A new report by PwC, an international consulting firm has said the listing of Nigerian tech startups on the Nigerian Exchange Limited (NGX) provides opportunities for its growth and success.
According to the report titled ‘Growing the Nigerian Technology Ecosystem through the Capital Market’, the opportunities are improved governance, transparency, funding, talent retention, and long-term sustainability.
“Albeit the growing tech-sector in the Nigerian economy and significant private funding secured by African tech start-ups, over the years the tech sector is grossly underrepresented in the Nigerian capital market,” it said.
It said out of the 157 companies listed on the NGX, only nine companies with a combined market capitalisation of circa N11 trillion are technology based companies (excluding traditional banks which have incorporated technology into their operations).
“As at December 31, 2022, the top 10 companies by market capitalisation on the NGX were dominated by Information Communication Technology and Industrial goods companies accounting for 70 percent of the total market capitalisation,” the report added.
Africa’s biggest economy is one of the continent’s more established startup ecosystems, with firms like Interswitch dating as far back as 2002.
The country has produced five out of seven unicorns in Africa such as Interswitch, Flutterwave, Opay, Andela, and Esusu4.
“Home to over 400 tech startups and ranked 61st out of 100 countries worldwide in the start-up ecosystem index, Nigeria also ranks number one in Africa in terms of venture capital investment destination, leading in both funding and number of equity rounds,” PwC said.
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It said the country accounted for 23 percent of all equity funding and 27 percent of the total deal count of $1.2 billion raised last year, portraying the country as the preferred investment destination in Africa. “Despite these impressive performances, the Nigerian capital market does not optimally reflect the activities of the sector.”
Further analysis of the PwC report showed that over the years, there have been several initiatives in the Nigerian capital market geared towards promoting innovation, growth as well as a technology driven capital market.
In 2021, the Securities and Exchange Commission (SEC) released rules on crowdfunding which provided guidelines for the registration and operation of crowdfunding platforms and intermediaries.
It also introduced rules on Robo Advisory Services for the regulation of persons or entities seeking to provide digital advisory services in the capital market and the introduction of a Regulatory Incubation program.
The NGX is set to launch a Technology Board, a specialised platform for technology based companies to list and raise capital on the NGX.
PwC said the proposed creation of a technology board by the NGX is a laudable initiative and once launched is expected to promote more listings from African technology companies, create an inclusive environment that would serve as a catalyst for further economic advancements whilst deepening the Nigerian capital market.
“This is also expected to increase the attractiveness of the Nigerian capital market to tech based companies and position the NGX as a preferred exchange hub in Africa,” it added.
