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 would enable tech startups to raise capital in foreign currency.
According to the exchange, this would create opportunities for domestic investors to have access to their shares and contribute to the growth of the Nigerian economy through democratisation 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, decried that even though public markets are viable options for raising capital, fintech firms have preferably opted for private markets because of disclosure rule and stricter governance requirements that are necessary for listing publicly.
To address this issue, he pointed out that the NGX received approval from the Securities and Exchange Commission (SEC) to launch a technology board for fintech and tech companies to raise capital.
Chiemeka stressed that the tech board is aimed at encouraging tech firms to approach the market for capital raising in local currency which is beneficial to them 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 dollars on the public market, Chiemeka revealed that the Exchange was working on a partnership that is geared towards tackling the 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 several shareholders, and years of operation among others have been relaxed to catalyse these listings.”
Chiemeka said that domestic investors had been allocating their Assets under Management (AuM) to majorly FGN bonds due to the high-interest rate environment.
He further lamented that there had been more outflows than inflows from FPIs which has impacted the performance of equities in recent times, especially as regards the volume and value of transactions.
Therefore, he called on the present administration to adopt 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 the removal of subsidy, they can also consider those that will incentivize companies to 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 the government in driving more listings. This will go a long way to encourage these institutions to look into the local markets.” Chiemeka said.
