The Nigerian Exchange Limited (NGX) has revealed plans to allow companies to list bonds denominated in dollars on the stock exchange, with the potential to extend this to stocks as well. The aim is to alleviate the challenges faced by companies operating in Nigeria’s special economic free trade zones and those earning foreign currencies, making it easier for them to access hard currency in the country.
Temi Popoola, CEO of NGX, stated that the initiative seeks to enable companies to issue bonds and eventually equities in dollars, aiming to address the issues caused by currency fluctuations. The ability to list and issue foreign-currency bonds will provide companies with a way to raise funds in dollars, mitigating the impacts of currency volatility.
Popoola emphasized that the government’s willingness to consider market reforms has increased the likelihood of success, and regulatory changes to facilitate these listings could be implemented relatively quickly.
NGX is also working with the Securities and Exchange Commission (SEC) to amend regulations to allow selected companies to pay dividends in dollars. This initiative is expected to tap into the substantial amounts of dollars held by both retail and institutional investors in Nigeria’s capital markets.
However, there are differing opinions on the potential impact of dollar-denominated investments. Some stakeholders express concerns about the risks associated with dollar debt, highlighting the need for companies to repay in dollars, potentially exacerbating currency risk. Others see the move as a way to unlock dormant dollar funds and encourage foreign portfolio investment (FPI).
Naira-denominated investments have faced challenges due to the devaluation of the naira, leading investors to seek dollar-denominated assets to hedge against currency depreciation. The proposal to introduce dollar-denominated listings aims to provide more options for investors and companies to navigate currency fluctuations and access foreign currency within Nigeria’s economy.
Businessday