A brand new report by TLP Advisory has revealed deep-rooted structural and regulatory boundaries stopping Nigeria’s high-growth startups from itemizing on the Nigerian Alternate (NGX), regardless of efforts to draw tech firms by the launch of the NGX Expertise Board in 2022.
The report, titled “Rethinking Funding & Exits: Nigeria’s Lacking IPOs and the NGX,” warns that the absence of native listings poses a significant menace to long-term sustainability and wealth creation in Africa’s largest startup ecosystem.
In response to the findings, most founders lack ample details about what it takes to go public.
A majority (53%) of surveyed founders say they don’t seem to be sufficiently conscious of the NGX itemizing course of.
This data hole is strengthened by present exit preferences, with practically half (46%) indicating they’d moderately pursue acquisitions than preliminary public choices. Solely about one in 5 (21%) founders would think about an IPO, and lots of of them choose international exchanges.
Foreign money mismatch
The report highlights a extra elementary structural difficulty, which is forex mismatch. In response to the report, about 77% of funded Nigerian startups elevate capital in US {dollars} however earn income in naira, making a pure incentive to pursue offshore exits.
- Different considerations embrace compliance prices and fears of undervaluation (26%), in addition to restricted market liquidity (16%).
- Nonetheless, the report notes that urge for food exists for native listings if reforms are enacted, with 42% of founders open to itemizing on the NGX and greater than half expressing constructive sentiment total.
Talking on the report’s launch in the course of the Africa Prosperity Summit, hosted by Ventures Platform, Co-founder of TLP Advisory, Odunoluwa Longe, mentioned the shortage of listings isn’t because of a scarcity of ambition.
“Nigeria’s startups have confirmed they will construct globally aggressive companies, however an excessive amount of worth nonetheless flows offshore as a result of viable native exit routes are restricted.
“The problem isn’t founder ambition or rejection of the NGX; it’s a disconnect propelled by data gaps, perceived illiquidity, and a forex mismatch that makes dollar-denominated exits extra engaging,” she mentioned.
The necessity for readability
Longe added that aligning regulators, founders, traders, and policymakers is essential to reworking the NGX right into a platform that helps growth-stage innovation.
“With readability, sensible schooling and confidence-building, we are able to flip the NGX into a real platform for long-term wealth creation in Nigeria,” she mentioned.
Additionally talking, Founder and CEO of AltSchool Africa, Adewale Yusuf, echoed the necessity for higher schooling and engagement.
“The NGX must actively interact founders and use them as channels to indicate what’s potential on the change,” he mentioned.
“Many people don’t absolutely perceive the method or necessities. With clear constructions and academic help, confidence within the native market will develop,” he added.
What it’s best to know
In 2023, the Minister of Communications, Innovation, and Digital Financial system, Dr. Bosun Tijani had introduced plans to collaborate with Nigerian Alternate Restricted (NGX) to stimulate startup listings with the then newly created NGX Expertise Board.
Tijani, who said this throughout a tech occasion themed; Put money into Africa’s Future- Let’s discuss exits- a joint initiative by the Ministry, NGX, and Future Africa in New York, on the sidelines of the United Nations Normal Meeting (UNGA) assembly, mentioned this was a part of the federal government’s efforts to diversify from oil.
- On the identical occasion, the Chief Govt Officer of the NGX, Temi Popoola, said that the Alternate would work assiduously to help the agenda of the Minister and the mandate of President Bola Tinubu.
- Whereas stating that know-how is an enormous enabler of the capital market, Popoola mentioned that NGX was eager on fostering innovation within the capital market, probably attracting a bigger pool of traders and mature tech firms to record on its platform.
- Nevertheless, two years after the promise by each officers, the results of the promised collaborations stays unseen.
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