Boosting Startups in Nigeria: Evaluating Government Initiatives to Support Entrepreneurs

Entrepreneurship is key for economic growth and job creation in Nigeria. The government has recognized this and introduced various initiatives to boost startups. However, more needs to be done to create an enabling environment for emerging businesses to thrive. This article evaluates the impact of current government entrepreneurship programs in Nigeria.

Overview of Startup Ecosystem in Nigeria

Nigeria has a fast-growing startup ecosystem. The country is home to multiple innovation hubs and incubators supporting new ventures. Nigeria’s young, tech-savvy population is increasingly turning to entrepreneurship.

According to startup listing platform Crunchbase, Nigeria has over 440 active startups. These are mainly in fintech, e-commerce, logistics, healthcare, and renewable energy sectors. Notable startups include Interswitch, Andela, Flutterwave, Opay, and Helium Health.

The startup ecosystem is concentrated in cities like Lagos, Abuja, and Port Harcourt. Key incubators and accelerators include CcHub, Passion Incubator, Wennovation Hub, and StartPreneur Africa. Nevertheless, startups still face challenges accessing skills, infrastructure, and funding.

The Nigerian government recognizes the need to develop the startup ecosystem further. It has introduced policies, schemes, grants, and other initiatives targeting entrepreneurs.

Analysis of Government Policies and Programs for Startups

The Federal Government of Nigeria, through various agencies, has rolled out programs to boost entrepreneurship. These aim to tackle key startup challenges like limited funding, infrastructure, training, and bureaucratic hurdles. This section analyzes major government initiatives.

Access to Finance

Limited access to capital hinders startup growth in Nigeria. Government schemes are now addressing this by facilitating finance for entrepreneurs.

Bank of Industry Startup Funding Schemes

The Bank of Industry (BOI) runs various funds targeting startups. These provide finance through debt, equity investments, and credit guarantees.

Key BOI initiatives include:

• The Youth Entrepreneurship Support Program (YES) – Provides loans of up to N5 million to startup entrepreneurs aged 18-35 years.
• The MSME fund – Supports micro, small and medium enterprises through loans and working capital finance.
• BOI/State Matching Funds – Partners with State governments to finance startups in each state.
• BOI/Dangote matching fund – Collaboration with Dangote Foundation to support young entrepreneurs.

Over ₦93 billion disbursed to startups and MSMEs through these BOI funds in 2021.

The Nigerian government’s ₦75 billion National Youth Investment Fund (NYIF)

The NYIF provides loans between ₦250,000 to N50 million to youth-owned enterprises. By 2023, the fund aims to reach 500,000 beneficiaries.

Technology and Innovation Funds

The National Information Technology Development Agency (NITDA) offers grants through its National Technology Entrepreneurship Support Scheme. Nigerian Communications Commission (NCC) also runs innovation competitions awarding grants to tech startups.

In 2021, NITDA disbursed ₦30 million to six startups through the IT Innovation and Entrepreneurship Support Scheme. NCC awarded grants worth ₦9 million to 12 startup teams.

These innovation funds enable startups to transform innovative ideas into products and services. More support is needed to expand their reach.

Business Plan Competitions

Various government agencies and state governments organize business plan contests for startups. Winners get grants and other benefits like training and incubation support.

Recent examples are FCT-SEED fund business plan competition by Abuja Enterprise Agency. Lagos Innovates organized by the Lagos State Employment Trust Fund. Delta State Government also runs a yearly business pitch competition.

Business plan competitions help startups get early-stage grants. Expanding these to more states and making them annual programs could benefit more entrepreneurs.

Tax Reliefs

Nigeria’s 2019 Finance Bill provides tax relief to support startups. Key provisions include:

• Exemption from company income tax for 2-3 years for eligible startups.
• Exemption from VAT for startup equipment purchases.
• Tax reductions for investors in regulated venture capital companies.

Startups certified by the Corporate Affairs Commission can benefit from these tax incentives. The reliefs make it easier for new businesses to meet tax obligations in their formative years.

Business Development Support

Beyond access to finance, startups need training, mentoring and infrastructure support. Nigerian government entrepreneurship agencies now provide these services.

SMEDAN MSME Clinics

The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) organizes MSME clinics nationwide. These provide training and mentoring to entrepreneurs on business registration, access to finance, and compliance.

Over 50,000 entrepreneurs participated in the MSME clinics held between 2013 to 2015. Expanding the clinics to rural areas can boost development of small businesses.

Business Incubation

Public-funded incubation centres offer startups office space, internet, mentoring and other support services.

Examples are the National Information Technology Development Agency (NITDA) technology incubation centres and the National Board for Technology Incubation (NBTI) centres.

There are now over 20 government-sponsored incubation facilities in Nigeria. However, more well-equipped and managed facilities are needed to reach tens of thousands of startups.

Digital Infrastructure

The National Information Technology Development Agency (NITDA) is developing ICT infrastructure like fibre optic networks, digital clusters and IT parks to support startups.

NITDA also sponsors startup events like StartupFriday, Artificial Intelligence Bootcamp and National Hackathon to promote innovation.

Improving Ease of Doing Business

Complex regulations and lengthy procedures for obtaining licenses, permits and approvals hamper business startups. However government ministries have taken steps to make compliance easier.

Business Registration Reforms

The Corporate Affairs Commission (CAC) launched an online registration portal to simplify business name search and reservation. CAC also partners with banks to ease company registration fee payments.

SME Regulatory Review

The Federal Ministry of Industry, Trade & Investment is undertaking reforms to eliminate burdensome regulations and multiple taxes facing SMEs in Nigeria.

One-Stop Investment Centers

One-Stop Investment Centers established in Lagos and Abuja simplify business licensing, approvals, and registration for investors.

Government Agencies Supporting Startups

Different government agencies run specific programs to promote startups in Nigeria:

• Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) – supports skills training, infrastructure, and market access for MSMEs.
• National Office for Technology Acquisition and Promotion (NOTAP) – provides patenting and IP support to innovators.
• Nigeria Export Promotion Council (NEPC) – assists startups with export training and market expansion grants.
• Nigerian Export-Import Bank (NEXIM) – provides export financing services for SMEs.
• National Agency for Science and Engineering Infrastructure (NASENI) – develops technology incubation centres.
• National Automotive Design and Development Council (NADDC) – supports tech startups in auto industry via the Auto-Tech Scheme.
• National Information Technology Development Agency (NITDA) – runs initiatives like the Office for ICT Innovation and Entrepreneurship (OIIE) and Startup Clinics to assist young tech companies.

Evaluating Progress and Impact

The Nigerian government has demonstrated commitment through the above initiatives to develop the startup ecosystem. But has good progress been made in achieving objectives? This section evaluates impact based on key implementation metrics.

Number of Startups Supported

About 500 startups reportedly benefited from BOI’s $100 million startup fund between 2018 and 2020. About 250 startups have undergone incubation and acceleration programs at centres sponsored by NITDA, NOTAP, and Federal Ministry of Science and Technology.

The NYIF aims to support 500,000 youth businesses. Only 8,000 youths received NYIF loans by the end of 2021.

Considering Nigeria’s large youth population more needs to be done to expand the scope and reach of existing schemes.

Volume of Disbursements to Startups

BOI disbursed ₦93 billion to startups and MSMEs in 2021, up 25% from the previous year. About ₦7.5 billion allocated under NYIF as at 2022.

ONLY ₦41 million has been disbursed by NITDA and NCC tech startup grant schemes since launch.

The participation by state governments in the funding space is still minimal – less than 15 states have active SME programs.

The scale of disbursements to startups remains inadequate given the needs of the ecosystem.

Number of States Covered

Federal startup programs mainly target entrepreneurs in Lagos, Abuja, Kano, Port Harcourt and Kaduna. Only about 12 states actively participate by organizing business plan competitions, conferences and providing startup grants. There is limited involvement of players in other states.

Expanding existing schemes to cover entrepreneurs in more states could boost startup activity in Nigeria.

Improved Startup Success Rate

While some startups receiving government grants have grown to raise further investments, the overall ecosystem success rate remains low.

Many startups struggle to scale beyond the seed stage due to a lack of follow-on funding, markets and proper incubation support.

More assessment is required to track how government programs translate to startup success, survival rates and direct jobs created.

Ranking on Global Startup Index

Nigeria was ranked 5th on Sub-Saharan African countries in the Global Startup Ecosystem Index 2020 by StartupBlink. Lagos is ranked as having the 17th best startup ecosystem in Africa.

Nigeria needs to improve its standing on global startup rankings by attracting more early stage funding, developing technical talent and creating stronger deal flow pipelines.

Challenges Facing Government Startup Support Schemes

Certain limitations constrain the effectiveness and impact of Nigerian government entrepreneurship initiatives.

Low Awareness Among Startups

Limited public awareness affects the take-up of existing grants and funds. Startups outside major cities are unaware of support programs.

SMEDAN trains MSMEs on accessing BOI funds during clinics. However more nationwide sensitization campaigns are needed through incubators and the media.

Weak Coordination Across Agencies

There are overlaps between business support initiatives run by BOI, SMEDAN, NOTAP, NITDA and Federal MSME Clinics.

Stronger inter-agency collaboration could streamline startup programs and amplify impact. States could also align their schemes with federal agencies.

Inadequate Funding

Ineffective disbursement hampers programs like NYIF and NITDA grants due to inadequate budgetary allocation.

The National Assembly needs to approve more funding through the budget for entrepreneurship schemes.

Bureaucracy & Complex Application Process

Excess paperwork, long processing times and complex documentation requirements hamper access to government funding and training programs.

Automating application procedures and documentation needed could significantly improve the ease of access for startups.

Limited Technical Assistance

Beyond grants, startups need extensive mentoring and advisory services in areas like product development, marketing, legal etc. Current programs provide limited technical support.

Partnerships between government agencies and private sector players could augment the technical assistance and incubation services available to startups.

Policy Inconsistencies & Reversals

Frequent changes in government policies and the reversal of incentive programs create uncertainty for businesses. E.g. Import duty waivers for startups was scrapped in 2020.

There should be continuity in implementation of startup policies and schemes across governments.

Recommendations

To enhance the effectiveness of government measures to support entrepreneurship in Nigeria, the following steps are recommended:

1. Increase funding allocation for startup programs: Budgetary allocation should be expanded to existing and new initiatives targeting startups. Innovation funds like NYIF require billions of Naira annually to reach impact at scale.
2. Improve monitoring & evaluation: Agencies like SMEDAN and NITDA should track startups supported through grants and monitor their growth progress. This helps to gauge impact and address gaps.
3. Encourage inter-agency collaboration: A taskforce between key agencies driving startup policies promotes coordination and synergy. States can also partner with federal agencies to implement programs.
4. Drive grassroots entrepreneurship: Startup schemes should move beyond the major cities to target grassroots entrepreneurs, youth, and women in rural areas.
5. Fast-track digitization of government services: Digitalising registration, licensing, permitting and application for startup programs improves ease of access.
6. Simplify bureaucratic procedures: Eliminate excessive paperwork and documentation needs to facilitate seamless access to grants and schemes.
7. Expand technical assistance: More capacity building, mentoring and advisory support should be provided to startups beyond grants. Partnerships with private sector will enable this.
8. Increase sensitization: Nationwide campaigns are needed to create awareness on existing government startup programs and opportunities.
9. Strengthen intellectual property protection: IP protection mechanisms should be reinforced to safeguard innovative startups.
10. Ensure policy stability: Regulations and incentive schemes for startups should be consistent across government transitions. This provides predictability.

Conclusion

This article has evaluated the impact of Nigerian government initiatives and policies aimed at promoting startups and entrepreneurship development. Though progress has been made, gaps exist in the funding quantum unlocked, a number of startups reached, monitoring and evaluation as well as bureaucratic bottlenecks. Addressing these limitations and implementing the recommendations above can significantly strengthen the startup ecosystem in Nigeria. With the right support, emerging innovative enterprises can transform the economy and drive growth.