Nigerian Startups Shunning Local IPOs: The Naira’s Role
Nigerian startups, particularly those with a focus on technology, are increasingly hesitant about listing on the Nigerian Exchange (NGX) for initial public offerings (IPOs). This reluctance is despite the introduction of a dedicated tech-friendly listing board designed to encourage the growth and public listing of these innovative companies. A recent survey conducted by TLP Advisory, an Africa-focused law firm, reveals that founders perceive the NGX as too risky, particularly for fundraising or achieving an exit strategy. The significant devaluation of the Nigerian Naira is a primary driver behind this trend.
The Weak Naira: A Major Detriment
The data underscores a challenging landscape for local IPOs. A striking statistic is the complete absence of tech startups listing on the NGX’s tech-focused board since its launch in 2022. Further illustrating the challenges, the Naira has depreciated by approximately 65% since the government relaxed foreign exchange controls in 2023. This financial environment heavily impacts the tech ecosystem, as 76.5% of Nigerian-funded startups currently hold capital in dollar-denominated assets. This indicates a strong preference for assets that maintain value in the face of Naira volatility. While the NGX saw over 10 new listings between 2021 and 2024, notably, none were from the tech sector.
In conclusion, the decision of Nigerian tech startups to avoid local IPOs reflects a broader concern about the financial stability of the Nigerian economy. The weakening Naira and the desire to protect capital are key factors contributing to this trend, creating a significant hurdle for the growth of the local stock market and the expansion of the tech sector.
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