MARKET AGENDA FOR LISTING FINTECH FIRMS

Sola Oni writes that Fintech companies offer investment opportunities that support growth of Small and Medium Scale Enterprises

The only thing that is constant in life is change. Covid-19 pandemic hit Nigeria like a thief in the night. The way it challenged the perceived technological prowess of the United States of America and United Kingdom made that of Nigeria a child’s play. Some fame-seeking pastors in Nigeria claimed that they had seen the vision ahead of the outbreak. This is an amusing tale of afterthought rather than genuine divine message. Covid-19 is an ambivalent scourge. Although, it has claimed many lives and forced humanity to look like masquerades, irrespective of the status, it has also institutionalized digitalization as the heartbeat of all activities.

Prior to March 2020, holding meetings by Zoom, Skype, Google Meet and other forms of video conferencing were not so popular in Nigeria, except by some firms that leverage it to resolve technical issues of computer with their foreign vendors. Today, it has become one of the most acceptable channels for workshops, conferences , religious services, and academic and social activities. This development has put services of Financial Technology (Fintech) companies on the pedestal of high demand.

Fintech companies are “software and other technologies used by businesses that provide automated and improved financial services.” Unlike banks, Fintech startups are characterized by flexibility of operations and ability to adjust fast to changes in the industry. But not all that glitters are gold. Fintech startup companies face some peculiar challenges according to Forbes. The famous magazine says it’s cumbersome for these enterprising companies to raise venture capital as venture investors will demand answers to questions such as what problem is the startup trying to solve, competence of management team, market opportunity, Pitch Deck, including overview and value proposition, regulatory issues, ability to compete with the existing huge financial brands in the industry, cost-effective marketing strategy to acquire customers, getting early adopters and averting slow sales cycles, Cybersecurity and data protection issues, intellectual property, models for business, revenues and expense and legal compliance.

The above brick walls have bullied the question of whether such companies have upward trajectory of dividend payment, a great expectation of investors when a company applies for listing on a securities market in Nigeria. In September, 1996, Gtco (formerly Guaranty Trust Bank) was listed by Introduction on NGX PLC (formerly The Nigerian Stock Exchange). Listing by Introduction means that the company has complied with all the Exchange’s listing requirements but it is not willing to float initial public offering (IPO) before listing. A company without record of consistent dividend payment stands the risk of undervalued shares. But in today’s world of ‘new normal’, managers of securities exchanges should go back to the drawing board on what exactly is the motive for a company’s application for quotation.

Unlike the current situation where many companies got listed to enable them enjoy benefits of capital injection through various financing options, securities exchanges may begin to witness a new era of companies seeking listing, primarily for credibility and prestige purposes. There is also a need to create a new board for quoted companies that do not necessarily require record of dividend payment as at the period of seeking quotation but have strong potentials to deliver shareholder value. Interestingly, the 25th Annual Conference of the Chartered Institute of Stockbrokers (CIS) which ended in October l featured “ Fintech Innovations and the Capital Market” as one of the key sub-themes. Some of the key takeaways is that Nigerian Government should address the issue of metric for determining identity as there is a conflict of choice between Bank Verification Number (BVN) and the National Identification Number (NIN). While BVN tends to be limited to banking requirement, NIN is believed to have wider scope. Also, the panelists pinpointed the need to address the concerns on inadequate technology infrastructure that can drive economic growth and development.

It has become clear that Nigeria should be thinking along the line of its comparative advantage in technology ownership either in software and marketing or manufacturing of hardwares. At the moment, the country is a dumping ground for technology by developed countries with all the associated risks. Every developed nation specializes in one area of technology or the other. They also carve out an area for technology giants. Such an environment is called Silicon Valley. For instance, San Fransisco Bay Area in California parades Google, Apple, Meta (formerly Facebook) and the rest. In China, Shenzhen city is the abode for homegrown tech superstars such as Tencent and Huawei. Every country should develop a technology policy and carve out its area of comparative advantage to avert unforeseen diplomatic row between the country and its supplier of hardware or software suddenly. This is why the United States and China are playing hide-and-seek diplomacy in the area of technology. Where does Nigeria belong? When shall our country have its own Silicon Valley?

Fintech companies are products of digitization. They are friends to millennials and Generation Z. It is necessary to have them quoted on the securities exchanges even if listing rules have to be amended to accommodate the technology savvy investors. This may be a form of agenda setting. Fintech companies have growth potentials. They also offer investment opportunities that support growth of Small and Medium Scale Enterprises (SMEs). For instance, they help SMEs to expand finance options, automate accounts, enable online payments, innovate insurance and expand retirement options amongst others.

At the Nigeria Tech/Fintech Conference hosted by Renaissance Capital in September this year in Abuja, The Chief Executive Officer, NGX, Temi Popoola admitted that NGX needed to open doors for technology companies by saying “ already, NGX has the Growth Board which is home to fast-growing companies, but we recognise that there is more to be done. Our approach is to begin to relook our rules and boards that may not necessarily be acceptable to players within the technology industry. We see that capital being raised in this space is mostly foreign, and we want to position ourselves to be more accommodating of the evolving landscape whilst developing the right market architecture.”.

“ One interesting thing to note is that the FinTech ecosystem has increased awareness around the capital market and the opportunities in personal investing. The next step for NGX would, therefore, be to look at the landscape and begin to leverage advancements that will help the capital raising, trading and settlement processes to democratise finance in Nigeria. Evidently, NGX is positioned to spur the next wave of growth and development in Nigeria, which is technology, and the market looks forward to announcements in this regard.”

Oni, an Integrated Communications Strategist, Chartered Stockbroker and Commodities Broker, is the Chief Executive Officer, Sofunix Investment and Communications