The Nigerian Exchange Limited (NGX) is partnering with the Central Securities Clearing System (CSCS) Plc and Euroclear to establish a dollar settlement platform aimed at enabling tech startups to raise funds in dollars.
This initiative from the Exchange aims to provide opportunities for domestic investors to access shares and simultaneously contribute to Nigeria’s economic growth through the democratisation of capital formation.
During the Annual A&O Fintech webinar themed: “Fueling Fintech: The Power of Capital, the Role of Regulation,” Jude Chiemeka, the Divisional Head of Capital Markets at NGX, highlighted that although public markets are viable avenues for capital raising, fintechs often prefer private markets due to regulatory disclosure rules and stringent governance requirements that come with public listing.
To address this challenge, NGX obtained approval from the Securities and Exchange Commission (SEC) to introduce a technology board tailored for fintechs and tech companies seeking to raise capital.
Chiemeka emphasised that the tech board aims to encourage tech firms to enter the market and raise capital in the local currency. This is especially beneficial in the current high interest rate environment that has made foreign investors more cautious.
Acknowledging that settlement concerns could deter fintechs from accessing capital in US dollars on the public market, Chiemeka revealed that the Exchange is working on a partnership to address this issue.
He stated, “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 revised the listing procedures for tech companies interested in listing. Requirements related to the number of shareholders, years of operation, among others, have been eased to stimulate these listings.”
Due to the prevailing high interest rate environment, Chiemeka noted that domestic investors have been channeling their Assets under Management (AuM) primarily into FGN bonds.
Furthermore, he disclosed that there has been more capital outflow than inflow from Foreign Portfolio Investors (FPIs), which has affected the performance of equities in recent times, particularly in terms of transaction volume and value. He called on the current administration to institute deliberate and supportive policies that encourage listings on the exchange’s platform.
Chiemeka stated, “The government needs to deliberate on policies that will incentivise corporations to list. Given that publicly traded companies pay more taxes and have better governance, there is an upside for the government in driving more listings. This will greatly encourage these institutions to consider the local markets as preferred platforms for raising capital.”
