Startups will now be listed on the Nigerian Exchange. Here is why it matters.

Ganiu Oloruntade
With this new regulation, startups will now be listed on the Nigerian Exchange
With this new regulation, startups will now be listed on the Nigerian Exchange. Image Source: TechCabal.

In a move that could herald a new dawn for Nigerian startups, the Securities and Exchange Commission (SEC) has approved the rules for listing on Nigeria Exchange Limited (NGX)’s new Technology Board.

The NASDAQ-style Board is a specialized platform for technology-based companies to list and raise capital on The Nigerian Exchange. The central goal is to encourage investments in indigenous technologically inclined companies and others across Africa, provide greater visibility to these companies and ultimately deepen the Nigerian capital market.

Securities listed on the Technology Board will be made accessible to qualified institutional
investors, retail investors, and high-net-worth investors.

In a statement on Monday, Temi Popoola, CEO of NGX, said the SEC approval “will position the Exchange as an appealing location for capital formation by enterprises within the Technology Sector”.

Nigerian Exchange Limited CEO, Temi Popoola.

“We are convinced that the NGX Technology Board would support the listing of start-ups on the Exchange as they endeavour to satisfy their financing needs, both those created in Nigeria and those from other African nations,” he added.

In line with this development, the Nigerian Exchange has since released a document detailing the simplified listing rules for the technology board. The 9-page document, which can be accessed here, provides issuers, sponsors, investors, and their advisors with important information about admissions, listing standards, disclosure, and notification requirements.

Read also: CWG leads Nigerian Exchange to a rebound with a 9.6% gain: Here is why it matters.

How the Nigerian Exchange Technology Board will work

Per the rules, there are two segments on the Technology Board: Start-Up Tech and Big Tech, with different requirements based on market capitalization.

“Start-Up Tech Segment” is the Technology Board’s platform for listing eligible entities and
financing start-ups and fintech companies with market capitalization between ₦420,000,000.00 (Four Hundred and Twenty Million Naira) and ₦42,000,000,000.00 (Forty-Two Billion Naira).

“Big Tech Segment” is the Technology Board’s platform for listing eligible entities and
financing technology companies with a market capitalization above ₦42,000,000,000.00 (Forty-Two Billion Naira).

Biggest wins of the Nigerian tech ecosystem.
Image Source: Unsplash.

To be listed on the Start-Up Tech Segment, the company in question must meet the following requirements:

  1. Be a public company limited by shares or where a private company reregisters as a public company or incorporates a Special Purpose Vehicle (SPV) or Holding Company as the public company to be listed.
  2. A core investor or strong technical partner with a minimum of one (1) year operating track record.
  3. A minimum number of two (2) shareholders or such number of shareholders as The Exchange may determine from time to time.
  4. An operating track record of at least twelve (12) months before the date that The Exchange receives the Issuer’s application to list on the Start-Up Tech Segment.
  5. An estimated minimum market capitalization of not less than Four Hundred and Twenty Million Naira (₦420,000,000.00) but not above Forty Two Billion Naira (₦42,000,000,000.00) on the date that The Exchange receives its application for listing on the Start-Up Tech Segment;
  6. If raising capital at the point of listing, has a minimum float requirement of five per cent (5%) of its issued share capital or has the value of its free float equal to or above Twenty Million Naira (₦20,000,000.00) on the date The Exchange receives the Issuer’s application to list.
  7. Meet other listing requirements as stipulated by The Exchange from time to time.

Similarly, to be listed on the Big Tech Segment, the company in question must meet the following requirements:

  1. Be a public company limited by shares or where a private company reregisters as a public company or incorporates a Special Purpose Vehicle (SPV) or Holding Company as the public company to be listed.
  2. A core investor or strong technical partner with a minimum of one (1) year operating track record.
  3. A minimum of five (5) shareholders or a such number of shareholders as The Exchange may determine from time to time.
  4. An operating track record of at least twelve (12) months before the date that The Exchange receives the Issuer’s application to list on the Big Tech Segment.
  5. If raising capital from the public at the time of listing, has a minimum free float requirement of ten per cent (10%) of its issued share capital; or has the value of its free float equal to or above Two Billion Naira (₦2,000,000,000.00) on the date that the Exchange receives the Issuer’s application to list.
  6. Achieves a market capitalization above Forty-Two Billion Naira (₦42,000,000,000.00) on the date The Exchange receives the Issuer’s application to list on the Big Tech Board.
  7. Undertakes to ensure that its promoters or directors retain a minimum of fifty per cent (50%) of their shares in the Issue during the Lock-Up Period and that they do not directly or indirectly sell or offer to sell such securities during that period.
  8. Meet other listing requirements as may be stipulated by The Exchange from time to time.

The methods for the listing of securities on the Technology Board include the following: Direct Listing, Initial Public Offer (IPO), Memorandum Listing, Accelerated Book Building, Dual Listing, Reverse Acquisition/Takeover/Merger, Depositary Receipts, Special Purpose Acquisition Companies (SPACs), and any other method that the Board of NGX may prescribe from time to time.

The document also covers eligibility to remain on the Technology Board, corporate governance requirements, fees, transfer or migration between listing segments, fees, and sanctions.

Read also: Jumia tops as Nigeria dominates list of 100 most-funded African startups.

A win-win for everyone

For the NGX, the SEC approval will help it get its bite from Nigeria’s growing startup market that has produced five unicorns (companies at the early stage of business but each of whose valuation is already $1 billion and above), and become the tech capital of Africa.

Before now, experts have proposed that African startups list their shares with African stock exchanges to raise capital locally and attract foreign investors into the local market, which is headed towards a massive boom in the coming years. Africa’s fintech revenue warms up to jump by 800 per cent to $30.3 billion by 2025, according to a study by McKinsey & Co released in August.

“Listings for Africa’s tech firms have many benefits, including fundraising and providing a seamless exit route to investors, supervision, and control of trading in securities, and fair price for the securities,” Seth Onyango, Editor at Bird Story Agency, wrote in this article.

With this new regulation, startups will now be listed on the Nigerian Exchange
The Nigerian Exchange.

To bring it home, getting startups to list could help revive Nigeria’s stock market, which has recorded a downward slide in recent months due to the country’s current economic woes.

In truth, listing startups on the Nigerian Exchange Technology Board is a game-changer as it offers a home-grown path to the public market without leaving the country’s shores. In the last couple of years, several companies of Nigerian origin have had their eyes on the top-ranked foreign exchanges to gain easy access to new markets and boost brand recognition.

But only a few have succeeded so far. In April 2019, Africa’s e-commerce giant Jumia got listed on the New York Stock Exchange (NYSE). Two years later, IHS Holding Limited, the parent company of IHS Towers, the pan-African mobile telecommunications infrastructure provider, completed its initial public offering (IPO) on the New York Stock Exchange.

However, other companies have continued to express interest in foreign bourses. In August this year, Flutterwave — the Nigerian unicorn valued at more than $3 billion — announced that it was preparing for its IPO on the Nasdaq stock exchange.


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