Leaked Nigerian startup bill reveals theme of licensing, fees, fines and penalties

by MMC
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For some time there has been talk of revamping the outdated 2007 Act of Nigeria’s information and technology body, the National Information Technology Development Agency (NITDA).

The bill, which established NITDA as the agency to oversee Nigeria’s technological transformation, is quite outdated. Over the past decade, Nigeria has arguably become Africa’s most attractive destination for venture capital. It’s also home to two unicorns (Flutterwave and Jumia) and the billion-dollar fintech company Interswitch.

To keep pace with the innovation that has swept the country, NITDA has taken it upon itself to review these laws and make them more beneficial to startups. Earlier this year, in March, the Managing Director, Kashifu Inuwa Abdullahi, proposed the realignment of the law with “the principles and ideals of the fourth industrial revolution” and Nigeria’s digital economy policy.

Yesterday, we could I had a glimpse of what that amended bill resembles, and its details are rather regarding more than friendly towards startups.

In summary, the bill states that NITDA wants technology companies operating in Nigeria to obtain a license, pay levies on pre-tax profits and sanction anyone (person or company) who acts contrary to the provisions of the new law..

In 2019, the World Bank ranked Nigeria 131st out of 190 countries in its rankings. Doing Business Indexwhich measures the ease of doing business through a comparative assessment of regulatory environments.

According to reportNigeria was among the 10 countries with the most notable improvements during the reporting period from May 2018 to April 2019. Certainly, the country has made some progress during this period, but since last year, any talk of the country moving forward has remained on paper.. In reality, businesses, especially those focused on technology, have faced strict regulations and policies detrimental to their growth..

We witnessed how the operations of motorcycle transport companies in Lagos have been arrested indefinitely early 2020, forcing them to change their economic model has survive. In March this year, the country’s central bank bans people from trading cryptocurrencies through banks; crypto startups are not alike, despite using peer-to-peer methods. And more recently, the Twitter ban has affected small businesses in general, as well as the way tech startups communicate with customers.

What’s in the invoice?

Section 6 of the amended bill details the powers given to the NITDA. Some of these include the power to set licensing and authorization fees, levy fees and penalties, and issue notices of contraventions and non-compliance with the law..

The agency says it also reserves the right to “enter premises, inspect, seize, seal, detain and impose administrative sanctions on offending individuals and businesses that violate any provision of the law,” subject to court order..

In Section 13, NITDA proposes to establish a fund (the National Information Technology Development Fund) to achieve the country’s digital economy goals.. How does this financing be financed? Aid grants, fees, money accrued for administrative payments and levies charged to technology companies.

The bill states that technology companies with an annual turnover of 100 million naira (~$200,000) will have to pay a levy of 1% of their pre-tax profits.

In Article 20 of the leaked bill, NITDA states that it will issue licenses and authorizations to technology companies, regardless of their size. Licenses are classified into three sections: product, service provider and platform provider. The invoice did not provide for any additional information about what these licenses entail and how startups can obtain them.

Howeverthe agency is more concerned about what will happen to individuals or businesses that do not obtain these licenses or pay the 1% levy fee.

“Any natural or legal person who operates an information technology or digital economy service, product or platform contrary to the provisions of this law commits an offense,” the agency said in the press release..

Those found guilty by the agency will be get a ticket not less than 3 million Naira (~$6,000) or detained for a year or more. The bill states that the NITDA may also decide to impose fine and imprisonment on such a person.

On the other handa fine of at least 30 million naira (~$60,000) will be to be in charge against legal entities. Corporate “directors” can also serve a prison sentence of two years or more.

And individuals or companies that refuse agency personnel to perform their duties below the law get a ticket not less than 3 million Naira (~$6,000) and 30 million Naira (~$60,000), respectively. Prison sentences vary from one year to two in this section for individuals and members of a legal entity.

Other offenses and sanctions are mentioned later in the bill. For example, any company falling into the category of taxpayers and not paying after two months will be subject to a fine of 0.5% of the total amount to be paid. to be paid every day after the fault.

TechCrunch contacted the agency for comment on the validity of the The invoice was leaked but received no response as of press time.

Startup Bill vs. NITDA Act

The amended bill leaked by NITDA comes as Nigeria’s tech ecosystem has mobilized to engage policymakers in the country to pass a bill on startups.

The Startup Bill aims to create a favorable environment for technology startups through regulations co-created with the Nigerian government.. This month the first version will be be done public during a first reading in the country’s National Assembly in October.

There is momentary uncertainty over stakeholders’ next steps following the contents revealed in the revised NITDA bill, as the agency is expected to play a major role in bringing the Startup Bill to fruition.

The leak of the NITDA amendment bill also presents a whole new level of threat. That’s way above what tech companies might have faced in recent times. If adopted, it will change their operation and radically affect the ease of doing business.

Many have called on startup executives and tech companies to pressure lawmakers to pass bills. Howeverthe general feeling is that lobbying is currently a dead end.

Sources say motorcycle transport companies tried to lobby important stakeholders before the Lagos State government banned them from plying its roads.. Howeverit still ended in a ban.

Despite being one of the pioneers of the Startup Bill, Iyinoluwa Aboyeji, co-founder of Andela and Flutterwave, also believes that lobbying could prove futile..

In a tweet, he says Nigerian lawmakers cannot be pressured and that startups should prepare for the worst while hoping for the best. He also advised Nigerian startups to start building for a global audience and incorporate their businesses outside the country if necessary..



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