Flutterwave’s NGX Dilemna

After last week’s news showing the team from Flutterwave meeting with Nigeria’s president, not a half day passes that I do not see a discussion on whether Flutterwave, perhaps the country’s most valuable startup, will take the bold step of listing on the Nigerian Exchange (NGX). The fintech giant, valued at $3 billion, is reportedly considering a dual listing on both the NGX and the American NASDAQ. But while the Nigerian government sees this as a golden opportunity to reinvigorate Nigeria’s stock market, the reality is far more complex.

Would the NGX provide the depth and liquidity Flutterwave’s investors expect? Or would the move be purely symbolic, with most of the action happening on Wall Street? More importantly, can Flutterwave justify its valuation in a market that favors profitability over rapid growth?

For years, Nigeria’s stock market has been dominated by traditional heavyweights like banks, telecoms, cement, and oil companies. The government wants to change that. A Flutterwave listing would be a milestone, proving that Nigeria can nurture billion-dollar tech firms and provide a viable exit for their investors.

The push for local listings is not new. In 2019, regulators persuaded MTN to go public on the NGX after slashing a hefty fine imposed on the telecom giant. More recently, in September 2023, Flutterwave CEO, 39-year-old Olugbenga Agboola joined President Bola Tinubu and Minister of Communications and Digital Economy Bosun Tijani at the G20 summit in India. Though the specifics of their discussions remain private, Nigeria’s leaders have since intensified their campaign to bring Flutterwave home.

But there’s a fundamental mismatch: the NGX has rules requiring listed companies to be profitable, and Flutterwave is not (not that the rules cannot be amended). Unlike MTN Nigeria ($3.5 billion) and Dangote Cement ($5.4 billion), Flutterwave operates in the high-growth, high-burn world of fintech. Investors in Nigeria’s stock market prefer companies that generate steady profits and dividends, not loss-making startups that bank on future growth.

To grasp the scale of the challenge, consider this: the NGX has a total equity market capitalization of around $44 billion, with daily trading volumes below $15 million. If Flutterwave goes public at its last valuation of $3 billion, it would represent 7% of the entire stock exchange, a significant chunk for a single company.

Would there be enough liquidity to support such a listing? Nigerian retail investors have shown enthusiasm for stocks like MTN and Airtel Africa, but those are cash-generating businesses. Fintech stocks, on the other hand, require a different level of investor sophistication, something the NGX is still developing.

Even for large institutional investors, Flutterwave would present a unique challenge. The company’s business model is promising, but its lack of profitability and exposure to regulatory risks in multiple African markets could make it a tough sell. Will it ever be profitable? When will it be profitable? How much loss does it even have? And then, is its loss growing or reducing? If reducing, by how much? As a private company, these are information it does not disclose to the public but which it would be forced to if it decides to take money from the Nigerian public.

If Flutterwave needs a cautionary tale, it only has to look at Jumia. In 2019, Jumia became the first African tech company to list on the New York Stock Exchange. The excitement was electric, with the stock soaring nearly 200% in its first few weeks to $40. But then reality hit. Investors soon realized that Jumia’s path to profitability was far from clear, and its stock price crashed. As of today, it is $2.5.

The key lesson? A strong brand and investor hype can only go so far in public markets. Financial fundamentals and long-term viability matter more.

Flutterwave, however, operates in payments, a sector with more stability than Jumia’s e-commerce play. The company processes billions of dollars in transactions across Africa and has major clients like Uber. If it can show strong financials and a clear path to profitability, it could avoid Jumia’s fate.

Given the risks of an NGX-only listing, Flutterwave is reportedly considering a dual listing; going public on both the US NASDAQ and the NGX. This strategy has worked for companies like Seplat and Oando, offering them global exposure while maintaining a local presence.

A dual listing could provide several advantages:

1. Stronger Valuation – The NASDAQ, home to tech giants like Apple and Google, would likely value Flutterwave higher than the NGX, where tech stocks are a rarity.

2. Better Liquidity – Investors could choose where to trade Flutterwave’s shares, ensuring a larger pool of buyers and sellers.

3. Market Confidence – A US listing would signal credibility, making Nigerian investors more comfortable with the stock.

But a dual listing isn’t without challenges. It increases regulatory complexity, adds compliance costs, and could split investor attention, with most of the liquidity flowing to NASDAQ while NGX investors are left with a secondary market that lacks excitement.

Despite the government’s lobbying efforts, Flutterwave remains noncommittal. In a statement to TechCabal, the company said:

“A potential Nigeria IPO is definitely one of our future ambitions—for now, we continue to evaluate market conditions to determine the best course of action for our business, our shareholders, and the broader ecosystem in which we operate.”

Translation? They’re in no rush. The company will likely watch how the NGX evolves, particularly after the FTSE Russell downgrade in 2023, which saw Nigeria reclassified from a “frontier market” to “unclassified” due to foreign exchange restrictions.

Don’t quote me, but in Nigeria’s usual marketplace theatrics, the company might want to extract a commitment from the government that if Flutterwave were to list, the Nigerian sovereign would itself invest substantially in the company as a hedge and risk management measure.

If Flutterwave does list locally, it will set a powerful precedent. But if the NGX cannot provide the liquidity and investor base needed for high-growth stocks, the listing could end up being more symbolic than transformative.

For now, all eyes remain on Flutterwave. Will it make history as Nigeria’s first major tech IPO? Or will it take its talents to Wall Street, leaving the NGX to dream of what could have been? Or will it just continue to nurse its ambitions in private, its financials available to its carefully selected investors?