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Financing, investment and government support

Government support

Does the government provide any incentives or support programmes to promote fintech innovation in your jurisdiction (eg, tax incentives, grants and regulatory sandboxes)?

The government is providing infrastructural support to innovation and technology hubs, shared spaces, a more consistent power supply and subsidised internet services to help promote innovation. Fintech entities engaged in innovative activities such as software development and publishing may also qualify for some of the incentives that are generally available to businesses in Nigeria, including the following:

  • Investment tax credits for R&D – the Companies Income Tax Act provides that companies and other organisations that engage in R&D activities for commercialisation will enjoy a 20% investment tax credit on their qualifying expenditure for that purpose. The act also provides that profit reserved by a company for the purposes of R&D is tax deductible provided that such reserves do not exceed 10% of the company’s total assessable profit.
  • Pioneer status – companies that are classified as operating in a pioneer industry or that engage in the production of pioneer products can apply for pioneer status, which – when granted – provides corporate tax relief and holidays for the first three to five years of operation. This may be extended for two further one-year periods, subject to factors such as the relative importance of the industry to national development at the time. The e-commerce service industry is accommodated under this scheme.
  • The Nigerian Investment Promotion Commission (NIPC) Act empowers the NIPC to negotiate, in collaboration with appropriate government agencies, special incentives for strategic or major investment.
  • The Treaty on Investment Promotion and Protection Agreement (IPPA) – an IPPA seeks reciprocal promotion and protection of investments by individuals and companies in the territories of participating states. An IPPA provides the baseline minimum protections for foreign investments.

Fintech companies can also access government funding through schemes such as:

  • the Youth Entrepreneurship Support Scheme of the Nigeria Bank of Industry (BOI) and the National Youth Service;
  • the BOI Graduate Entrepreneurship Fund; and
  • the Lagos State Employment Trust Fund for Micro, Small and Medium-Sized Enterprises Loan Programme for residents in Lagos.

Has the government concluded any international cooperation agreements to promote and facilitate the cross-border expansion of fintech businesses?

The Central Bank of Nigeria, in partnership with the Bill and Melinda Gates Foundation, is developing a regulatory framework for fintech as a new group in the financial services sector. The objective is to empower small companies (generally referred to as start-ups), innovators, technology companies and young Nigerians that have great ideas but lack the financial wherewithal to release their products or integrate with banks.

Financing and investment

What private financing and investment schemes are available and commonly used for fintech start-ups in your jurisdiction?

The funding avenues available to new and growing businesses in Nigeria include equity, debt and mezzanine funding, although these avenues are not exclusive to fintech businesses. Additionally, companies can raise debt from individuals, companies, banks and financial institutions subject to conformity with regulatory requirements from the capital markets, where applicable, unless their articles of association provide otherwise. Most fintech companies raise equity rather than debt as most investments come mainly from venture capitalist and private equity firms. There are also funds set up by individuals and entities that are available to small and medium-sized businesses, in addition to the increase in private equity funds that are focused on African fintech.