Nigeria Plans Dollar Asset Listings To Ease Forex Woes

Nigeria Plans Dollar Asset Listings To Ease Forex Woes

The Nigerian stock exchange is considering the possibility of allowing dollar-denominated bond listings and potentially extending this to stocks, aiming to facilitate foreign currency accessibility for companies within Africa’s largest economy.

Nigerian Exchange Ltd., under the leadership of CEO Temi Popoola, is specifically targeting companies operating from the country’s special economic free trade zones and those generating foreign currency revenue.

Popoola mentioned, “Our primary goal is to enable these companies to issue bonds in dollars and eventually offer equity in dollars as well, which could potentially address the challenges caused by fluctuations in foreign currency.”

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Companies in Nigeria’s oil sector, a significant producer of crude oil, consistently highlight their difficulties in accessing dollars for raw materials. Despite a recent foreign-exchange market overhaul that led to a 40% depreciation of the naira to attract inflows, the shortage of dollars remains unresolved under the administration of President Bola Tinubu.

The official exchange rate of the naira to the dollar stands at 770.72 according to FMDQ OTC Securities Exchange, while it’s 906 naira on the parallel market, as reported by Abubakar Mohammed, the CEO of Forward Marketing Bureau de Change Ltd., which tracks informal market data.

Although no specific timeline was provided for implementing these proposals, Popoola mentioned that the government has displayed a keen interest in comprehensive market reforms. Changes to listing regulations could be realized relatively quickly.

In addition to easing foreign exchange controls, Nigeria has recently discontinued fuel subsidies and initiated agricultural reforms to combat rising food inflation.

Apart from facilitating foreign-currency bonds and listings, the stock exchange is collaborating with the local Securities and Exchange Commission to amend regulations, allowing selected companies to pay dividends in dollars. Popoola expressed optimism, stating that the current administration’s proactive approach suggests these goals are attainable.

Both retail and institutional investors possess substantial amounts of dollars that can be harnessed by domestic capital markets to encourage more local listings.

Popoola emphasized the importance of enabling target companies to access dollars within the domestic market to prevent them from seeking listings abroad.