Key Highlights
- Only 9 companies with a combined market capitalization of circa N11 trillion are technology-based companies excluding traditional banks which have incorporated technology into their operations.
- The top 10 companies by market capitalization on the NGX were dominated by ICT and Industrial goods companies accounting for 70% of the total market capitalization.
- Nigeria has a fast-growing tech sector mainly driven by financial services and telcos.
PricewaterhouseCoopers (PwC ) Nigeria has disclosed that out of the 157 companies listed on the Nigerian Exchange (NGX), only 9 companies with a combined market capitalization of circa N11 trillion are technology-based companies excluding traditional banks which have incorporated technology into their operations.
PwC stated this in a report tagged ‘Growing the Nigerian Technology Ecosystem through the Capital Markets’ obtained by Nairametrics.
Tech-sector underrepresented in the capital market
The professional services firm noted that 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.
According to the report, as of 31 December 2022, the top 10 companies by market capitalization on the NGX were dominated by ICT and Industrial goods companies accounting for 70% of the total market capitalization.
Creation of a technology board
The report noted that 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 and 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 In addition, the tech ecosystem would benefit from improved governance, transparency, talent retention, funding, and long-term sustainability amongst others by listing on the Nigerian Exchange whilst addressing concerns of these start-ups about likely pricing/ risk premiums and ongoing regulatory commitments that would follow,” the report said.
Nigeria has a fast-growing tech sector
According to the report, Nigeria has a fast-growing tech sector mainly driven by financial services and telcos.
- “However, a holistic and inclusive approach must be adopted for the entire tech ecosystem. Home to over 400 tech start-ups and ranked 61st out of 100 countries worldwide in the start-up ecosystem index, Nigeria also ranks number 1 in Africa in terms of venture capital investment destination, leading in both funding and number of equity rounds.
- It accounted for 23% of all equity funding and 27% of the total deal count of $1.2 billion raised in 2022, portraying the country as the preferred investment destination in Africa,” the PwC said.
Healthy ecosystem needed
The report noted that despite these impressive performances, the Nigerian capital market does not optimally reflect the activities of the sector.
It added that a healthy ecosystem that creates a balance for all subsectors of the technology ecosystem and ensures the optimal flow of required funding to innovate and grow while strengthening governance for long-term sustainability is fundamental to enhancing economic growth.
- “Agritech, clean-tech, ed-tech, e-health, Recruitment & HR, prop-tech, mobility & logistics etc are equally important and require adequate investments to enhance their capacity to contribute to national and regional development,” it said.
Impressive growth for African tech
According to the report, in Africa, the tech ecosystem has experienced impressive growth and is evolving rapidly.
- “There is a high level of optimism about the potential that the continent has to offer by harnessing the strength of its largely young, rapidly growing, and technology-savvy population. The number of tech start-ups securing funding in Africa has grown by 1087% from 55 in 2015 to 653 in 2022, while total equity funding raised annually increased by 1673% from $277 million to $4.9 billion in the same period (Partech,2022).
- To accelerate the growth of the tech ecosystem, it is worth noting that the governments in some African countries have created initiatives such as; Program 12J in South Africa that provides tax deductions for investors, the Finance Act 2020 in Nigeria that reduces taxes for start-ups, the Nigerian Startup Act 2022 providing a framework for the development of the Nigerian technology and innovation ecosystem, the State Mandated technology training in Ivory Coast, Rwanda’s Private Public partnership with Carnegie Mellon, Egypt’s creation of the largest Fintech accelerator, among others,” the report stated.
What you should know
The Nigerian Exchange Limited (NGX) is set to launch a Technology Board. The Technology Board is a specialized platform for technology-based companies to list and raise capital on the NGX.
Consequently, in December 2022 the Securities and Exchange Commission (SEC) approved the NGX Rules for listing on the Technology Board (The Rules).
The Rules aim to attract technology companies to the capital market with less stringent listing requirements (compared to other listings boards) and provide Issuers, sponsors, investors, and advisors with important information about admissions, listings standards, disclosure, and notification requirements for the Technology Board.
