Tech sector grossly underrepresented in Nigerian capital markets, says PwC
By Onome Amuge
Despite 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 a new report by PricewaterhouseCoopers (PwC).
The report, titled “Growing the Nigerian Technology Ecosystem through the Capital Markets,”
Observed that out of the 157 companies listed on the Nigerian Exchange (NGX), only nine companies with a combined market capitalization of circa N11 trillion are technology based companies, excluding traditional banks which have incorporated technology into their operations.
According to the report, Nigeria is home to over 400 tech start ups and ranked 61st out of 100 countries worldwide in the startup ecosystem index , and also ranks number one in Africa in terms of venture capital investment destination, leading in both funding and number of equity rounds. It added that Nigeria accounted for 23 per cent of all equity funding and 27 per cent of the total deal count of US$1.2 billion raised in 2022, 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. 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,” the report stated.
PwC, however, expressed optimism that the launch of the proposed technology board by the NGX, will 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.
The report described the proposed creation of a technology board by the NGX as a laudable initiative, noting that once launched, will 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.
It further noted that the development is 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 startups about likely pricing/ risk premiums and ongoing regulatory commitments that would follow,” it added.
The report, authored by Omobolanle Adekoya, a PwC partner, and Elizabeth Ekpo, senior manager,PwC, said Nigeria has a fast growing tech sector mainly driven by the financial services and the telcos,while suggesting that holistic and inclusive approach must be adopted for the entire tech ecosystem.
PwC also identified agritech, clean-tech, ed-tech, e-health, recruitment & HR, prop-tech, mobility & logistics as equally important and require adequate investments to enhance their capacity to contribute to national and regional development.