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‘Why Nigeria’s tech stocks can’t hit $1tr mark in 30 yrs’

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• Brokers blame uncertainty, harsh business climate


• Experts decry poor infrastructure for tech hardware

With global technology companies, including Apple, Amazon, Netflix, Zoom, apparently doing well, and to a large extent, influencing gradual recovery of the US stock market, some surpassing the $1 trillion valuation, the challenge is gradually shifting to players in Nigeria.

Attention is gradually shifting towards faster recovery of the Nigerian Capital Market, which can boast of technology and telecoms firms such as Chams Plc, CWG Plc, eTranzact, NCR, Triple Gee and Company Plc, Courtville, Omatek, MTN Nigeria and Airtel Nigeria.

While the capital market valuation is put at N13.364 trillion as of September 20, 2020, the tech stocks account for 4.89 per cent of the market.

Checks by The Guardian showed that as of July, CWG Plc, which was listed in 2013, had a market capitalisation of N6.41 billion ($16.5 million); eTranzact had N10.9 billion ($28.28 million) capitalisation. It was listed on August 7, 2009. NCR was listed on May 30, 1979, and had a market capitalisation of N216 million.

Other players, including Triple Gee and Company Plc, which was listed on April 2, 2013, had N283 million ($730,322) capitalisation. Courteville, as of July, had N745.9 million ($1.92 million) capitalisation and was listed in April 2009. Omatek Plc got listed in 2008, and market capitalisation is N2.94 billion ($7.58 million). Chams Plc, which got listed on September 8, 2008, had, as of July, a market capitalisation of N4.69 billion ($12.1 million).

AMONG the major telecoms players, MTN Nigeria was listed on May 16, 2019, and had a market capitalisation of N2.36 trillion ($6.08 billion) as of July, while Airtel Nigeria, which got listed on July 9, 2019, had a market capitalisation of N1.123 trillion ($2.89 billion).

While much is expected from the global technology stocks, which are on the upward swing, it may however, take another 30 years for listed firms on the local bourse to hit the $1 trillion market valuation.

Technology experts, who spoke with The Guardian, said the fundamentals in the country had not shown anything promising, but more of a tough future because of obvious challenges in Nigeria and Africa as a whole.

President of the Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, agreed that the new unicorns in Africa that could hit the $1 trillion valuation in ICT would most likely come from Kenya, South Africa, Egypt, and Nigeria. He, however, noted that the unicorns might grow into the likes of Apple and Amazon by 2050.

According to him, on the back of a growing demographic that is below 34 years old, and “the penchant to diversify the economies of Africa away from reliance on the extractive industries, there’s a possibility for the youth to leverage local music and film content.

The main challenge is the youth’s mindset in not believing they have their own destiny in their hands.”

The ATCON president noted that the globalisation of these tech companies had caused and would continue to create profound impact on the direction of adoption of critical technology.

“It is very apparent over the past decades that the growing importance in the ability to automate processes and develop smart communities is now upon us. The transition in Nigeria has just begun and these tech giants are attempting to define the way we work, rest, play and live our daily lives. COVID-19 demonstrates the potential,” he stated.

On how Nigeria can encourage more tech companies to go public like counterparts abroad, Teniola described innovation as key to driving the kinds of valuations required in attracting unicorn status and correspondingly high market cap.

“The trend in one or two recent telco listings demonstrates the potentials,” he stated.

KEHINDE Aluko, a telecoms expert, said getting to that level requires ruggedness and huge investments, coupled with favourable government-enabled environment, “I am looking at 20 to 30 years from now for that to materialise.

“If you check those companies, I mean Apple and Amazon, they didn’t just start now, it was a journey for them. The earlier we started the journey here, the better for the economy as a whole. I don’t think we have started here.”

A former Group Managing Director/Chief Executive Officer, CWG, a listed firm on the Nigerian Stock Exchange (NSE), James Agada, believes that on paper, it is possible for indigenous IT firms in the region to get to that level, but practically it may not materialise on time.

Agada had told to The Guardian last year that Nigerians often placed value on companies based on their ability to pay dividend, “but if you go and check, Amazon has never paid dividend, but their Chairman and CEO is the richest man in the world. They don’t pay dividend and they are not about to pay. Even if you check their figures, they are barely breaking even.

The issue in Nigeria, is that what we consider as assets here differ from what they consider as assets or capital there.

“In America and other developed countries, they are looking at the firm’s future potential. They see Amazon, Apple in that clan of bringing out huge potential.

“Even if you look at our banks, you will think they are big, but they are actually small. They are small because if you look at how much dividend they have to pay every year, to do a major investment may be difficult.”

Agada said the country might end up seeing Nigerian-majority owned companies operating from the U.S., to adopt American operating system to grow very large, as is already happening in startups, like Flutterwave. This firm is registered as a U.S. company, even though it is mainly run by Nigerians, and same goes for Andela.”

On the possibility of government policies changing some things positively, Agada noted that the American system believes strongly in future value to be created in another 20 years because they have policies that create stability to guard against major shocks or disruptions.

“But in Nigeria, there are very few people, who believe in its future,” he said.

“So, in terms of policy, it will be to start creating that environment that will give people confidence that there would be a future, if not, Nigeria would continue to be a short-time country, banks will not give long-term loans and the challenges will persist.”

IN one of his interviews with The Guardian, the immediate past president of the Institute of Software Practitioners of Nigeria (ISPON), Dr. Yele Okeremi, said Nigeria had no IT ecosystem. “The industry is very fragmented. There are quite a few firms doing well but the industry is a collection of firms that are engaged in similar services. If you have 10 to 25 companies, when, in fact, you should have 3000 companies, then, the industry does not exist. That is the case with Nigeria,” he stated.

At his book launch in Lagos late 2018, Chairman, Zenith Bank, Jim Ovia, had predicted a bright future for technology companies, saying: “The Internet enables you to do online transactions, online sales, online education and everything.

“Amazon is now over $1 trillion. This Amazon doesn’t have a factory anywhere. They don’t have any oil well at all, but have over $1 trillion in market capitalization — richer than Nigeria with twice its GDP. It is because they embraced technology and the Internet.”

Chief Executive Officer of Sofunix Investment Limited, Sola Oni, admitted that the Nigerian Stock Exchange (NSE) had been working relentlessly to ensure that telcos listed their shares on the market. However, he cited harsh operating environment, characterised by uncertainties as major impediment to attracting them to list on the exchange.

According to him, attracting the telcos to the nation’s bourse should not be done by fiat, but rather with moral suasion and some legislative incentives.

“At long last MTN and Airtel are listed. But our market is still in dire need of more companies in telecoms. The concern generally is the nature of our operating environment.

“Every company will consider the cost-benefit analysis of quotation in an environment characterised by uncertainties at different levels. This creates a barrier for more tech companies to come. The companies offshore have better operating environment,” he said.

He said the tech companies are $1 trillion firms with potential and capacity to increase profitability regardless of impacts of COVID-19.

“They have something in common: Internal efficiency which reflects in lower transaction costs, innovativeness and focused leadership.

“For instance, Microsoft’s business model focuses on partnering with customers and entering strategic alliances with competitors such as those in storage business like Dropbox and database Oracle.

“Such collaborative techniques enhance the company’s operations with multiplier effects on top and bottom lines. Amazon leverages customer purchase and offers them free products such as e-books and free premium streaming videos among others.

“Apple specialises in one version of one platform of its prime product, Android as its comparative advantage. Google’s data transferability, which works on all platforms, is a sales strategy. When a company is operating optimally in all seasons, the products are on high demand and it rewards its shareholders, there will be demand for its stocks. They are companies to watch.”

VICE President of Highcap Securities, David Adonri, said telcos enterprises are engineering businesses that set the tone for the 4th Industrial Revolution.


“There is no hi-tech company in Nigeria. We do not produce, but only consume technology; hence, we are disadvantaged and uncompetitive. We cannot maximise income and extract other benefits embedded in the hi-tech value chain.”

Adonri noted that Nigerian firms operating in the tech space were able to also demonstrate the resilience of the sector by making good profit during the pandemic in spite of the competitive disadvantage.

“Tech may not be able to lead the Market yet in Nigeria due to absence of the necessary scientific and technological foundation to propel its development.

“Regrettably, Nigerian Ministries of Mines & Steel, Science & Technology and Communications Technology that should set the machinery in motion for domestication of tech, are wallowing in the shadows of obscurity,” he said.

He said the current 4th industrial revolution spreading across the world was driven by hi-tech (infotech, fintech, artificial intelligence and block chain technology).

At the forefront of engineering enterprises that have entrenched themselves in the field are multi trillion dollar global giants like Apple, Amazon, Microsoft, Facebook and Google occupying the commanding heights of the new global economy.

He said these high-tech companies render services and produce items that facilitate operations of the virtual channels of communication and transactions.

According to him, they rely on their country’s well-developed metallurgical, tools and machinery industries to which they combine electronics or digital scientific knowledge to create innovative products and services.

“Their prime position in the global economy came to the fore during this global pandemic when their income soared higher while other aspects of the global economy collapsed under the constraints of lockdown.”

However, he said Nigerian enterprises are only service providers at the peripheral end of the software used to render telecoms and transactional services.

This is because Nigeria lacks the engineering infrastructure to enable tech hardwares to be produced locally.

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