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Nigeria’s Stock Exchange hopes to solve its currency problems by listing dollar assets

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According to a Bloomberg story, the Nigerian Exchange Ltd. has proposed allowing dollar-denominated bond listings on its platform to provide access to foreign money for firms in Nigeria.

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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 also considering expanding this possibility to include stock listings valued in dollars.

According to Temi Popoola, CEO of Nigerian Exchange Ltd., in an interview with Bloomberg, this proposal’s main objective is to make it easier for businesses to operate out of the nation’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,” Popoola said.

It might help with the problems caused by changes in foreign currency.

The action is a response to ongoing worries expressed by oil businesses, a significant industry in Nigeria, about having access to dollars to purchase raw materials.

The Reforms of President Tinubu

The lack of foreign money has persisted despite recent efforts, including revamping the foreign exchange market in June under President Bola Tinubu’s new administration, which led to a 40% devaluation of the naira.

The CEO, Popoola, did not give a particular timetable for the prospective adoption of these recommendations.

Still, 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 and remove foreign exchange controls.

Notably, the nation has ended fuel subsidies, which totaled $10 billion the year before, and started an agriculture overhaul to fight the nation’s skyrocketing food inflation.

Other projects of the NGX

Nigerian Exchange Ltd. is working with the regional Securities and Exchange Commission to alter legislation allowing certain companies to issue dividends in dollars, proposing dollar-denominated listings and foreign currency bond issuances.

In response, Popoola said, “Given the proactive stance of the present government, it is logical to believe that these goals can be reached.”

The action is anticipated to tap into large cash reserves held by institutional and retail investors, promoting a more favorable atmosphere for local listings.

However, Popoola issued the following warning: “If the target firms are unable to obtain dollars in our sector, many of them may choose to list abroad.”

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