The Nigerian Stock Exchange (NGX) is missing out on tech listings, and it's a problem that needs addressing.
The core issue: A recent report by TLP Advisory reveals that many Nigerian tech founders are hesitant to list on the NGX due to a lack of understanding of the listing process. This misunderstanding is a significant barrier to the growth of the local tech industry and the economy as a whole.
The report highlights a startling fact: not a single tech company has listed on the NGX to date. This is largely because over half of the founders surveyed admitted to being unaware of the listing process, and only a small minority would even consider listing. Many prefer to look abroad for listings, and almost half would rather exit their investments through acquisitions.
But here's where it gets controversial: the report suggests that the NGX itself is partly to blame. It seems the exchange hasn't been proactive in educating these founders. None of the founders interviewed received direct outreach or educational sessions from the NGX about listing opportunities.
And this is the part most people miss: the report emphasizes the need for consistent engagement and outreach to bridge the awareness gap between startups, investors, and the exchange. This includes roadshows, workshops, and advisory support to educate founders on the benefits and processes of listing.
The currency conundrum is another significant hurdle. Most startups backed by international investors operate in US dollars, making it impractical to list in the local naira currency. The naira's recent instability, losing over 65% of its value since 2023, further complicates matters. This issue is a major deterrent for startups considering listing on the NGX.
The report suggests strengthening local capital sources to reduce dollar dependence and mitigate exchange rate risks. However, with a large proportion of Nigeria-funded startups holding dollar capital, this is easier said than done.
The NGX's relatively small market capitalization, at $62 billion compared to the NYSE's $28.3 trillion, also raises concerns. The report proposes exploring dual-listing partnerships with larger exchanges to attract foreign liquidity while maintaining a local presence.
Market frictions, such as compliance costs and potential undervaluations, are additional worries for founders. These concerns, coupled with the exchange's liquidity issues, make the NGX a less attractive option for many.
Meanwhile, foreign stock exchanges like the London Stock Exchange are actively courting African firms, offering greater liquidity and exit opportunities. This poses a threat to the NGX, as it risks losing out on valuable listings and investment.
The good news? Almost half of the founders surveyed would consider listing on the NGX if the right reforms were implemented. This is a clear call to action for Nigerian authorities to step up their game and make the necessary changes to attract and retain local tech listings.
So, what do you think? Is the NGX doing enough to engage with tech founders? Are there other factors at play that could be hindering tech listings in Nigeria? Share your thoughts and let's spark a conversation!
