Nigerian Exchange Limited (NGX) has disclosed that it is working with the Central Securities Clearing System (CSCS) Plc and Euroclear to create a dollar settlement platform that will enable tech startups to raise in dollars.
The Exchange stated that this would create opportunities for domestic investors to have access to their shares and at the same time, contribute to the growth of the Nigerian economy through democratization of capital formation.
Speaking during the Annual A&O Fintech webinar themed; Fueling Fintech: The Power of Capital, the Role of Regulation, the Divisional Head, Capital Markets, NGX, Jude Chiemeka, noted that although public markets are viable options for raising capital, fintechs have preferably opted for private markets because of regulatory rule of disclosure and stricter governance requirements that is necessary for listing publicly.
He explained that to address this issue, NGX received approval from the Securities and Exchange Commission (SEC) to launch a technology board for fintechs and tech companies to raise capital. Chiemeka stressed that the tech board is geared at encouraging tech firms to come to the market and raise capital in local currency, which would prove beneficial amid the high interest rate environment that had made foreign investors hawkish.
Whilst stating that the issue of settlements may discourage fintechs from accessing capital in US dollars on the public market, Chiemeka revealed that the Exchange was working on a partnership that is directed at fixing that problem.
He said, “NGX is working with CSCS and Euroclear to create a dollar settlement platform that allows tech companies (start-ups or existing ones) to raise capital in dollars. We have reviewed listing procedures for tech companies who want to list. Requirements around number of shareholders, years of operation among others have been relaxed to catalyse these listings.”
Owing to the high interest rate environment, Chiemeka said that domestic investors had been allocating their Assets under Management (AuM) to majorly FGN bonds. He further revealed that there had been more outflows than inflows from FPIs and that had impacted the performance of equities in recent times, especially as regards volume and value of transactions. He called on the present administration to eke out deliberate and enabling policies to drive listings on the exchange’s platform.
“The government needs to be deliberate on policies that will encourage corporates to list and now that it is thinking of creating palliatives due to removal of subsidy, they can also consider those that will incentivise companies list and see the domestic capital markets as choice platforms to raise capital. Publicly traded companies pay more taxes and are better governed so there is an upside for government in driving more listings. This will go a long way to encourage these institutions to look into the local markets.” Chiemeka said.