Two weeks ago, I wrote about why more Nigerian companies are not accessing the capital market, despite the various benefits they could derive by listing on the Nigerian exchange (NGX).
Capital markets enable business owners to raise money to bring their ideas to fruition or to expand. Without this option, business owners would have to save up their profits (which would take an absurd amount of time) and some very expensive bank loans that could impact profitability in the future.
From IHS Towers to Jumia and now Flutterwave, there seems to be a growing wave of Nigerian companies deserting the Nigerian exchange (NGX) to list on foreign stock exchanges.
The short answer to why this trend is happening is tied to why companies access the capital market in the first place—to access a wider array of investors.
The depth and liquidity of a stock exchange are important to companies. Foreign exchanges provide the quality of investors that helps improve company valuations and supply the funding needed. Macroeconomic factors like high inflation and interest rates—both not beneficial to company valuations—also contribute to the recent listing emigration.
I spotlighted another benefit of going public (listing on an exchange): it helps spread ownership risk (person or people responsible for managing risks or threats). This could present opportunities for the business owner or early investors to cash in on returns on the equity they invested in the business's early days.
Today, I want us to consider a second question: why do some companies list on foreign exchanges?
I have to note that listing on foreign exchanges is not