The Nigerian Exchange Limited (NGX) has advocated a new policy to allow to permit dollar-denominated bond listings on its platform, potentially expanding their stocks too, with the aim of easing their difficulty in accessing hard currency in the most populous black nation on earth.
CEO of Nigerian Exchange Ltd, Temi Popoola, speaking to Bloomberg said the primary goal of this proposal is facilitating companies operating from the country’s special economic free trade zones, as well as those generating revenue in foreign currency.
He explained that disbursing dividends in dollars could potentially address the challenges posed by fluctuations in forex currently bedevilling the economy, adding that NGX is working with the Securities and Exchange Commission, SEC, and other market stakeholders to create a revised listing regulation for companies within the free trade zones who had their topline revenue to bottom-line in dollars.
Explaining further on companies within the free trade zone, Popoola said that some of these companies’ financial structures may not align with an Initial Public Offering (IPO) in local currency, which could push them abroad.
CEO of Nigerian stock exchange applauds forex reforms and dollar revenue companies
Popoola commended the government’s forex reforms and highlighted that some companies listed on the Exchange generate revenue and report profits in dollars.
He emphasized the potential for investment if these firms could distribute dividends to local investors in dollars, which could mitigate the impact of forex fluctuations.
The NGX is collaborating with the Securities and Exchange Commission (SEC) and other market stakeholders to revise listing regulations for companies in free trade zones that have dollar-based revenue.
Popoola explained that this move could prevent such companies from seeking foreign listings due to currency misalignment.
He also underscored the importance of tapping into the available dollar liquidity in Nigeria’s domestic capital market for both retail and institutional investors.
The Exchange aims to facilitate the issuance of dollar denominated bonds and eventually dollar equity to attract listings and align with national objectives.