Mixed reactions have trailed the proposal by the Nigerian Exchange Limited to allow dollar-denominated listings on the local bourse in a bid to improve the country’s current forex challenges.
The Chief Executive Officer of NGX, Temi Popoola, had on Tuesday, said that selected companies would be allowed to offer the dollar-denominated assets.
He said, “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.”
In a fresh statement issued by the NGX on Wednesday, Popoola, reiterated that the proposal, which did not have a timeline yet, presented an opportunity for companies with diverse business models, some of which not only generated revenue in dollars but also reported profits in dollars.
“This presents an investment opportunity especially if these firms could distribute their dividends to local investors in dollars,” he said.
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The NGX CEO explained that disbursing dividends in dollars could potentially address the challenges posed by fluctuations in forex currently bedevilling the economy.
He added that NGX was working with SEC and other market stakeholders to create a revised listing regulation for companies within the free trade zones that had their topline revenue to bottom-line in dollars.
Aremu added that the proposal would also be able to take care of the appetite of Nigerians who had been wanting to trade in foreign assets from Nigeria.
He said, “In recent times, there has been an appetite among Nigerians to trade foreign stocks and bonds. I have even such clients. It is a good development when we can now do such on the Nigerian Exchange. The benefits are quite enormous. Listing on the NGX also helps to increase the market cap.”
However, former Statistician General of the Federation, Dr Yemi Kale was not keen on the move.
Reacting via his X handle (formerly Twitter), Kale said, “If firms raise dollar debt, they also have to repay in dollars. So, a firm issues dollar bonds to make FX transactions e.g imported inputs. It produces and sells its products in naira, then has to convert profit back to dollars to pay investors at maturity. See the risk?
Kale, who is the partner, chief economist with KPMG NG, added, “Majority of Nigerians also don’t earn dollars but convert to dollars to hedge against purchasing power depreciation. So once the existing supply goes into bonds, where will the extra come from without further pressure on FX rate? That takes us to attract foreign capital to those bonds since domestic is limited. What rate will you have to make the dollar bonds to attract them? Has to be much higher than what obtains in their country which is about 4-6 per cent presently to account for the huge risk involved.
