Leveraging NGX for Your Startup's Transformative Exit

In the last ten years, the Nigerian tech ecosystem in particular has been awash with talent, ambition, and investment. In industries from payments to logistics, education, gaming and more, solving real problems are companies from Lagos to Nairobi. But as these startups start to age, a question remains: what is the best exit for a successful African startup?

Until recently, foreign acquisition has been seen as the holy grail of startup exits in Nigeria. When Stripe acquired Paystack for over $200 million in 2020, many Nigerian founders began to believe the narrative that success as a founder meant being successful in terms of attracting Silicon Valley, or Johannesburg and cashing out in dollars. Some wish to dual-list on the NYSE or the London Stock Exchange to gain international credibility.

But this common form of escaping has serious implications for the local economy: it drains wealth out of Nigeria, it creates a disinterest by the public sector in locally generated value, and it excludes Nigerians from being able to own a part of a digital economy that they play a role in enabling and growing.

But what if there’s an alternative, a better alternative, to this exit that preserves value in Nigeria?

How about if Nigerian startups like BetKing, Flutterwave, or OPay were to do differently, and instead of cashing out to a foreign company, do an IPO on the Nigerian stock exchange, NGX?

This may sound disconnected from reality in a country where capital markets are considered slow, illiquid and badly regulated. But one company, BetKing, if it is possible at all, could be transformational.

 

The Missed Opportunity: Homegrown Giants, Foreign Listings

Among these are Flutterwave, Andela, OPay, Interswitch, Jumia, and BetKing, which have all been gamechangers in African commerce and finance. But none of these companies can be found on the NGX. While their businesses affect the lives of millions in Africa, an average Nigerian has no ability to own a share of them unless he invests overseas.

In contrast, Nigeria’s stock market remains vastly untapped. By 2024, the NGX had only 174 companies, compared with 972 on the London Stock Exchange LSE and over 2300 in the New York Stock Exchange. This translates into fewer investment opportunities, less liquidity and no wealth creation in the home country.

So why aren’t more startups going public?

 

BetKing: A Perfect Candidate for a Nigerian IPO

A case in point is BetKing. BetKing is a household name in Nigeria’s booming sports betting industry and is operationally ready for a public listing. It is already highly governed and very compliant, scaled and profitable. It is working in Nigeria, Kenya, Ghana, Ethiopia and South Africa and can work with all the difficult regulations in these spaces.

 

Backed by Major Investors

In 2020, MultiChoice Group – a company on the Johannesburg Stock Exchange – bought 49% of BetKing for $400 million. It also highlights the overall power of that brand within the region, and its ability to generate revenue. BetKing has figured prominently in MultiChoice’s annual reports as making “significant contributions to the group’s technology-driven betting revenue streams”.

 

Strong Employment and Economic Impact

BetKing directly employs between 50 and 200 Nigerians at corporate positions and provides thousands of agents and operators jobs through its retail shop model. Such a company being listed on the NGX would help wealth distribution, job creation, financial literacy and increased participation of locals in capital markets, among other things.

 

Why Nigerian Startups Avoid the Local Exchange

These advantages notwithstanding, skepticism still exists amongst founders in Nigeria. And rightly so.

 

The 2008 Crash Trauma

The 2008 financial crash in Nigeria has left a deep scar on investors' confidence. The All-Share Index fell from over 66,000 in March 2008 to below 20,000 in early 2009, erasing billions in value. Most retail investors lost it all as companies were delisted or went bust. The market has still not recovered fully over a decade later.

 

Liquidity Issues and Shallow Market Depth

The most urgent problem is liquidity. NGX’s average daily trading volume has been low compared to other markets, and the market capitalization as a percentage of GDP is comparatively low. As of Q2 2024 market cap in Nigeria was N56 trillion ($38 billion) or less than 10% of GDP, while South Africa’s JSE regularly reaches over 300% of GDP.

 

Exit Pathways Are Limited

NGX IPOs are also seen as slow and bureaucratic compared to foreign acquisitions or rounds of venture capital. Investor education is almost non-existent, financial reporting frameworks are not uniform, and capital markets regulations are perceived to be outdated or rigid.

 

The Untapped Potential of the NGX

But the Nigerian Stock Exchange has huge potential. The right reforms and success stories in such a market with a very young population, increasing digital penetration and financial inclusion could result in a lot of capital and innovation unleashed.

 

Empowerment by Online Retailers

Retail investors’ access to foreign stocks is already being facilitated through apps such as Trove, Bamboo, RiseVest, and Chaka. Access to IPOs would also increase massively if similar digital tools were developed to cater to Nigerian equities. The democratization of participation through FinTech platforms could mean that millions of Nigerians could become equity owners of Nigeria-domiciled brands.

 

Investor Education Is Crucial

Better education of investors is needed in order to make this work. Local investors should comprehend risks, rewards and the long-term play. Stakeholders in the capital markets, including SEC Nigeria, NGX, NIBSS, etc., should collaborate with financial influencers, institutions and schools to educate the public on investing.

 

The Economic Case for Local IPOs

Value stays in Nigeria when successful Nigerian companies are listed on the NGX. Rather than having that capital channeled through Delaware headquartered holding companies or offshore VC funds, through IPOs, real wealth can be built by local investors, institutional pension funds, and ordinary Nigerians.

 

Increased Transparency and Governance

Also, being publicly listed requires a greater degree of transparency and governance, which is something that Nigeria is missing in its business leadership. When companies go public, they are subject to higher levels of accountability that arguably advance the whole system and lead to more sustainability.

 

Better Valuations and Predictable Exits

The windfalls from foreign buyouts are exceptional, but. Acquisition has only been the exit path for a handful of Nigerian startups, such as Paystack and MainOne. Whereas an IPO may provide a more certain and earlier stage exit for founders and early-stage investors. Companies such as BetKing are already at a scale that would enable valuation growth after listing.

 

A Call to Action: Build the Future Locally

Opting to list locally isn’t merely a financial decision, but a message. An example of an IPO in Nigeria by a brand such as BetKing would:

- Build confidence in the local capital markets

- Capture institutional and retail investor interest.

- Encourage reforms for better liquidity and access to markets.

- Changing the discourse from one of dependency to one of autonomy

 

Imagine a New Capital Market Narrative

See what happens when the leaders of Nigeria’s tech and digital economy sit at the same investment table with Dangote Cement and MTN Nigeria.

- A dynamic interface between traditional capital and innovation.

- Greater job creation via employee ownership and business growth.

- Local businesses are staying local, and they pride themselves on supporting local businesses.

- Retention of capital, less forex outflows, better macroeconomic stability

These things are not whimsical aspirations; they are reality if just one company like BetKing decides to list on the NGX.

 

Final Thoughts: Would You Invest?

Nigeria’s economy is at a crossroads. A young population, good depth of mobile and internet penetration, and a growing middle class, particularly in the economy’s informal segment, enable this opportunity for a new form of economic inclusion. But it also won’t if the average Nigerian continues to be unable to access vehicles for wealth creation, like owning equity.

Foreign buyouts result in an exit to capital markets that do not include their users and customers. Wealth, experience, and trust are drained from the local system. But if even a single startup, such as BetKing, dares to go public locally, there could be a new golden age of shared success and faith in the market.

Consider, for a moment, the millions of Nigerians who might choose to directly invest in a company they deal with every day. Picture BetKing alongside Dangote Cement, MTN Nigeria, and BUA Foods, industry titans now joined by new ideas born from tech. It could be such a list:

- Rekindle new investor interest

- Improving capital markets infrastructure

- Change investor thinking to focus on building for the local market

- Deter capital flight and currency volatility

- Put some real skin in the game for Nigerians

Of course, going public on the NGX is not so easy. It requires a clean cap table, upgrades in governance, educating investors and a long commitment to transparency. These are part of an ecosystem that is maturing, rather than barriers. Unintuitively, this is all beneficial and outweighs the friction.

It is now time to take back our capital markets as investing is now easier than ever for young Nigerians with the advent of fintechs and digital tools, coupled with a laissez-faire attitude from the regulators.

For Nigeria’s founders, policymakers and investors: here lies the real question:

Will you continue to run for exits abroad or help build the future where you live?

Would you consider investing in a Nigerian IPO? And if so, which company do you think should take the lead?