Nigerian Exchange Limited (NGX) recently revealed its collaboration with the Central Securities Clearing System (CSCS) Plc and Euroclear to establish a platform for dollar settlements. This move aims to aid tech startups in acquiring foreign currency for capital funding.
The creation of this settlement platform, according to NGX, would offer domestic investors the chance to access their shares and contribute to Nigeria’s economic growth by democratizing capital formation.
During the Annual A&O Fintech webinar themed ‘Fueling Fintech: The Power of Capital, the Role of Regulation’, Jude Chiemeka, Divisional Head of Capital Markets at NGX, emphasized the challenges faced by fintech companies when considering public markets for capital raising. He mentioned that stringent disclosure rules and governance requirements associated with public listing often drive fintechs toward private markets.
To counter this issue, Chiemeka noted that NGX secured approval from the Securities and Exchange Commission (SEC) to establish a technology board for fintech and tech companies seeking capital.
The technology board’s primary aim is to motivate tech firms to seek capital in the local currency due to the prevailing high interest rate environment, which has made foreign investors more cautious.
Chiemeka acknowledged that settlement concerns might discourage fintechs from seeking dollar-denominated capital on the public market. He disclosed that NGX, in collaboration with CSCS and Euroclear, is working on a solution to this problem.
He mentioned, “NGX is partnering with CSCS and Euroclear to establish a dollar settlement platform, allowing tech companies—both startups and existing ones—to raise capital in dollars. We’ve revised the listing procedures for tech firms, relaxing requirements on shareholders and years of operation to stimulate these listings.”
Chiemeka also pointed out that domestic investors tend to allocate their Assets under Management (AuM) primarily to FGN bonds due to the high-interest rate environment.
He expressed concern over the imbalance between outflows and inflows from Foreign Portfolio Investors (FPIs), impacting equity performance recently, particularly transaction volume and value.
Chiemeka called upon the current administration to adopt intentional and supportive policies to encourage listings on NGX’s platform.
“The government should implement policies that motivate companies to list. As it considers measures related to the removal of subsidies, it could also explore incentives for companies to list, making the domestic capital markets an attractive choice for capital raising. Publicly traded companies contribute more taxes and are better governed, providing benefits to the government by promoting increased listings. This would significantly encourage institutions to explore local markets,” Chiemeka emphasized.