Flutterwave plans to list on Nigeria’s NGX, providing both opportunities and challenges. Benefits include enhanced capital access and increased prestige; however, profitability issues, regulatory requirements, and macroeconomic conditions may pose significant risks. The company may need strategies like ADRs to attract foreign investment if it proceeds with the listing.
Flutterwave, a leading fintech company, has announced plans to list on Nigeria’s Nigerian Exchange Group (NGX). Established in 2016 by entrepreneurs Olugbenga Agboola and Iyinoluwa Aboyeji, Flutterwave has expanded across various African nations, including Ghana, Kenya, and South Africa, achieving unicorn status in 2021. Although not the first fintech to list on the NGX, it stands out as a young unicorn in a market where established firms typically prevail.
The prospective benefits of Flutterwave’s public listing include enhanced access to capital and increased opportunities for stock liquidity. This move would also elevate the company’s profile, providing a transparent valuation. Additionally, it could boost Nigeria’s technology sector and attract necessary foreign direct investments through share offerings.
However, challenges abound. Reports indicate that Flutterwave has yet to achieve profitability, a critical requirement for investors in the Nigerian market. In an environment of high inflation, investors tend to favor proven profitability over future potential, creating hesitancy among capital sources such as pension and mutual funds.
Moreover, Flutterwave would face extensive regulatory obligations upon going public. Compliance requires submission of audited financial accounts and meeting specific revenue benchmarks. Although the NGX has initiated a less stringent Technology Board aimed at accommodating startups like Flutterwave, the resulting limitations could restrict retail investors from participating in the offering, potentially affecting the company’s access to local capital.
The macroeconomic climate could further complicate Flutterwave’s listing. Following recent economic downturns, successful public offerings have dwindled. The declining trading volumes of newly listed non-bank companies indicate a challenging environment for liquidity and investor interest. Additionally, the current negative interest rate-inflation differential reflects a restrictive economic backdrop.
While proceeding with the listing could present significant risks, Flutterwave might consider strategies such as American Depository Receipts (ADRs) to attract foreign investment. Such measures could enhance the possibility of garnering sufficient interest and capital, ultimately stabilizing the company amidst uncertain market conditions.
In summary, Flutterwave’s potential listing on the Nigerian Exchange Group presents a duality of opportunity and risk. Although the listing could enhance access to capital and boost Nigeria’s fintech reputation, challenges related to profitability, regulatory compliance, and macroeconomic pressures could hinder its success. To navigate these obstacles, Flutterwave may need to adopt innovative approaches such as ADRs to attract foreign investors.
Original Source: www.connectingafrica.com
