Nigeria wants startup listings at home. It must first create the right conditions

On the sidelines of the UN General Assembly in September 2023, Nigerian policymakers and business leaders gathered in New York for an event titled Invest in Africa’s Future — Let’s Talk About Exits.

Among those in attendance were Flutterwave CEO Olugbenga Agboola, NGX CEO Temi Popoola, and Minister of Communications Bosun Tijani. A key topic of discussion was Flutterwave’s eventual IPO, with Popoola making the case for the fintech to list on the Nigerian Exchange.

Three years later, that vision remains unrealised. Flutterwave has shelved IPO discussions as it prioritises profitability, while Popoola is still searching for the first tech listing of his tenure.

That search has taken on renewed urgency. If reports are accurate, two of Nigeria’s biggest startups are preparing to go public. Neither, however, is expected to list on the NGX — a prospect Popoola has openly lamented.

At a recent meeting with President Bola Tinubu, he urged the government to encourage startups operating in Nigeria to also list on the local exchange.

But attracting homegrown tech IPOs will take more than presidential backing. Unless Nigeria addresses the structural reasons startups prefer foreign exchanges, the NGX’s biggest listing ambitions are likely to remain out of reach.

Making the case for a Nigerian listing

Unlike a traditional business, getting a successful startup to list — whether partially or wholly — on the Nigerian Exchange would, for the NGX boss, be viewed through a nationalist and even political lens.

A successful listing would demonstrate that the bourse can attract homegrown technology companies while further deepening what is already heightened retail investor interest in the market. It would also hand whichever political party is in power another tangible achievement to point to.

Regardless, there is a fairly compelling case for startups or technology businesses operating in Nigeria to list on the exchange. Whether that case is strong enough to convince founders and their shareholders is a different question.

One argument lies in the second-order effects such a decision could create. When Amazon sought to acquire Careem, its founders were initially reluctant to sell. But one investor argued that a successful exit could unlock broader domestic participation in venture capital. 

The founders ultimately agreed, and the Middle East has since witnessed a surge in venture investment. Closer home, Paystack’s acquisition by Stripe is widely regarded as a defining moment for Nigeria’s startup ecosystem because it showed investors what was possible.

For Nigeria, a major local listing could potentially unlock even more domestic capital. Despite the ecosystem’s progress, much of the funding flowing into startups still originates from outside the continent. The downside, as Oluwatomi Solanke, CEO of Trove Finance, argues, is that foreign capital has a tendency to leave when better opportunities emerge elsewhere or conditions become more difficult in Nigeria.

Another challenge is the absence of comparable technology success stories on the NGX. While the exchange has a handful of listed technology companies, none has gone public since Nigeria’s startup boom began. Computer Warehouse Group listed in 2013, eTranzact in 2009, and Chams Plc in 2008.

None of these companies emerged from the venture-backed startup wave of the last decade, leaving local investors with few reference points for valuing high-growth technology businesses.

For Saeed Seghosime, Principal at Oui Capital, the case for a local listing is not primarily financial. He argues that the reporting and compliance requirements that come with a public listing may outweigh the immediate fundraising benefits. Instead, his argument is more practical.

“For a licensed fintech, operating in Nigeria means engaging closely with regulators and serving a Nigerian customer base. Being visibly committed to the market can therefore have value beyond the capital raised. It can strengthen the company’s relationship with the ecosystem and give the public an opportunity to participate in the success of a company they already interact with,” he says.

Uwem Uwemakpan, Head of Investment at Launch Africa, agrees, arguing that a local listing also aligns a startup’s capital structure with the realities of its business.

“If your revenue is in naira, your customers are Nigerian, your licences are Nigerian, and your staff are Nigerian, listing at home aligns the currency of your earnings with the currency of your equity and removes an FX risk that would typically show in your share price every quarter.”

The bigger challenge, both argue, is how these companies would be valued once they list. Nigeria’s stock market is dominated by traditional businesses in banking, manufacturing, and telecommunications. 

Those sectors are priced very differently from the way investors typically value fintechs and other high-growth technology companies. Listing on the same exchange means they risk being judged using metrics such as dividend yields and earnings visibility rather than growth potential.

As Uwemakpan puts it, “Two identical businesses can carry very different multiples purely on which room they are valued in.”

Policy alone does not make a listing

There is a familiar tendency among Nigerian policymakers to reach for regulation as a tool to achieve economic outcomes. While policy interventions are sometimes necessary — and have proven effective in certain contexts — they are unlikely, on their own, to persuade startups to list locally.

“High-growth technology companies are inherently global,” Solanke says, arguing that mandating local listings could ultimately be counterproductive.

Uwemakpan approaches the issue from a different angle. Rather than forcing companies to list at home, he argues, such a policy would be enough for foreign investors to price the additional risk into their valuations of Nigerian startups.

International investors, Seghosime adds, value flexibility. They want the freedom to decide where, when, and how they realise their investments. A mandatory local listing requirement would restrict those options, making Nigerian startups less attractive to global capital.

Instead of more policy, all three point to something more fundamental: market infrastructure. The biggest constraint, they argue, is the depth and liquidity of the Nigerian Exchange.

“The constraint of the NGX is the free-float turnover and concentration. A $4 billion company floating 15% is asking a market averaging around ₦35 billion a day to absorb, then continuously trade, roughly $600 million of a stock with no domestic comparable. That arithmetic doesn’t work,” Uwemakpan says.

For context, a 15% float in a $4 billion company would be worth roughly $600 million — equivalent to well over ₦800 billion at current exchange rates. 

That is 23 times larger than the average value of shares traded on the NGX in a day, raising legitimate questions about whether the market could comfortably absorb and sustain trading in a listing of that size.

Seghosime is more optimistic but no less cautious.

“Nigeria has demonstrated that it can mobilise significant domestic capital when there is a compelling opportunity. The recent banking recapitalisation raised approximately ₦4.7 trillion, with a substantial majority coming from local investors. So the capacity to mobilise capital is there.”

His caution lies in how such a listing should be structured. Rather than pursuing a full listing from the outset, he advocates for a progressive approach, allowing companies to float a relatively small stake, gauge market demand and liquidity, and then decide whether to increase the free float over time.

That argument carries additional weight when viewed through the lens of Nigeria’s secondary market. Raising capital through an IPO is only one part of the equation. Investors also need confidence that they can exit their positions when they choose.

Today, the NGX remains a relatively concentrated market, with trading activity dominated by a small number of institutional investors and a limited pool of highly liquid stocks. For foreign investors in particular, that raises concerns about whether they would be able to sell meaningful stakes without materially affecting the share price.

What Nigeria can do instead

All hope is not lost. All three experts agree that Nigeria can eventually attract a major startup listing, even if it is not immediate. But getting there requires fixing the market before trying to convince companies to list.

For Solanke, the starting point is better information. High-growth technology companies need consistent analyst coverage so investors can understand their business models, compare them with peers, and arrive at informed valuations. That research infrastructure, he argues, is still largely absent.

Once that foundation is in place, attention should shift to improving market liquidity through stronger market-making and building a credible technology sector index. Those changes would make it easier for investors to value, buy, and trade technology stocks with greater confidence.

Only then, Uwemakpan argues, should policymakers and the NGX return to founders with a pitch for a local listing.

Nigeria does not lack startups capable of going public. What it lacks is a public market designed for the kind of companies those startups have become. Until that changes, founders and their investors will continue to look abroad for deeper pools of capital, better liquidity, and valuations that reflect how global technology companies are priced.

The NGX’s ambition is therefore not impossible. But if Nigeria wants its biggest startups to list at home, it must first build a market that gives them a compelling reason to stay.