Venture Capital in Nigeria: A Comprehensive Legal Analysis

Abstract

Venture capital has emerged as a critical driver of innovation and economic growth in Nigeria, with significant investments flowing into the country’s burgeoning technology ecosystem. Between 2020 and 2024, Nigeria recorded a total of 404 private capital deals with an aggregate reported value of approximately USD 3 billion. However, the legal landscape governing venture capital in Nigeria has undergone profound transformation in recent years, marked by the enactment of the Investments and Securities Act 2025 (ISA 2025), the Nigerian Tax Act 2025 (NTA 2025), and the continued implementation of the Nigeria Startup Act 2022 (NSA). This article provides a comprehensive legal analysis of venture capital in Nigeria, examining the statutory framework, regulatory requirements, tax considerations, deal structures, cross-border considerations, and practical compliance challenges facing VC fund managers and investors. It further explores recent regulatory shifts, including the SEC’s 2026 minimum capital increase for VC fund managers, and offers actionable guidance for navigating Nigeria’s rapidly evolving venture capital ecosystem.

I. Introduction

The venture capital industry in Nigeria has evolved considerably over the past decade, transitioning from an informal, relationship-driven market into a structured ecosystem shaped by a complex web of laws and regulatory requirements. This evolution has been propelled by several factors: the emergence of a vibrant startup culture, increasing interest from international investors, and perhaps most significantly, a concerted effort by Nigerian policymakers to create a legal and regulatory framework capable of supporting private capital formation.

Today, Nigeria stands as one of Africa’s most dynamic venture capital destinations, attracting investment across fintech, logistics, deeptech, energy, and education sectors. Yet for VC fund managers, general partners (GPs), limited partners (LPs), and portfolio companies, navigating this landscape requires a sophisticated understanding of multiple overlapping legal regimes. These include corporate formation under the Companies and Allied Matters Act 2020 (CAMA 2020), securities regulation under the ISA 2025 and SEC Rules, tax obligations under the NTA 2025, sector-specific incentives under the NSA, and foreign exchange controls under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

This article aims to serve as a definitive legal resource for practitioners, investors, and entrepreneurs seeking to understand, and operate within, Nigeria’s venture capital legal framework. It addresses both the foundational legal architecture and the latest regulatory developments, with particular attention to the seismic shifts introduced in 2025 and 2026.

II. The Core Legal Framework for Venture Capital in Nigeria

A. Companies and Allied Matters Act 2020 (CAMA 2020)

The Companies and Allied Matters Act 2020 (CAMA 2020) serves as the foundational corporate legislation for venture capital firms operating in Nigeria. Under CAMA 2020, VC firms may be registered as private limited liability companies or, more recently, as limited liability partnerships (LLPs). The registration process involves selecting a unique business name, drafting the memorandum and articles of association, and obtaining necessary approvals from the Corporate Affairs Commission (CAC), which is the regulatory body charged with implementing CAMA.

The introduction of the LLP structure under CAMA 2020 represents a significant development for VC firms. LLPs offer several advantages over traditional limited liability companies, including greater flexibility in profit distribution, avoidance of double taxation at the entity level (depending on tax treatment), and reduced compliance burdens. However, as recent analyses have noted, there exists a potential conflict between the fiscal treatment of LLPs under CAMA 2020 and the newly enacted Nigeria Tax Act 2025, requiring careful structuring advice.

For foreign VC firms seeking to operate in Nigeria, CAMA 2020 requires that, unless an exemption applies, foreign investors must register a subsidiary in Nigeria before carrying on business activities. Such subsidiaries may be wholly or partially foreign-owned.

B. Investments and Securities Act 2025 (ISA 2025)

The Investment and Securities Act 2025 (ISA 2025), signed into law in March 2025, repeals and replaces the Investments and Securities Act 2007 (ISA 2007), introducing a revised statutory framework for capital market regulation. The ISA 2025 represents one of the most comprehensive reforms of Nigeria’s financial markets in nearly two decades and carries profound implications for venture capital.

The most significant innovation of ISA 2025 for the VC industry is the express statutory recognition of private equity and venture capital as regulated collective investment schemes (CISs). Section 150 of the ISA 2025 expands the statutory definition of CISs to include both open-ended and closed-ended pooled investment vehicles, including those offered exclusively to qualified investors. This presumption now extends to most PE and VC funds unless specifically exempted by regulation. Section 151 authorises the Securities and Exchange Commission (SEC) to recognise a wider range of legal forms, including limited partnerships, trust structures, and contractual schemes, aligning Nigeria with international practice and providing structural flexibility for domestic and cross-border fund sponsors.

Beyond classification, ISA 2025 codifies several other critical provisions for VC funds:

• Regulated Fundraising: Section 95(1)(d) authorises CISs to raise capital from the public, subject to compliance with disclosure and registration rules. Section 95(2) classifies private equity and venture capital activities as legitimate commercial investment business, reinforcing their eligibility for regulated fundraising.
• Permitted Investments: Section 168 expands the scope of investments permitted for CISs, including infrastructure, private debt, unlisted equity, commodities, derivatives, and digital assets. It also imposes a 20% cap on foreign securities (listed on exchanges in IOSCO member jurisdictions) unless otherwise approved by the SEC, formalising the types of investments typically undertaken by VC funds.
• Disclosure Obligations: Sections 162 to 165 mandate the pre-clearance of offering documents and impose liability for misstatements or omissions, with disclosure requirements applying regardless of whether the fund targets public or qualified investors.
• Manager Registration and Conduct Standards: Section 155 imposes registration requirements and conduct standards for fund managers, establishing a framework for regulatory oversight of VC fund operations.

C. The Securities and Exchange Commission (SEC) Rules

The SEC Rules and Regulations 2013 (as amended) constitute the detailed implementing framework for the ISA. In April 2025, the SEC introduced material amendments to its private equity and venture capital regulations, followed by a further significant update in January 2026. These amendments mark a notable shift in the regulatory landscape for Nigeria’s capital markets.

The key amendments affecting VC funds include:

• Exemption Threshold for Full Registration: Private equity and VC funds in Nigeria with a target fund size of ₦5 billion or less are now exempt from full SEC registration, up from the previous threshold of ₦1 billion. However, such funds must still file governing documents and obtain a “no objection” certificate from the SEC. The SEC’s 2025 Ease of Doing Business guide mandates smaller funds to provide a notarised compliance checklist executed by the boards of both the fund manager and sponsor, containing details including the investment policy and objectives, profile and experience of the fund manager, material risks, and fund duration.
• Minimum Share Capital for VC Fund Managers: In Circular No. 26-1 issued on 16 January 2026, the SEC raised the minimum share capital for venture capital fund managers in Nigeria from ₦20 million to ₦200 million. Existing fund managers are required to increase their share capital to meet this new requirement on or before 30 June 2027.
• GP-LP Alignment Requirements: Private equity funds in Nigeria must commit at least 3% of the fund’s size if targeting pension funds as LPs. The requirement is reduced to 1% where a sovereign wealth fund or development finance institution (DFI) is an LP.
• “Good Faith” Asset Valuations: The previous statutory requirement for valuation based on fair market value has been replaced. Under the new rules, valuation must be done on a “good faith” basis, based on any methodology approved by a fund’s Advisory Board. This “good faith” rule effectively affirms a GP’s fiduciary duty to act with loyalty, honesty, and diligence in decisions affecting the financial interests of LPs.
• Investment Concentration Limit: VC funds may now invest up to 70% of a fund’s assets in a single portfolio company, a significant increase from the previous 30% limit. This provides greater flexibility for funds pursuing concentrated investment strategies.
• Fee Structure Cap: Private equity and VC funds raising capital from Nigerian investors must not exceed a 2% management fee and 20% performance fee/carried interest, codifying the industry-standard “2-and-20” model.
• Manager Experience and Track Record Requirements: The SEC has introduced enhanced requirements regarding the experience and track record of fund managers, including a minimum of five years of relevant investment experience for key personnel.

D. Nigeria Startup Act 2022 (NSA)

The Nigeria Startup Act 2022 (NSA), signed into law in October 2022, is a landmark piece of legislation designed to foster innovation, attract investment, and create a favourable business climate for tech-enabled startups in Nigeria. While not exclusively focused on VC, the NSA establishes critical incentives and mechanisms that directly affect VC investment.

The Startup Label and Portal: The NSA introduces the “Startup Label,” issued by the National Information Technology Development Agency (NITDA), as a prerequisite for enjoying the Act’s incentives. To qualify, a startup must: (i) be registered as a limited liability company with the CAC and in operation for less than 10 years; (ii) have its objects focused on innovation, development, production, or improvement of a digital product, service, or process; (iii) have at least 33% of its shares held by a Nigerian founder or co-founder; and (iv) be certified by NITDA via the Startup Portal.

For venture capitalists to be registered on the Portal, the VC must be a partnership or company that provides capital to a startup exhibiting high growth potential in exchange for equity and must have at least one fund with investments in a Nigerian startup.

Tax Incentives: The NSA provides critical tax incentives for VC investors, including:

• Exemption from Capital Gains Tax: Angel investors, venture capitalists, private equity firms, and other institutional investors who invest in Labelled startups and hold their equity for a minimum of two years are exempted from paying Capital Gains Tax on the disposal of such investments.
• Pioneer Status Incentive (now replaced): Originally, Labelled startups could apply for PSI granting a three-year tax holiday (extendable by two years). However, as discussed below, the NTA 2025 has replaced the PSI with the Economic Development Incentive (EDI).
• Regulatory Sandboxes: The NSA empowers regulatory authorities (including the SEC, CBN, and NAICOM) to introduce sandbox programs that allow Labelled startups to test innovative products or services in a controlled environment without the full burden of regulatory compliance.

Startup Investment Seed Fund: The NSA establishes the Startup Investment Seed Fund, to be managed by the Nigeria Sovereign Investment Authority (NSIA), with a minimum annual allocation of ₦100 million. The fund provides grants, loans, and equity investments to Labelled startups.

III. Venture Capital Fund Formation and Structuring in Nigeria

A. Choosing the Appropriate Legal Vehicle

When establishing a VC fund in Nigeria, sponsors must carefully consider the appropriate legal vehicle. The primary options under Nigerian law include:

1. Private Limited Liability Company (Ltd)

The most common structure for VC firms in Nigeria, a private limited liability company offers limited liability protection, perpetual succession, and a well-established regulatory framework under CAMA 2020. However, this structure may expose the VC firm to entity-level taxation on profits, and distributions to investors may be subject to withholding taxes.

2. Limited Liability Partnership (LLP)

LLPs were introduced under CAMA 2020 and offer several potential advantages for VC funds, including pass-through taxation (depending on tax treatment), greater flexibility in profit allocation, and reduced compliance burdens compared to companies. However, as noted earlier, there appears to be a fundamental conflict between the fiscal treatment of LLPs under CAMA 2020 and the newly enacted NTA 2025, requiring careful tax planning.

3. Limited Partnership under Lagos State Partnership Law

VCs may also register as limited partnerships under the Partnership Law of Lagos State, but would need to register as business names with the CAC to operate outside Lagos State.

4. Unit Trust Scheme

For funds seeking to raise capital from the public, a unit trust structure may be appropriate, though this subjects the fund to more extensive SEC regulation.

B. Fund Documentation

VC fund documentation in Nigeria typically includes:

• Limited Partnership Agreement (LPA) or Constitution and Shareholders’ Agreement (for company structures), addressing profit sharing, governance, and investor rights.
• Private Placement Memorandum (PPM) or Information Memorandum, setting out the fund’s investment strategy, risks, and terms, which must be pre-cleared by the SEC under ISA 2025.
• Subscription Agreements governing the terms of investor participation.
• Investment Management Agreement between the fund and the fund manager.
• Side Letters for investors with special terms.
• Custody Agreements addressing asset safekeeping requirements.

IV. Regulatory Compliance for VC Funds and Fund Managers

A. SEC Registration Requirements

The SEC’s registration framework for VC funds operates on a tiered basis:

For funds above the ₦5 billion threshold, documentation requirements include the information memorandum, partnership agreements, and more comprehensive disclosure materials.

B. Minimum Capital Requirements for Fund Managers

As of Circular No. 26-1 (January 2026), the minimum share capital for VC fund managers is ₦200 million, increased tenfold from the previous ₦20 million requirement. This increase took effect immediately for new entrants, with existing managers granted until 30 June 2027 to comply.

The primary goal of this increase is to enhance market stability, protect investors, and align regulations with global standards by ensuring that only VC managers with sufficient capital to handle operational risks are licensed to operate, thereby deterring unqualified entrants.

However, this requirement has attracted criticism from market participants. As one analysis notes, the logic may not hold under the structure of venture funds, because the GP is typically a separate entity from the fund manager with the benefit of limited liability, and investment losses are designed to be borne by LPs, not by the fund manager. Additionally, a VC fund manager’s operating model is not designed to depend primarily on paid-up share capital; rather, financial sustainability is built into the fund structure through management fees calculated as a percentage of committed capital.

C. Ongoing Compliance Obligations

Registered VC funds in Nigeria are subject to ongoing compliance obligations, including:

• Monthly Reporting: VC fund managers must submit monthly reports to the SEC, mirroring public fund reporting requirements.
• Annual Financial Statements audited by a registered firm.
• Valuation Reports prepared on a “good faith” basis as required by the April 2025 amendments.
• Material Change Notifications to the SEC.
• Investor Reporting including periodic statements of performance and fees.
• Anti-Money Laundering (AML) Compliance: VC funds must implement AML/CFT policies in accordance with the Money Laundering (Prevention and Prohibition) Act and relevant CBN and SEC guidelines.

D. Registration Fee

The SEC imposes a registration fee of 1% of fund size, a significant cost consideration for fund sponsors.

V. Tax Considerations for Venture Capital in Nigeria

A. The Nigerian Tax Act 2025 (NTA 2025)

The Nigerian Tax Act 2025, signed into law on 26 June 2025, repealed and replaced several existing tax laws, including the Companies Income Tax Act, the Capital Gains Tax Act, and the Venture Capital (Incentives) Act. The NTA 2025 introduces fundamental changes that profoundly affect VC investments in Nigeria.

Expanded Definition of “Nigerian Company”: One of the most consequential reforms under the NTA 2025 is the expansion of the definition of a “Nigerian company” to include not only entities incorporated in Nigeria, but also foreign-incorporated companies whose central or effective place of management or control is located in Nigeria. This represents a significant departure from the previous legal framework, under which tax residence was largely determined by place of incorporation.

For years, the PE and VC sectors relied on offshore holding companies typically domiciled in Mauritius, the Netherlands, or Delaware to insulate international returns from the Nigerian tax net. Under the NTA, if the critical strategic decisions, board meetings, or investment committee approvals for these offshore vehicles occur within Nigeria, such entities may now be classified as Nigerian companies for tax purposes and become subject to Nigerian tax on their global income, subject to applicable treaty reliefs.

Repeal of Venture Capital Incentives: With the repeal of the Venture Capital (Incentives) Act by the NTA, qualifying venture capital companies will no longer enjoy certain incentives. One such incentive is that qualifying VCs will no longer enjoy capital allowances on equity investments in a venture project company.

Replacement of Pioneer Status Incentive with Economic Development Incentive: The NTA abolishes the Pioneer Status Incentive (PSI), which previously provided a three-year tax holiday (extendable by two years) for qualifying startups, and replaces it with the Economic Development Incentive (EDI). The EDI offers a 5% annual tax credit on qualifying capital expenditure for a period of five years, subject to approval by the President upon the recommendation of the Nigerian Investment Promotion Commission (NIPC) and the Minister of Finance. This amendment reflects a deliberate policy shift from declaratory incentives to performance-based reliefs, encouraging real, traceable capital deployment rather than passive qualification based on sectoral labelling.

Capital Gains Tax Rate Increase: The NTA significantly increased the Capital Gains Tax (CGT) rate from 10% to 30%, representing a 200% increase that has been widely criticised by industry participants for its potential to dampen long-term capital formation and discourage M&A transactions and startup investment. Private equity firms in Nigeria are slowing dealmaking, with some freezing investment as they lobby the government to soften the impact of the tax. The industry, which saw USD 3 billion in deals concluded between 2020 and 2024, had historically predicated its transactions on paying a 10% tax when exiting investments.

CGT Exemptions for VC Investors: Section 163(1)(m) of the NTA creates a tax exemption on gains accruing from the disposal of assets by an angel investor, venture capitalist, private equity fund, accelerator, or incubator with respect to a labelled startup, provided the assets have been held in Nigeria for a minimum of two years.

CGT Exemption for Small Companies: Small companies with annual gross turnover of ₦50 million or less and total fixed assets not exceeding ₦250 million are now entirely exempt from Companies Income Tax (CIT), Capital Gains Tax, and the newly introduced taxes under the NTA.

B. Taxation of VC Firms by Legal Structure

C. Withholding Tax and Double Taxation Treaties

Dividends, interest, and royalties paid to foreign VC investors are generally subject to Nigerian withholding tax at rates ranging from 7.5% to 15%, subject to reduction under applicable double taxation treaties. Nigeria has entered into double taxation agreements (DTAs) with several countries, including the United Kingdom, Netherlands, South Africa, and Canada, among others, which may provide relief from Nigerian tax on certain types of investment income.

D. Foreign Exchange Controls and Repatriation

Foreign VCs bringing funds into Nigeria are guaranteed the transferability of interests on dividends and repatriation of investments. Funds must be brought in through authorised dealers (banks), who then issue a Certificate of Capital Importation (CCI) as proof of the importation of capital. The CCI allows foreign VCs to repatriate funds without restriction.

Under the NTA 2025, non-resident persons deriving income from Nigeria must register for tax and obtain a Taxpayer Identification Number (Tax ID) to file required returns and pay taxes in Nigeria. Such a Tax ID is a prerequisite to dealing with Nigerian banks, insurance companies, stockbrokers, or other financial institutions.

VI. Deal Structuring and Investment Documentation

A. Common Investment Structures

VC investments in Nigerian startups typically employ one or more of the following structures:

1. Straight Equity Investment

The most straightforward structure, involving the acquisition of shares in the portfolio company. Investment documentation typically includes a Share Subscription Agreement, Shareholders’ Agreement, and updated Memorandum and Articles of Association.

2. Convertible Notes

A debt instrument that converts into equity upon the occurrence of specified events (e.g., a subsequent qualified financing round or maturity date). Convertible notes offer flexibility in valuation and reduced upfront transaction costs.

3. Simple Agreement for Future Equity (SAFE)

Increasingly popular in early-stage VC transactions, SAFEs provide a streamlined mechanism for investing in startups without immediate valuation. However, as one analysis notes, the landscape of early-stage venture finance in Nigeria has seen important changes marked by the increasing prominence of hybrid instruments like the SAFE, though its legal status and tax treatment require careful consideration.

4. Preferred Equity

Preferred shares offer enhanced rights, including liquidation preferences, anti-dilution protections, dividend rights, and board representation.

B. Key Legal Provisions in Nigerian VC Investment Agreements

Investment documentation in Nigeria typically includes provisions addressing:

• Liquidation Preference: Governing the order and amount of distributions upon a liquidation event, typically 1x to 3x the original investment amount.
• Anti-Dilution Protection: Full-ratchet or weighted-average anti-dilution provisions protecting investors from value erosion in future down-rounds.
• Drag-Along and Tag-Along Rights: Mechanisms ensuring minority shareholders (founders) can be compelled to sell their shares in a third-party acquisition (drag-along), while allowing minority shareholders to participate in such sales (tag-along).
• Board Representation and Veto Rights: Rights to appoint directors and veto certain fundamental corporate actions (e.g., changes to share capital, mergers, asset sales).
• Information Rights and Inspection Rights: Access to periodic financial statements, budgets, and operational information.
• Pre-emptive Rights and Right of First Refusal: Rights to participate pro-rata in future equity issuances to maintain ownership percentage.
• Share Transfer Restrictions: Lock-up provisions and consent requirements for share transfers.

C. Foreign Investment Considerations

Foreign VCs investing in Nigerian startups must comply with the Nigerian Investment Promotion Commission Act, which guarantees the transferability of funds and prohibits expropriation. Foreign investors may hold 100% equity in most sectors, except those reserved for Nigerian investors in the Nigerian Investment Promotion Commission’s Negative List.

Additionally, foreign VCs should be mindful of the NTA 2025’s expanded definition of “Nigerian company” and its implications for offshore holding structures. As noted, if the central management and control of an offshore vehicle occurs in Nigeria, that entity may be subject to Nigerian tax on its global income.

VII. Cross-Border Venture Capital

A. Common Offshore Structuring

Historically, international VCs investing in Nigeria have utilised offshore holding companies domiciled in Mauritius, Delaware, the Cayman Islands, or the Netherlands to achieve tax efficiency and regulatory flexibility. The NTA 2025’s expanded tax residence rules now pose significant risks to these structures, requiring careful review of where strategic decisions are made and where investment committee approvals occur.

Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) : Nigerian VC funds with foreign investors must comply with FATCA and CRS reporting obligations, including due diligence on investor accounts and reporting to the Federal Inland Revenue Service (FIRS) for exchange with foreign tax authorities.

B. Repatriation of Capital

Foreign VCs may repatriate capital, dividends, and proceeds from exits through authorised dealers, subject to:

• Production of Certificate of Capital Importation (CCI) as proof of original capital importation.
• Compliance with applicable tax clearance certificates.
• Adherence to CBN foreign exchange regulations.

C. Bilateral Investment Treaties (BITs)

Nigeria has entered into BITs with several countries, providing protections for foreign investors including fair and equitable treatment, protection against expropriation, and access to international arbitration. However, many of Nigeria’s older BITs are in the process of being reviewed or renegotiated, and investors should verify the current status of applicable treaties.

VIII. Exits: Strategies and Legal Considerations

A. Exit Mechanisms

VC investors in Nigeria typically pursue one or more of the following exit strategies:

1. Initial Public Offering (IPO) : Listing on the Nigerian Exchange Limited (NGX) or a foreign exchange. The NGX has introduced rules for technology boards and growth boards designed to accommodate high-growth companies.

2. Secondary Sale (Trade Sale) : Sale of portfolio company shares to a strategic acquirer (e.g., a larger technology company, financial institution, or multinational corporation).

3. Secondary Sale to Another Financial Investor : Sale to another PE or VC fund.

4. Share Buyback : Repurchase of shares by the portfolio company from investors, subject to solvency and other legal requirements under CAMA 2020.

5. Merger or Consolidation : Combination with another entity, requiring compliance with the Federal Competition and Consumer Protection Act (FCCPA) and SEC approval where applicable.

B. Exits Under the Nigerian Tax Act 2025

The NTA 2025’s 30% CGT rate has created significant headwinds for VC exits. As Bloomberg reported, private equity firms in Nigeria are slowing dealmaking, with some freezing investment as they lobby the government to soften the impact. Members of the Private Equity and Venture Capital Association of Nigeria (PEVCA) met with authorities and are seeking further engagement after the 30% tax came into effect at the beginning of 2026.

Exemptions are available for gains on shares in companies certified as startups under the NSA, provided the investment is held for at least two years. However, these exemptions may protect only a limited number of investments, and industry participants want the exemptions to apply to a broader swath of investments.

Additionally, exemptions are made for sales of companies or stakes worth less than ₦150 million (approximately USD 112,000) and where proceeds are reinvested in another Nigerian company.

C. Cross-Border Exit Considerations

Exits involving foreign acquirers require consideration of:

• CBN foreign exchange approvals for repatriation of sale proceeds.
• Compliance with the NTA 2025’s CGT provisions, including withholding tax obligations on the acquirer.
• Potential capital allowances recapture.
• Compliance with sector-specific regulatory approvals (e.g., CBN approval for fintech acquisitions).

IX. Recent Developments and Current Challenges

A. 2025 SEC Amendments: A Regulatory Reset

The SEC’s April 2025 amendments to the Rules and Regulations introduced a “regulatory reset” for Nigerian private capital. As one analysis notes, the regulatory reset of 2025 has established stronger foundations for Nigeria’s private capital markets. ISA 2025 strengthens the legal underpinnings of private capital by expressly recognising venture capital and private equity funding within Nigeria’s regulated investment framework and empowering the SEC to supervise “specialised or alternative investment schemes”.

B. January 2026 Minimum Capital Increase

The SEC’s January 2026 circular raising minimum share capital for VC fund managers to ₦200 million has generated significant debate. Critics argue the requirement may be misaligned with the realities of venture capital, creating a structural misalignment as smaller or early-stage managers may be forced to lock up capital far in excess of what they actually need to satisfy their business models.

C. Startup Funding Slowdown

Nigeria’s startup funding has faced significant headwinds. In January 2025, Nigerian startups raised USD 81.2 million across seven deals. By January 2026, funding had dropped to USD 45.9 million, representing a 43.47% year-on-year decline despite a slight increase in the number of disclosed deals from seven to eight.

This decline reflects a tightening funding environment globally and specific challenges in Nigeria, including currency volatility, inflation, and policy uncertainty. As capital concentrates around fewer mega-deals elsewhere, analysts suggest Nigeria’s challenge in 2026 will be translating its deal-making momentum into scalable, currency-resilient growth stories capable of restoring investor confidence.

D. Nigeria’s Dominance in African Startup Shutdowns

At least 18 African startups shut down in 2025, up from 12 in 2024, marking a 50% increase. Nigeria accounted for the largest share of the shutdowns and the heaviest capital losses, reflecting both its dominance in Africa’s startup scene and its exposure to currency volatility, inflation, and policy uncertainty.

E. Pension Fund Investment in VC

Nigeria’s push to deploy pension funds into private markets, a critical potential source of local currency VC capital, has hit policy snags, limiting the growth of domestic institutional investment in VC funds.

X. Practical Compliance Checklist for VC Fund Managers

The following checklist outlines key compliance touchpoints for VC firms operating in Nigeria:

• Fund Formation: Select an appropriate legal vehicle (Ltd, LLP, or LP) and ensure governing documents are robust and aligned with SEC rules on VC fund operations.
• Licensing and Filings: Determine whether the manager or adviser requires SEC registration, whether the fund must register or only submit documents for a “no objection” certificate.
• Minimum Capital: Ensure fund manager meets ₦200 million minimum share capital requirement by the 30 June 2027 deadline.
• Investor Protection and Disclosures: Ensure adherence to valuation policies (on a “good faith” basis), fee and expense disclosures (2% management fee, 20% performance fee maximum), and conflict-of-interest management.
• Tax Compliance: Register for Tax ID; comply with CIT, CGT, and withholding tax obligations; determine applicability of NTA 2025’s expanded tax residence rules; assess double taxation treaty benefits.
• AML/CFT Compliance: Implement AML policies and procedures, conduct customer due diligence on investors, and report suspicious transactions.
• Data Protection: Comply with the Nigeria Data Protection Act 2023 (NDPA) and NDPR regarding processing of personal data of investors and portfolio companies.
• Reporting: Prepare and submit monthly reports to SEC, annual audited financial statements, and valuation reports.
• Exit Planning: Consider IPO, secondary sales, or buybacks within Nigeria’s corporate, securities, and tax frameworks, alongside exchange control regulations applicable to foreign investors.

XI. Conclusion

The legal landscape for venture capital in Nigeria has undergone a remarkable transformation in recent years. The enactment of the ISA 2025, the NTA 2025, and the continued implementation of the NSA represents a concerted effort by Nigerian policymakers to create a mature, transparent, and investor-friendly environment for private capital formation. The SEC’s April 2025 amendments and January 2026 circular further refine this framework, raising standards for fund managers while providing greater flexibility in fund structuring and investment concentration.

However, significant challenges remain. The 30% CGT rate introduced by the NTA 2025 has created substantial uncertainty and deterred investment, with PE firms reportedly freezing deals pending further engagement with authorities. The tenfold increase in minimum share capital for VC fund managers, while intended to enhance market stability, may inadvertently exclude smaller and early-stage managers from the market. Currency volatility, inflation, and policy uncertainty continue to weigh on investor confidence, as reflected in declining startup funding figures.

For VC fund managers, GPs, LPs, and portfolio companies, successfully navigating Nigeria’s VC ecosystem requires a sophisticated understanding of overlapping legal regimes, careful tax planning, and proactive compliance management. The regulatory reset of 2025 has established stronger foundations for Nigeria’s private capital markets, but translating these foundations into sustained investment growth will depend on continued policy refinement, regulatory consistency, and the restoration of investor confidence.

As Nigeria positions itself as a leading destination for venture capital in Africa, market participants should remain vigilant, engage actively with regulators through industry associations such as PEVCA, and seek specialised legal advice tailored to the unique characteristics of Nigeria’s legal and regulatory environment.

About the Author

This article is provided for informational purposes only and does not constitute legal advice. Readers should consult qualified legal counsel for advice regarding their specific circumstances.

Keywords: Venture Capital, Nigerian Law, Investments and Securities Act 2025, Nigeria Tax Act 2025, Nigeria Startup Act 2022, Securities and Exchange Commission, Private Equity, Fund Regulation, Capital Gains Tax, Startup Funding

Date: May 2026