Access to finance especially low-cost finance is one of the major issues facing startups and SMEs in Nigeria. Nigerian SMEs face a difficult challenge in raising funding. Majority of SMEs in Nigeria raise funds through overdraft and credit lines according to research in 2018. Less than 40% obtain bank loans, less than 10% raise funds through equity with about 3% using debt.
In its bid to alleviate these difficulties, the Nigerian Stock Exchange (NSE or the Exchange) on 28 January 2020 launched the Growth Board to assist small and medium scale enterprises (SMEs) and growth-oriented companies looking to raise capital and promote liquidity in the trading of their shares.
Read also: Retirement: when and how to prepare to be financially ready
The Growth Board is designed to encourage small-cap and growth-oriented companies with good corporate governance standards to list. It aims to encourage companies with high growth potential to seize the opportunity of raising long term capital and promote liquidity.
The Growth Board was established as part of the NSE’s initiative on elevating the Nigeria Capital market and meeting the needs of businesses at every phase of their lifecycle.
The board targets fast-growth companies such as SMEs operating in various sectors including technology companies. It also highlights the benefits available in the capital market for Start-Ups, SMEs and Technology companies
Benefits of the NSE Growth Board to Issuers
- Provides a platform for accessing cheap and long-tenured capital (equities and fixed income) for growth companies.
- Provides global visibility for attracting international investors.
- Ensures increased Corporate Governance while providing the necessary support mechanism/framework for sustainability.
- Enhances visibility for growth companies to support brand promotion and customer acquisition
- Serve as an exit option for Core Investors amongst others.
Growth Board companies will enjoy the full complement of Value Added Services (Institutional Services; Investor Relations; Analyst Coverage, Corporate Access and Corporate Governance), expanded Designated Advisers, reduced NSE fee structure, reduced pre and post-listing obligations and increased turnaround time for approvals and time to market.
Routes to listing on the Growth Board
Firms can list on the NSE Growth Board either via Entry route level or the Standard level.
The Growth Board – Entry platform would serve as the Entry-level board for public capital financing for start-ups and SMEs with a market valuation between N50m and N500m. Companies admitted on The Growth Board – Entry platform would be publicly traded and subject to regulation. Companies seeking admittance to the Growth Board (Entry) would need to be duly registered as a Public Limited Liability Company, in addition to satisfying other requirements of The Exchange.
Read: Bible Lessons for 2021: Setting your Financial/Investment Goals
The Growth Board – Standard platform would serve as the Standard board for public capital financing for Medium size business and venture capital seed companies with a market valuation between N500m and N4Bn. Companies admitted on The Growth Board – Standard platform would be publicly traded and subject to regulation. Companies seeking admittance to the NSE Growth Board (Standard) would need to be duly registered as a Public Limited Liability Company, in addition to satisfying other requirements of The Exchange.
Eligibility
NSE has stipulated the criteria for accepting companies to its Growth Board – Entry segment and Standard segment.
For the entry segment it is based on 2 criteria – either an already listed company (route 1) or a new business (route 2)
Route 1
- Company is already listed on the Main Board or Alternative Securities Market (Growth Board) Board of The Exchange, or is seeking to list on the Growth Board (Entry) of The Exchange, and
- Is duly incorporated as a public company limited by shares;
- Has been in operation for at least two (2) years; Has audited financials prepared in line with the International Financial Reporting Standards (IFRS);
Route 2
- Company is a new business that can provide evidence of investment either through:
- A core investor or a strong technical partner that has a minimum of two(2) years’ operating track record, or
- A majority shareholder who is either a High Net Worth individual or is a director of a listed company;
- Has a market capitalization that is equal to, or is in excess of Fifty Million Naira (N50m) on the date The Exchange receives the Issuer’s application to list on the Entry Segment and Has a minimum free float of ten per cent (10%) of its issued share capital.
For the Standard Segment:
Route 1
Company is already listed on the Main Board or Alternative Securities Market (Growth Board) Board of The Exchange, or is seeking to list on the Growth Board (Entry) of The Exchange, and
- Is duly incorporated as a public company limited by shares;
- Has been in operation for at least two (2) years;
- Has audited financials prepared in line with the International Financial Reporting Standards (IFRS);
- Has grown its revenue by a minimum rate of twenty percent (20%) cumulatively in its last (two) 2 years of operations;
Route 2: Company is a new business that can provide evidence of investment in it by :
- A core investor or a strong technical partner who has a minimum of four(4) years’ operating track record, or
- A majority shareholder who is a High Net Worth individual; and
- Achieves a market capitalization that is equal to, or in excess of Five Hundred Million Naira (N500m) on the date The Exchange receives the Issuer’s application to list on the Growth Board;
- Has a minimum free float of fifteen percent (15%) of its issued share capital.
For more details on NSE, Growth Board visit NSE website.
By: Ifunanya Ikueze
