Nigeria’s Capital Market Authority Mulls Dollar-denominated Bond, Stock Listings

The Nigerian Exchange Limited (NGX) has proposed the listing of dollar-denominated bonds and stocks in the capital market to help improve the challenges in the foreign exchange market.

Companies operating at the free trade zones and firms that earn in dollars will participate in the dollar-denominated listings, according to NGX Chief Executive Officer, Temi Popoola.

Popoola said the introduction of the dollar-denominated bond and stock will be crucial to the reform of the foreign exchange market, and there’s already a positive reaction from the Federal Government towards the proposal.

The NGX chief said scarcity of the United States currency could force firms to take their listings abroad if companies continue to struggle to obtain foreign exchange in the Nigerian market.

“Our primary objective is to enable these companies to issue bonds denominated in dollars and eventually offer equity in dollars as well. It could potentially address the challenges posed by fluctuations in foreign currency,” Popoola said in a Bloomberg report on Tuesday.

Popoola further stated that: “If the target companies cannot access dollars within our market, many of them may opt to list abroad,”

According to Popoola, given the proactive stance of the current administration, it is reasonable to anticipate that the objectives of the initiatives can be achieved.

His statement followed a report that Nigeria’s external reserves stood at $3.7 billion as of the end of 2022, not $37.08 billion as reported by the Central Bank of Nigeria (CBN).

This was disclosed by JP Morgan, a United States-based financial institution. The firm also stated that the foreign reserves dropped by $10.3 billion or 73.5 per cent from the $14 billion reported at the end of last year.

Note that JP Morgan also clarified that the external reserves reported by the firm are based on limited information, so the figure might not be the actual foreign reserves.