A recent report indicates that African startups, particularly those based in Nigeria, are expressing strong reservations about listing on the Nigerian Exchange (NGX) primarily due to significant currency and liquidity issues. More than two-thirds of surveyed founders cited “currency and foreign exchange mismatches” as the main impediment to pursuing a local listing. This challenge stems from the fact that the vast majority of startups backed by international investors use the US dollar as their accounting currency. Since the NGX is denominated in the local naira currency, listing locally exposes these companies to substantial exchange rate risks, exacerbated by the naira’s instability, which has seen its value drop by over 65% since its free float in 2023. The TLP report emphasizes that because 76.5% of Nigeria-funded startups hold dollar capital, early-stage venture investors deploying that dollar capital consequently expect dollar-denominated exits to mitigate devaluation risks. This means a local listing in naira becomes primarily an exercise in complex foreign exchange risk management, rather than pure capital raising. Beyond currency concerns, the relatively limited liquidity of the NGX is a major deterrent. The NGX holds a market capitalization of approximately $62 billion, which is dwarfed by major global exchanges like the New York Stock Exchange (NYSE) at around $28.3 trillion, raising concerns about founders’ ability to manage large-scale exits. The report suggests two primary avenues for resolution: first, strengthening local capital sources to reduce reliance on dollar deployment; and second, urging the NGX to explore dual or cross-listing partnerships with exchanges such as NASDAQ, AIM, and JSE to attract essential foreign liquidity while maintaining a vital local presence. In addition to these systemic issues, 26% of founders highlighted market frictions like compliance costs and potential undervaluations as key concerns, with 16% explicitly pointing to the exchange’s insufficient liquidity as a major deterrent factor.
