From policy to practice: Why Nigeria’s Startup Act is failing outside Abuja

Nigeria’s much-celebrated Startup Act is facing growing scrutiny as weak implementation across states limits its impact beyond Abuja, raising fresh concerns about policy execution and investor confidence.

More than four years after its enactment, the law designed to accelerate innovation, improve access to funding, and position Nigeria as a leading digital economy in Africa has yet to translate into meaningful change outside the Federal Capital Territory (FCT) and a handful of major urban centres.

The uneven rollout highlights a widening gap between federal policy ambition and state-level execution, leaving many startups to contend with persistent regulatory and structural constraints.

Industry observers say the ecosystem remains active but constrained.

Adeolu Adewumi-Zer described Nigeria’s startup and SME landscape as one marked by strong entrepreneurial energy but limited by structural bottlenecks. According to her, “Nigeria’s startup and SME ecosystem is vibrant but constrained, with strong entrepreneurial energy limited by access to capital, weak structures, and inconsistent policy implementation.”

Data from the National Bureau of Statistics (NBS) underscores the contradiction. The Information and Communications Technology (ICT) sector contributed between 17 and 20 percent to Nigeria’s GDP in 2024, reinforcing its position as one of the country’s fastest-growing sectors. Yet, this growth has not been matched by the institutional support required to sustain startups across regions.

Most states have yet to domesticate or operationalise the Act, despite federal efforts to establish frameworks such as the National Council for Digital Innovation and Entrepreneurship. The result is a fragmented policy landscape in which startups outside Lagos and Abuja continue to face multiple taxation, weak infrastructure, and regulatory uncertainty.

“There’s been a lot of policy conversation, but not much has filtered down to us at the state level,” said Uzo Azuka, a founder based in southern Nigeria. “We still deal with the same regulatory bottlenecks and limited access to funding.”

The implications extend beyond the tech ecosystem. Persistent execution gaps are beginning to shape political sentiment, particularly among young Nigerians who are increasingly demanding accountability from leaders.

“Why should young Nigerians continue to support current political leaders when there are clear gaps in executing policies like the Startup Act, and limited efforts to replicate similar frameworks across other critical sectors of the economy?”

Concerns over policy follow-through are not limited to technology. In the creative sector, the proposed Creative Industries Development Bill intended to provide a structured framework for one of Nigeria’s most globally competitive industries has yet to progress beyond prolonged development and consultation stages.

The bill is expected to establish institutional support, funding mechanisms, and governance structures to unlock the full potential of Nigeria’s creative economy. However, its slow movement mirrors the implementation challenges facing the Startup Act, reinforcing concerns about continuity and execution in reform efforts.

Experts say the pattern points to a deeper governance challenge.

“Implementation is where the real problem lies,” said a policy analyst familiar with the Act’s rollout. “States are critical to making the Startup Act work, but many lack the institutional capacity or clear strategy to engage with the innovation ecosystem.”

Providing further context, Uchenna Uzo, noted that the effectiveness of the Act varies significantly by region. “The purpose of the Startup Act is to drive innovation. However, its limited effectiveness in some states reflects the still-low levels of entrepreneurship and venture activity in those regions. It is important to recognise that certain states are inherently more competitive for starting and scaling businesses than others. Ultimately, it comes down to the strength of the enabling environment. Where the Act is not gaining traction, it signals that state governments have yet to provide the necessary infrastructure and support systems for startups to thrive.”

The broader enterprise landscape reinforces this challenge. According to NBS and SMEDAN, micro, small and medium enterprises (MSMEs) account for more than 96 percent of businesses in Nigeria and contribute about 46 percent to GDP. However, many remain informal and disconnected from structured innovation frameworks such as the Startup Act.

Recent indicators suggest a more difficult operating environment for entrepreneurs, while startup funding has become increasingly cautious amid concerns over regulatory clarity and consistency across regions.

Although Nigeria remains one of Africa’s leading startup destinations, analysts warn that uneven policy implementation could erode long-term investor confidence, particularly in underserved markets.

Lagos continues to stand out as an exception. With stronger institutions, higher internally generated revenue, and a deliberate focus on innovation, the state attracts a significant share of startup activity and funding. However, this concentration also underscores a structural imbalance, with growth clustered in a few locations rather than broadly distributed.

In many other states, the absence of dedicated innovation agencies and coherent startup frameworks persists, despite increased federal allocations. Analysts argue that the issue is less about funding constraints and more about prioritisation.

“States are receiving more revenue, but innovation is still not seen as a core economic driver,” the analyst added.

Experts say bridging the gap will require stronger coordination between federal and state governments, measurable implementation targets, and deeper collaboration with private sector players.

Without such measures, the Startup Act and similar reform efforts risk remaining symbolic rather than transformative.

Ultimately, the law’s success will not be judged by its intent, but by its execution. Until states take a more active role in driving innovation, Nigeria risks turning one of its most ambitious policy frameworks into a symbol of unrealised potential.