Nearly all the tech businesses in Nigeria today were non-existent the year the legend of the ‘Nigerian Prince’ was born. The most popular version of that legend goes as far back as the 1990s.
According to an online version, the supposed benefactor is a Nigerian royal, government official or business executive whose fortune is hostage to war, corruption or political unrest. The desperate personage needs only your bank account number (to transfer the money for safekeeping) or a relatively small advance payment (to cover taxes, bank fees or well-placed bribes), or both. People who fell for the story got their hands badly burnt. Over the years, the legend was to be used severally in describing persons and sometimes online businesses operating from Nigeria. Then, every young man in any of the cyber cafes littered across the country or with a laptop and browsing on the internet was classified as ‘Yahoo Yahoo’ as it is known in local parlance.
Although the ‘Nigerian Prince’ is millions of miles away from an appropriate comparison to any Nigerian tech startup dead or alive, last week that phrase was again employed in a most brutal fashion by Citron Research, a known activist stock short seller in a bid to warn investors off Jumia Technologies equity listing on the New York Stock Exchange (NYSE)
Andrew Left, founder of Citron Research in the report which cited Nigerian media articles, alleged that it had uncovered a “smoking gun” and went ahead to show why it thought Jumia’s equity was “worthless”. Citron alleged that Jumia increased its reported active customers for 2017 in the IPO prospectus, when compared with previous investor presentation.
“Not even that elusive Nigerian prince can cover this one up,” he wrote.
Jumia which lost significant share price – down nearly 15 per cent at $20.86 – as soon as the market saw the report, issued two rebuttals on Monday and Tuesday. Prior to the seven-day loss, Jumia stock was up more than 220 per cent.
Sacha Poignonnec, co-chief executive and co-founder, on Monday, said the company “completely stands by” the numbers it included in its initial public offering filings.
“We will not be distracted…by those who seek to create doubt to profit at our expense and that of our long-term stakeholders,” he said.
Juliet Anammah, CEO of Jumia Nigeria, also spoke to CNBC on Tuesday, calling the allegations “selected, biased and unverified facts with a clear intent of damaging the brand.”
Prior to Jumia’s response, Citibank had released an 11-page statement challenging some of the allegations made by Citron. The bank however said Jumia needed to be more transparent about some of the issues raised, particularly whether active user numbers were inflated and about a related-party transaction involving one of its co-chief executives.
Besides Citibank, many founders in the Nigerian tech ecosystem also did not find the entire episode particularly appealing.
The dust of where it originated stirred by Jumia’s listing document, where it designated itself a “German company” still lingers. The debate had raged for weeks both on social platforms and in the media whether it is possible for Jumia to be listed as a “German company” and still bear the nomenclature of an “African company” considering its very significant investment in the e-commerce space in Africa.
Interestingly, Citron ignored both the “German company” and “African company” claims and settled for Jumia as the “Nigerian company.”
“Despite what they are writing, making Jumia now a Nigerian company, the people who produced that report are Germans, in Germany,” Ndubusis Ekekwe, a tech expert and chairman of Fasmicro, wrote on LindkedIn. “Germany cannot win IPO and Nigeria now to pick the scandals; it will not happen.”
Bosun Tijani, co-founder of the Co-Creation Hub (CcHUB), like Ekekwe, said that the association of Nigeria with fraud not only dents the image of the country but also that of tech startups in the country. He went as far as signing a new petition ‘US Securities and Exchange Commission: SEC enforcement to investigate Andrew Left of Citron Research.’
“I am not a fan of Jumia, but dragging the tech ecosystem in Nigeria to achieve a rubbish objective is not acceptable,” he tweeted to his followers and urged them to sign the petition. As at the time of publishing this report the petition had 598 signatures to reach its target of 1,000.
Some Nigerians have also noted that the Citron allegations could indirectly be aimed at Nigeria as a country.
“As much as I think Jumia’s valuation did not show its true position, that report (by Citron) was written not to show the facts of the matter but just to say that anything out of Nigeria is fraudulent. And this take is becoming tiring,” Otarigho Omorh tweeted from the handle @o_omorh.
The SEC is yet to issue an official statement on its position but there is no gainsaying the importance of getting the narrative right. A probe from SEC on “fraud” allegations could have dire consequences for other startups from Jumia’s “native” country, Nigeria. Konga for instance is believed to be nursing dreams of listing on the NYSE. What extra price would it need to pay for carrying a “fraud” badge? In another sense, would investors become more critical of Nigerian tech startups they may like to fund?