NGX mulls dollar-denominated bond, stock listings to boost FX liquidity

The Nigerian Exchange Limited (NGX) has disclosed its proposal to allow companies list bonds denominated in dollars on the bourse.

Temi Popoola, chief executive officer of NGX, spokes during a recent interview with Bloomberg.

He said the exchange is also contemplating extending the opportunity to include dollar-denominated stock listings.

“Our primary objective is to enable these companies to issue bonds denominated in dollars and eventually offer equity in dollars as well,” he said.

“It could potentially address the challenges posed by fluctuations in foreign currency.”

While commending the government on reforms taken to address foreign exchange (FX) challenges in the country, Popoola said the exchange featured a number of companies with diverse business models, some of which not only generate revenue in dollars but also report profits in dollars.

“This presents an investment opportunity especially if these firms could distribute their dividends to local investors in dollars,” he said.

Popoola explained that disbursing dividends in dollars could potentially address the challenges posed by currency fluctuations as well as increase the availability of forex.

He also said that the 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 top-line revenue to bottom-line in dollars.

Speaking further on companies within the free trade zone, Popoola said that some of their financial structures may not align with an initial public offering (IPO) in local currency, which could push them abroad.

“If they (some companies) were to conduct an initial public offering (IPO) in Naira, it may not align with their capital structure. So if they cannot access dollars within our market, many of them may opt to list abroad,” he said.

“It is worth noting that a substantial amount of dollar liquidity is available to both retail and institutional investors in Nigeria. It is imperative that our domestic capital market taps into this reservoir of funds.”

Popoola said the exchange’s primary objective is to enable the companies issue bonds denominated in dollars and eventually offer dollar equity.

“This can help attract listings and achieve the objectives of the administration under President Bola Tinubu,” he said.

Drawing parallels between Jamaica and Zimbabwe where provisions exist for certain companies to list in dollars while conducting business within the framework of their local currency, Popoola said NGX is keen to channel the dormant capital lying idle in domiciliary accounts into the capital market.

“Initiatives like domestic trading of Eurobond on the Exchange will play a crucial role in catalyzing this and we will be working with the Central Bank on that,” he said.

“Regulations can enable companies who earn in dollars pay their dividends in dollars and we are optimistic of achieving swift implementation following the pace of reforms by the new government.”