NGX targets dollar asset listings for firms within free trade zones

In a bid to tap into reservoir of funds in companies within the free trade zones, Nigerian Exchange Limited (NGX) has revealed that it is in talks with the Securities and Exchange Commission (SEC) and other market stakeholders to accommodate dollar asset listings from firms, particularly within the free trade zone.

Chief Executive Officer, NGX, Temi Popoola, stated this during a recent interview with Bloomberg.

Whilst commending the government on reforms taken to address FX challenges in the country, Popoola noted that the Exchange features 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.

The CEO explained that disbursing dividends in dollars could potentially address the challenges posed by fluctuations in forex currently bedeviling the economy, adding that NGX is working with 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. He said, “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. 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 further noted that the Exchange’s primary objective is to enable these 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.”

Drawing parallels with 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. 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.”