Financing your SME business via selling equity

This article speaks to the criteria and process for a Small & Medium Enterprise (SME) and other startups to list shares on the Nigerian Stock Exchange.

Every small business needs capital to operate. Initially, that capital could come from debt financing, or selling founders’ equity to family and friends, venture capital or a private equity firm.


However, listing a company on the stock exchange is another way to raise long term funds or provide an exit to early investors.

Why Should A SME/Startups consider Listing on a stock exchange?

The most significant reason to list is that listing enables SMEs/Startups to raise cheap long-term financing from a wider group of investors, including international investors and provides an exit option for early investors.


The listing also brings a higher level of corporate government and visibility to the organization as it must publish results and reorganize internally.

The NGX Growth Board

The Nigerian Stock Exchange offers a Growth Board designed to provide SMEs and startups with a market capitalization of N50m to N500m an opportunity to raise equity funds. The growth board is intended to encourage small-cap and growth-oriented companies with good corporate governance standards.

The Growth Board has Entry and Standard routes, we are focusing on Entry route in this article. There are Route 1 and Route 2 pathways. If the SME has already been listed on the main board or seeks to be listed, then it goes through Route one

Route One criteria include the SME/Startup duly incorporated by the Corporate Affairs Commission as a public company limited by shares.


Next, it must have audited financials prepared per the International Financial Reporting Standards (IFRS). Date of the last audit by nine months. The SME/ Startup does not need to have posted pre-tax profits.

The SME also needs two years minimum operating track record; alternatively, If the SME/Startup is a new business it should provide evidence of investment either through a core investor or technical partner that has a minimum of two (2) years’ operating track record.

Alternatively, it can also provide evidence of a majority shareholder who is either a High Net Worth individual or is a director of a listed company; then.

The company must be capitalized to the tune of N50m minimum. Capitalization of N50m means the number of shares the company has issued multiplied by the market price should produce a number at or higher than N50m.

Other requirements to list on Entry Growth board include.

  • The SME Has a minimum free float of ten per cent (10%) of its issued share capital, meaning 10% of the issued share capital is not restricted and is available to be purchased in the secondary market.
  • The SME must also have a minimum of twenty-Five (25) public shareholders.
  • The SME will also undertake to ensure that its promoters or directors retain a minimum of fifty per cent (50%) of their shares in the Issuer for a minimum period of twelve(12) months from the date of its listing, meaning the directors cant pump the up the stock, sell to new investors and exit the market with profits.

What About Costs

The cost to list an SME on the Entry Growth board of the NSE is as follows. Application Fees of N250,000, then an annual listing fee of N200,000

Any Post Listing requirements?

  • The SME/Start up, once listed, must submit Quarterly semi-annual and Annual reports. Also, a certificate that the SME has adhered to corporate Governance is required.
  • The SME/Startup needs an SEC-approved financial adviser to guide it through this process, and once listed, it needs to retain an adviser.


The benefits of being listed are numerous apart from the funds raised. Overall, a listed company is deemed more credible and is held to a higher standard than an unlisted company, and this perceived value adds a premium to the company shares and future offers.

With the inflated cost of debt financing, equity financing must remain an option for SMEs in Nigeria.


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