Experts, yesterday, lauded the Nigerian Exchange Limited (NGX)’s proposed dollar asset listings for firms within the free trade zones, stating that it is a brilliant move and will ‘bring to life’ ‘dead’ dollars in domiciliary accounts and address Nigeria’s FX challenges.
The Chief Executive Officer, Temi Popoola, in an interview with Bloomberg, had revealed that it is discussing with the Securities and Exchange Commission (SEC) and other market stakeholders to accommodate dollar asset listings from companies, particularly within the free trade zone.
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 oppourtunity 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.”
denominated in dollars and eventually offer dollar equity. “This can help attract listings and achieve the objectives of the administration under President Tinubu,” he said.
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.”
Reacting, market operators who spoke during a programme monitored by Daily Sun, said that the fate of the Naira has been worsened by the COVID-19 pandemic and its current devaluation means that local investors have to invest in dollar denominated assets to hedge against the depreciation.
Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, stated that although the Naira has not been able to achieve convergence since the unification of FX windows, the stock market’s strategy is a positive one. He said, “It is positive that we are even beginning to think in that direction. It simply means that in the near future, we will be able to achieve local currency convertibility and trade other currency instruments on our bourse”.
For his part, Kalu Aja, a policy analyst, said, “NGX proposing this is a brilliant move. If the FG issues a dollar savings bond that pays 4 per cent with $1000 minimum investment, it will be over-subscribed and so money talks. Nigerian PFAs that cannot invest abroad and want to hedge Naira exposure can buy these 4 per cent and local investors that want to earn dollars in revenue can do so without going via apps or foreign investors”.(The Sun)
