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Nigeria’s main stock exchange plans to digitise the equity sales process so companies can attract younger buyers interested in cryptocurrencies and foreign assets rather than local public companies.
A successful offering of 575 million shares by MTN Group Ltd.’s Nigerian unit in December was “groundbreaking,” according to Temi Popoola, chief executive officer of the Lagos-based Nigeria Exchange Ltd. The South African wireless carrier offered a stock issue to investors “end to end” electronically for the first time, he said.
The sale was 1.2 times oversubscribed, with 85% of the investors aged under 40 years. This compares with 30% of overall equity investors, Popoola said in emailed response to questions.
“In an age where investors’ needs are becoming increasingly sophisticated and the burgeoning youth demography are depending more on technology to transact business, our goal is to spur the next wave of growth,” he said.
While young Nigerians have shied away from trading in local equities, they are actively buying and selling crypto, accounting for the largest volumes outside the US, according to Paxful, a Bitcoin marketplace. Africa’s most populous country also has the largest proportion of retail users conducting transactions under $10,000, according to Chainalysis.
Still, the bourse in Africa’s largest economy may struggle to match the returns offered by crypto currencies. The Nigerian Exchange 50 Index, a gauge for the nation’s biggest equities, gained 28% in the three years to 2021. Bitcoin jumped sixfold in the same period.
Digital apps
MTN experimented with a digital application named PrimaryOffer administered by the Nigerian Exchange. The app enabled paperless subscription, allowing investors to access the offer on electronic devices and complete the process in less than five minutes. There was also a paper-based subscription.
“At NGX we understand the disruption new age technology-based investments have created in the financial industry,” Popoola said. “Digital transformation is the next phase of growth for the NGX.”
The bourse plans to automate other procedures such as access to company information, engagement of market operators and resolution of complaints, according to Popoola. It’s also looking to attract technology companies that want to raise further capital in a bid to increase opportunities for traders, he said.
Many Nigeria and Africa-focused tech startups have attained unicorn status — a $1 billion valuation for a private company — in recent years, including Flutterwave Inc, which boosted its valuation to more $3 billion after its latest $250 million funding round.
Attracting youth to the local bourse will “create and sustain a boost” in the market as they become controllers of the economy in the future, Poopola said. “They will be primary beneficiaries of the sustainable and long-term gains that come from investing.”
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