Nigerian Exchange Limited (NGX) says it is working with the Central Securities Clearing System Plc (CSCS) and Euroclear to create a US$ settlement platform that will enable tech startups raise capital in US Dollars.
This, it said in a statement, will create opportunities for domestic investors to access 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 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.
This, he added, is because the issue of settlements may discourage fintechs from accessing capital in US Dollars on the public market, following which the Exchange is working on a partnership directed at fixing that problem.
He also assured that the Exchange has “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.”
Chiemeka added that although public markets are viable options for raising capital, fintechs have preferably opted for private markets because of regulatory requirement for disclosure and stricter governance requirements necessary for listing publicly.
To address this issue, he continued, the NGX received approval from the Securities and Exchange Commission (SEC) to launch a technology board for fintechs and tech companies for raising capital.
He further 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.
Owing to the high interest rate environment, Chiemeka said that domestic investors had been allocating their Assets under Management (AuM) to majorly FGN bonds, lamenting that there had been more outflows than inflows from Foreign Portfolio Investors, a situation that had impacted the performance of equities in recent times, especially as regards volume and value of transactions.
He, therefore, challenged the present administration to fashion deliberate and enabling policies to drive listings on the exchange’s platform.
According to him, “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.