The National Council of Digital Innovation and Entrepreneurship: Imperatives for Nigeria’s Startup Ecosystem

Gabriel Eze, Associate

PDF version downloadable here.

Introduction

The Federal Government of Nigeria inaugurated a 14-member National Council for Digital Innovation and Entrepreneurship (“Council”) on Wednesday 5 April 2023. The Council’s establishment is coming on the heels of the Nigeria Startup Act 2022 (NSA). But the implementation of the NSA has been a major concern. In a related article on the NSA, it was identified that two of the three potential pitfalls of the NSA center on implementation: (1) absence of a compliance mechanism; and (2) composition of the Council membership and its impracticality. 

Thankfully, the inauguration of the Council in April 2023, and the eventual launch of the Startup Support and Engagement Portal (the “Startup Portal”) in November 2023 are bold steps in the right direction towards actualizing the objectives of the NSA. 

 

Functions and Powers of the Council

The Council is the mitochondria that is expected to generate the political will needed to power most of the programs under the NSA. 

Generally, the Council will formulate and provide general policy guidelines, direct the harmonization of laws and regulations, approve the programs, monitor and ensure the implementation of the policies and programs, and support digital technological development of startups.

 

Composition of the Council

The membership of the Council is in four categories as follows:

1. The Presidency – the Council is headed by the President and Vice President of Nigeria as Chairman and Vice Chairman respectively. 
2. Ministries, Departments, and Agencies (MDAs) – comprises (a) the Minister responsible for Finance, Budget, and National Planning; (b) the Minister responsible for Industry, Trade, and Investment; (c) the Minister responsible for Science, Technology and Innovation; including (d) the Governor of the Central Bank of Nigeria (CBN). In the absence of the Presidency, the Minister responsible for Communications and Digital Economy will preside over the Council while the Director-General of the National Information Technology Development Agency (NITDA), serves as its Secretary.
3. Startup Consultative Forum (Forum)  – the Council must be represented by some members of the Startup Consultative Forum as established under section 12 of the NSA.
4. Professional Bodies – one member each from the Nigeria Computer Society (NCS) and  the Computer Professionals Registration Council of Nigeria (CPN) are represented in the Council.

Amongst others, it is particularly a welcome development having the CBN Governor in the Council. This is for two major reasons. First, a significant number of startups today are not only in technology but also in the FinTech space, a sector where the CBN is the major regulator. Second, the CBN is not only, arguably, the single most powerful regulator in the country, but also the regulator whose policies and regulations in the financial services sector affect other industries the most. Therefore, to avoid, or at least minimize regulatory conflicts, inconsistencies, and tensions, it is vital to have the CBN Governor in the Council.    

To achieve effectiveness in the Council, there must be “people interoperability” between the Minister responsible for Communications and Digital Economy, and the Director-General of NITDA, and between the public and the private sectors. 

Also notable is the power of the Minister responsible for communications and digital economy to preside over the Council in the absence of the Presidency.¹ It would be expected—and understandably so—that the Presidency may almost always be absent. Therefore, the Minister for Communications and Digital Economy must always ensure that it exercises its powers responsibly in accordance with the provisions of the NSA. Similarly, though NITDA, an agency under the political control of the Minister, is the Secretary of the Council, it is important that the Director-General of NITDA ensures that the Council is administered in an accountable, responsive, and transparent manner. This should always be in the best interest of all stakeholders in line with the vision, mission, and objectives of the NSA. Both the representatives of the public sector and private sector in the Council must always be carried along with the activities of the Council. 

 

Structure of the Council: Membership, Meetings, and Committees

The Council is a corporate body with perpetual succession. The Council has a common seal with powers to sue or be sued in its corporate name. It may also acquire, hold, purchase, mortgage, and deal with property, movable, or immovable, real or personal as it deems necessary in its own name. 

 

Tenure of Council Members

Under the NSA, the tenure of members of the Council is determined based on whether a Council member is an ex-officio or non-ex-officio member. 

For a member other than an ex-officio, the NSA provides a 2-year term with eligibility for reappointment for another two years and no more, subject to the terms and conditions of a member’s appointment. The member must be a person of proven integrity, and have at least 10 years of cognate experience in public or private service. 

An ex-officio member is a person who is appointed into the Council by virtue of his or her office. When an ex-officio member ceases to hold the office on the basis of which he or she became a Council member, his or her membership expires. The President, Vice President, the 3 Ministers, the CBN governor, and the Director-General of NITDA are all ex-officio members of the Council.  

Because Council membership is tenure-based, the NSA provides for when membership may cease. A member of the Council shall cease to hold office where the member resigns, dies, or his or her seat is declared vacant by the Council. 

 

Two “missing” principal officers who ought to form part of the ex-officio members 

I propose a review of the Council’s membership. Two persons ought to be included as ex-officio members of the Council: the Vice Chairman/Chief Executive Officer of the Nigerian Communications Commission (NCC) and the Director-General of the Securities and Exchange Commission (SEC). 

First, concerning NCC, telecom service providers will increasingly launch products and services in the FinTech space. Here, Airtel’s SmartCash, MTN’s MoMo, and 9Mobile’s 9PSB come to mind. They are payment service banks (PSBs) licensed by the CBN. Besides, telecom is a strategic driver of the digital economy agenda in Nigeria. As the telecom regulator, the NCC widens access to digital services, supports the emergence of new services and industries, spurs business innovation, and significantly contributes to the country’s Gross Domestic Product (GDP).²  Also, NCC’s recent introduction of a mobile virtual network operator (MVNO) license is bound to stimulate innovation in the telecom industry and beyond in Nigeria.³ An MVNO is a company that does not own a mobile spectrum license but sells mobile services under its brand name using the network of a licensed mobile operator. It means that these licensed companies will be providing the same services as Airtel, Globacom, MTN, and 9mobile.⁴ MVNOs need not have any (major) infrastructure as they can ride on the existing MVNOs infrastructure in the country after a proper agreement has been reached with the telecom giants. As more startups incrementally innovate in the telecom industry in the country, the NCC will continue to play a critical role. Furthermore, in the emerging world of embedded finance—financial services or products integrated within nonfinancial services or platforms—I see the NCC having an increasingly crucial role to play. Embedded finance is essentially where banking and telecom meet.

Second, concerning the SEC, artificial intelligence (AI) and blockchain are two emerging technologies that will increasingly impact the capital market. More and more startups will play in the big league without having to become as established as their traditional finance counterparts.⁵ The SEC has played a significant—and quite commendable role—in ensuring that innovations in the digital stock trading market are not stifled. Think Bamboo, Chaka, Trove, etc. who now operate legally with the Sub-Broker/Sub-Broker Serving Multiple Brokers Through a Digital Platform license in Nigeria. 

Lastly, concerning know-your-customer (KYC) requirements for account opening and verification on startup platforms, the National Identity Number (NIN) Slip or National Identity Card—apart from the Bank Verification Number (BVN)—will become increasingly vital. This is where the Nigerian Identity Management Commission (NIMC) comes in. But the inclusion of the Director-General of the NIMC may not be indispensable. The NIMC is an agency under the Minister of Communications, Innovation and Digital Economy. Though this is also the same with the NCC, the NCC is too big a regulator in the digital economy to be left out of the Council, hence the need for its inclusion, as recommended above.

 

Meetings

The Council is required to meet not less than 4 times each year. The Chairman has the responsibility to summon meetings upon a 14-day notice given to the Chairman by at least one-third of members.⁶ 

Sometime in May 2023, representatives of the Startup Consultative Forum reportedly accused the then Minister for Communications and Digital Economy, Prof. Isa Ali  Pantami, of holding a Council meeting without satisfying the required quorum. At the purported meeting presided by the Honorable Minister, only 4 members of the Council were present. This conflicted with the requirement of section 1(3) of the Schedule to the Act. 

Of the 14 members of the Council, at least 8 members must be present in order to form a quorum. The 8 members must include the presiding Chairman and two private-sector representatives. Any meeting purportedly held by the Council without the statutory quorum is legally invalid. 

 

The Council Agent, Committees, and Advisers

The statutory functions and powers of the Council are quite immense. Having a structure that will help ensure the efficient and effective administration and implementation of the Act is vital. To ensure that the Council benefits from the expertise and experience available outside the membership of the Council, it’s why structures such as the Council agent, committees, and advisers, are put in place. 

In March 2023, an issue arose when the former Minister for Communications and Digital Economy, Prof.  Pantami, constituted a 27-member ad hoc think-tank group. Named Nigeria Startup Act 2022 Implementation Committee (NSAIC), the NSAIC’s responsibility is to create a framework for the implementation of the NSA. Also, the Minister wanted the chairman of NSAIC to become a Council member and also attend Council meetings. Reportedly, relying on section 4 of the NSA which confers the President of the Federal Republic of Nigeria with the power to issue directives of a general or specific nature relating to the NSA, former President Muhammadu Buhari, approved the Minister’s request. However, the representatives of the Startup Consultative Forum kicked against this. According to the representatives, the Minister’s action amounted to a non-legislative amendment of the provisions of the NSA. 

 

Distinction between a Council agent, Committees, and Advisers under the NSA

The NSA is not silent on the constitution of committees. It is not also silent on the appointment of what it describes as a “Council agent” and advisers as well. A distinction between a Council agent, committees, and advisers may be helpful here. 

On the one hand, under the NSA, the Council is mandated by the NSA to appoint a Council agent for such a period as it may deem fit. A Council agent is to act in accordance with any general or specific directions of the Council towards the effective monitoring and implementation of the provisions of the NSA. The Council agent must submit quarterly monitoring reports and annual reports to the Council on the status of the programs being implemented under the Act.⁷ The appointment of a Council agent is mandatory. This is to be done by the Council where properly constituted.

On the other hand, the Council may appoint such a number of committees—whether standing or ad hoc—as it deems fit. Committees are appointed “to consider and report on any matter with which the Council is concerned”. To ensure reasonable flexibility, the Council reserves the discretion to determine the membership, tenure, and quorum of such committees. A committee set up by the Council is required to be presided over by a member of the Council. Committee decisions are recommendations subject to the Council’s final decision.⁸ Obviously, committees hold their meetings separately. No committee member is a Council member. But a Council member is required to chair a committee. Whether the Council will appoint any committee member is subject to the Council’s discretion. 

For advisers, the Council may desire to obtain the advice of any person on any particular matter. The Act permits the Council to co-opt such a person to the Council for such period as it deems fit. However, advisers shall not be permitted to vote at any Council meeting. Also, advisers shall not be reckoned with in determining  Council Quorum.⁹

Flowing from the above, the Minister’s action of constituting the NSAIC in the manner sought above is irregular under the NSA. This is notwithstanding the President’s approval. For the implementation of the Act, what is contemplated under section 8 of the Act is the appointment of a Council agent. The Council agent may however be either standing or ad hoc since the Act clearly states that appointment will be “for such period as [the Council] may deem fit”. Considering the nature of the task in question, a standing Council agent will be more appropriate, not ad hoc. So, while NSAIC may become a Council agent for this purpose, it is important that the process of constituting and appointing the NSAIC is regularized accordingly. The Council Chairman being the President (or Minster where the President is absent) does not have the sole authority to appoint a Council agent. The decision to appoint a Council agent rests on the Council—a properly constituted Council with the statutorily required quorum. 

However, the former Minister’s intention to have the NSAIC chairman attend Council meetings—though discouraged—is not abominable under the Act. While it is expected that attendance of Council meetings will be restricted to its statutorily recognized members, section 3(4) of the Schedule to the Act effectively accommodates the idea of nonmembers attending Council meetings. According to section 3(4)(b) specifically, amongst other grounds, the validity of any proceedings of the Council or any of its committees shall not be affected by “the reason that any person not entitled to do so took part in the proceedings of the Council or committee”. The schedule to a statute has been judicially noticed to be part and parcel of such statute.

The NSA Secretariat i.e. NITDA must ensure full compliance with the provisions of the Act by all stakeholders, including the Council chairman. A house divided against itself cannot build a strong ecosystem. 

 

The Launch of the Startup Portal and the Council’s Call to Duty

In November 2023, Nigeria’s Minister of Communications, Innovation, and Digital Economy, Dr. Bosun Tijani (the “Minister”) announced the launch of the Startup Portal. The Minister made the announcement via his verified X (formerly Twitter) account stating that “the startup portal will drive the identification and aggregation of Nigerian startups, venture capital companies, hubs, and innovation centers in order to facilitate engagement and support for ecosystem players.” The Minister further stated that “the launch of the portal will … initiate the process of setting up the startup consultative forums to select representatives to the National Council for Digital Innovation and Entrepreneurship, in order to facilitate discourse and consensus among Nigerian ecosystem players …” 

The Forum is to be set up by the Secretariat subject to the approval of the Council. The Forum will be made up of industry stakeholders and representatives registered on the Startup Portal from labeled startups, venture capitalists, angel investors, incubators, accelerators, and innovation hubs; and two civil society organizations involved in the advancement of technology and innovation.¹⁰

The composition of the Forum is instructive. Its composition is not unconnected to its role in actualizing the objectives of the NSA. The Forum is to provide a platform for information sharing and collaboration in the Nigerian startup ecosystem with respect to:

1. information on a startup that qualifies to be labeled under the NSA;
2. relevant incentives that apply to a startup; 
3. information on available local capabilities;
4. nomination of representatives to the Council;
5. deliberations on a memorandum to be sent to Council for consideration; and
6. other policy proposals that may be relevant to the Nigerian startup ecosystem.¹¹

 

The Imperatives of the Council for Nigeria’s Startup Ecosystem

1. Governance is brought closer: By inaugurating the Council, the Government has brought governance closer to the stakeholders in the startup ecosystem. This is expected as the Council would need to collaborate with private stakeholders towards actualizing the objectives of the NSA. In line with the Federal Government’s National Digital Economy Policy and Strategy (NDEPS), one looks forward to seeing policies and regulatory instruments that are fit for purpose and that actually support and enable innovation-driven enterprises to thrive in Nigeria.
2. A step towards actualization: The objectives of the NSA in the areas of capacity building, collaboration, seed funds, talent development, tax incentives and reliefs, and training, if realized, would be a giant step out of a pipe dream for many. With the resources contemplated under the NSA, the Council must ensure that access to digital infrastructures such as (mobile) broadband, including in rural and remote areas, as well as access to data—which has become an infrastructure for data-driven innovation—should be cheaper and more accessible.
3. Transforming Nigeria’s digital economy through policy and legislative reforms:  Given its mandate to, among others, monitor and evaluate regulatory frameworks which engender the development of startups in Nigeria,¹² the Council needs to introduce policies that will help shape market conditions, make market entry flexible, and support the scaling of startups in Nigeria. For instance, how many Nigerian startups can meet the present licensing requirements of a digital asset exchange (DAX) under the ‘Rules on Issuance, Offering Platforms and Custody of Digital Assets’ (the ‘Rules’) issued by the SEC in May 2022?¹³ This further supports my earlier recommendation regarding why the SEC’s Director-General ought to be included in the Council’s membership. With the SEC’s Director-General and other relevant officers in the Council, we should expect a more holistic and integrative approach in policy-formulation and regulations that stimulate digital innovation, support economic growth, and achieve shared prosperity for all. 

Besides, the NSA being essentially a policy-driven legislation,¹⁴ can attract the much needed capital Nigeria needs to revamp its economy if advanced rightly. In 2022, Nigeria’s technology startup ecosystem reportedly attracted about $1 billion. According to the founder of CcHub, who also doubles as the current Minister, the sector can attract over $10 billion in funding.¹⁵ If Nigeria however fails to get its act together to champion and implement a roadmap that will make the country’s technology startup ecosystem globally competitive, we may end up with yet another talkshop. This is where the Council comes in.

Commendably, on 15 April 2024, NITDA announced via its verified X account that 12,948 startups, 912 VCs, 1,735 angel investors, and 925 accelerators, incubators & hubs have already registered on the Startup Portal. It would be great to make the list of startups successfully registered accessible to the public. It would also be great to have regular updates on the activities of the Council. The major resolutions of the Council after each meeting it holds should be published for all stakeholders and the members of the public to follow. For any meaningful and productive stakeholder engagement, communication is vital. Opacity should be avoided and discouraged. The startup ecosystem is no exception. A Council that must keep the startup ecosystem awake must itself not sleep, or be seen or perceived to be asleep. 

 

Conclusion 

The Council, symbolizing the political will that has perhaps been missing in Nigeria’s startup ecosystem, should create strategic partnerships. This should involve partnerships with innovation-driven enterprises, consumers of innovation, technology start-ups, innovation hubs and labs, investors, academia, funding agencies, civil society organizations, and service providers by bridging the market gap while encouraging supply and demand across these industries. The Council, based on its strategic partnerships, should continue to push for the adoption of the NSA by the 36 states of the Federation. I am aware that a number of states in Nigeria have initiated processes in this direction. We must be intentional about nurturing Nigeria’s startup ecosystem across the Federation as the NSA could be the means by which  Nigerian states digitize themselves and prepare for the digital economy. 

Together, all stakeholders must collaborate to achieve startup growth and development as well as efficient and effective policy development and implementation, repositioning Nigeria in the global map of startup innovation. Infusion Lawyers, a stakeholder in Nigeria’s startup ecosystem, will continue to monitor and give regular updates on the progress of the NSA implementation. With my partners and the rest of the team at the firm, I am of course always happy to assist startups with maximizing the opportunities provided by the NSA, while also minimizing business and regulatory risks. We are also available to contribute to the work of the Council as a partner in innovation.

 

 

Image source: The Nigeria Startup Portal