so.

Based on the investigations conducted under section 33, if the CBN is satisfied that the bank is liable in respect of the issue it was investigated for[x], the CBN may exercise the powers conferred on it under section 34(2) which includes the power to (notwithstanding any law or the memorandum and articles of the bank) remove a director and appoint any person in his stead and stipulate the amount to be paid to that director as remuneration.[xi]

 

Other Financial Institutions

Under the BOFIA, “other financial institution” refer to individuals, groups or companies that engage in the business of discount houses, bureau de change, finance company, money brokerage, foreign exchange purchase, international money transfer services, mortgage refinance or guarantee company, finance holding company or payment service providers, factoring, project financing, debt administration, equipment leasing, fund and investment management, private ledger services, and local purchases order financing.[xii]

Under the BOFIA, where the CBN is satisfied that a company classified as an “other financial institution” is in “a grave situation”, the CBN may exercise the powers granted to it under section 34, including the power to remove and appoint a director.[xiii]

 

Conclusion

The powers of the CBN to appoint and remove directors in a financial services company have been tested at the Court of Appeal[xiv] where it was held that the power of the CBN to remove and appoint directors was legal in line with sections 33 and 34 of BOFIA.[xv] Financial institutions must note that, notwithstanding their powers to remove and appoint directors at their discretion, its decision is subject to the regulatory oversight of the CBN.

 

[i] See our article on “Nigerian Companies and Allied Matters Act 2020 – Does The Removal of a Director Result in His or Her Disqualification as a Director of Other Companies?” https://pavestoneslegal.com/nigerian-companies-and-allied-matters-act-2020-does-the-removal-of-a-director-result-in-his-or-her-disqualification-as-a-director-in-other-companies/

[ii] Section 272 CAMA 2020

[iii] Section 273 (1) CAMA 2020

[iv] Section 274(1) CAMA 2020

[v] Section 288(1) CAMA 2020

[vi] Sections 288(2)(3) CAMA 2020

[vii] Section 2(1) BOFIA

[viii] Sections 1 and 2 CBN Act.

[ix] Section 7 BOFIA. CBN’s Revised Assessment Criteria For Approved Persons’ Regime For Financial Institutions

[x] Section 34(1)(d) BOFIA

[xi] Section 34(2)(f) BOFIA

[xii] Section 131 BOFIA

[xiii] Section 62 (1) BOFIA

[xiv] Danson Izedonmwen & Anor v. Union Bank PLC & Anor (2011) LCN/4919 (CA); appeal no: CA/L/1205/10 delivered by John Inyang Okoro, J.C.A on the 21st day of November, 2011

[xv] Then 33 and 35 of the BOFIA 1990.