Viability of Crowdfunding as a Source of Capital

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Friday, May 29, 2020  11:00 PM / by NASD Plc/ Header Image Credit:  NASD 


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In our newsletter last week, we continued our series on Crowdfunding and highlighted the benefits of Crowdfunding as a means of funding.

 

Crowdfunding platforms have gained popularity in recent years as an alternative capital source-both for debt and equity; however, the major challenge of uncertainty of funding remains. In this week's edition, we shall discuss the viability of Crowdfunding and the importance of exploring the viability of this alternative source of funding in the Nigerian climate for MSMEs.

We need to establish country specific strategies to drive and establish crowdfunding as a viable alternative for funding.

 

1.    Enabling Policies

The crowdfunding market is in its infancy, especially in developing countries, but the potential market is significant. Putting in place enabling policies, rules, and regulation for crowdfunding such as the proposed Crowdfunding rules by the Securities and Exchange Commission is important. If approved, this will effectively establish crowdfunding as a viable source of capital as it serves as reassurance to the Investors, and entrepreneurs.  It also helps in balancing the need for investor protection with capital formation.

It is also pertinent to state that addressing policies and regulations that currently make it burdensome for MSMEs to commence and conduct business operations as well as bankruptcy laws for MSMEs is also evaluated.

 

2.    Technology

In Nigeria, technological advancement has become necessary to ensure smooth operations and continuity of business as evidenced during this COVID-19 pandemic. To ensure smooth running of crowdfunding, platforms must have access to reliable broadband Internet or mobile data networks to facilitate ongoing communication between investors and entrepreneurs. In addition, enabling tools must also be employed to operate freely in order to streamline the business lifecycle.

 

3.    Mitigation Of Risks Associated With Crowdfunding

The rate of growth of crowdfunding, and its emergence in developing and developed countries, suggests that this phenomenon can become a tool in the innovation ecosystem of most countries economically. It is necessary to craft exceptions to security regulations that allow easy registration for fundraising projects that will also strategically tie crowdfunding to patriotism i.e. establish rules and regulations that support local production and businesses.

 

Conclusion:

NASD is rightly positioned to serve as the social web between the closed and private nature of investing in small businesses and start-ups by enhancing the flow of both information and capital to MSMEs.

 

 

Year-to-Date Overview

 

NASD OTC Securities Exchange Market closed on a negative note this week, as the market recorded a decrease in performance. NASD Security Index Year to date return fell by -0.87%. Total volume traded Year-to-Date stands at  7,788,623,261 units in 590 deals and total Value traded is N9,846,797,706.13.

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Week 22 Overview

 

NASD OTC Securities Exchange closed the week with a positive return in NSI. The NSI return rose by 0.43% to close the week at 691.46 points against 688.51 points in the preceding Friday, May 22 2020.

 

In addition, Week 22 saw NASD Investors gain N2.17 Billion in value. NASD OTC Market capitalization closed at N507.92 Billion compared to N505.75 Billion in the preceding Friday, resulting from a positive movement of prices.


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There was a 9,488.80% increase in the total value traded during the week as week 22 saw NASD Investors trade a total of N2,387,470,722.25 in value compared to N24,898,546.00 in the previous week. Total trade activity for the year is valued at N9,846,797,706.13.


In the same pattern, volume traded during the week was 170,282,375.00 units compared to  620,727.00 units in the previous week leading to a 27,332% increase in trade volume compared to week 21. Total volume traded for the year is 7,788,623,261 units.


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Top Traded Securities by Volume

 

The week closed with Central Securities clearing System Plc Ranking top among top three most traded securities by volume and FrieslandCampina Wamco Nigeria Plc as the least traded among the three most traded in week 22.

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Top Traded Securities by Values

 

The week closed with Central securities Clearing system Plc Ranking top among top three most traded securities by value and FrieslandCampina Wamco Nigeria Plc as the least traded among the three most traded securities by value in week 22.


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Guess The Advancers!

 

Two of NASD OTC big stocks closes the week with a positive increase in value. The central Securities Clearing System which currently holds a Market Capitalization of N67.75 Billion closes the week at N13.55 representing a 6.78 percent increase from the previous close of N12.69.

 

The price of Niger Delta Exploration and Production also climbed by 9.21 percent to close the week at N294.88 compared to last week close of N270.

 

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A Big Stock Declines!

 

One of NASD OTC big stocks close the week with a negative movement in price. FrieslandCampina Wamco Nigeria Plc which currently holds a Market Capitalization of N110.51 Billion closes the week at N113.19 representing a -5.68 percent decrease from the previous close of N120.


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Market Numbers Year -to-Date

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  3. Benefits of Leveraging on Crowdfunding for MSMEs
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