The Nigerian Exchange Ltd. has proposed allowing dollar-denominated bond listings on its platform in an effort to provide access to foreign currency for firms in Nigeria.
Bloomberg reported that this effort is viewed as a viable remedy for the problems with foreign exchange that businesses in Africa’s biggest economy encounter.
The Nigerian Exchange is additionally contemplating expanding this possibility to include stock listings valued in dollars.
According to the CEO of Nigerian Exchange Ltd., Temi Popoola, this proposal’s main objective is to make it easier for businesses to operate out of the country’s special economic free trade zones and generate foreign currency earnings.
“Our main goal is to enable these companies to issue bonds denominated in dollars and ultimately to offer equity in dollars, it might help with the problems caused by changes in foreign currency,” Popoola said.
The action is a response to ongoing worries expressed by oil businesses, a significant industry in Nigeria, about having access to dollars for the purchase of raw materials.
The lack of foreign currency has persisted despite recent efforts, including the revamping of the foreign exchange market in June under President Bola Tinubu’s new administration, which led to a 40% devaluation of the naira.
Popoola did not give a particular timetable for the prospective adoption of these recommendations, but he did mention that the government has shown a strong interest in more comprehensive market reforms. He also emphasized the potential for listing regulations to be changed in a rather short amount of time.
Nigeria has done things to address other economic issues in addition to removing foreign exchange controls. Notably, the country has ended fuel subsidies, which totaled $10 billion the year before, and started an agriculture overhaul to fight the country’s skyrocketing food inflation.
Nigerian Exchange Ltd. is working with the regional Securities and Exchange Commission to alter legislation that would allow certain companies to issue dividends in dollars, in addition to proposing dollar-denominated listings and foreign currency bond issuances.
In response, Popoola said, “Given the proactive stance of the current administration, it is reasonable to anticipate that these objectives can be achieved.”
The action is anticipated to tap into large cash reserves held by institutional and retail investors, providing a more favourable atmosphere for local listings.
However, Popoola issued the following warning: “If the target companies cannot access dollars within our market, many of them may choose to list abroad.”