Amidst the lingering crises in Nigeria’s foreign exchange market, the Chief Executive Officer, Nigerian Exchange Limited (NGX), Temi Popoola, has stated that dollar asset listings can address the challenges.
Commending the federal government’s forex reforms in an interview with Bloomberg yesterday, 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.
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.
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.”