NGX Collaborates with CSCS and Euroclear to Create Dollar Settlement Platform for Tech Startups

In a bid to boost capital formation and support the growth of tech startups in Nigeria, the Nigerian Exchange Limited (NGX) has announced a partnership with the Central Securities Clearing System (CSCS) Plc and Euroclear to develop a dollar settlement platform. This platform will enable tech startups to raise capital in foreign currency, providing opportunities for domestic investors to have access to shares and actively contribute to the growth of the Nigerian economy.

The decision to create this platform was driven by the preference of fintech firms to raise capital through private markets rather than publicly listing on stock exchanges. The strict disclosure rules and governance requirements associated with public listing have deterred many tech firms from considering public markets as a viable option for raising capital.

To address this challenge, the NGX received approval from the Securities and Exchange Commission (SEC) to launch a technology board specifically designed for fintech and tech companies seeking to raise capital. This tech board aims to encourage tech firms to tap into the local market for capital raising in the local currency, which is particularly advantageous in the current high interest rate environment that has made foreign investors cautious.

The Divisional Head of Capital Markets at NGX, Jude Chiemeka, emphasized the importance of the dollar settlement platform. He highlighted that settlements in foreign currency may discourage fintechs from accessing capital in dollars through the public market. Therefore, the collaboration with CSCS and Euroclear is crucial in creating a platform that enables tech startups to raise capital in dollars.

Chiemeka 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 reviewed listing procedures for tech companies who want to list. Requirements around several shareholders and years of operation, among others, have been relaxed to catalyze these listings."

Currently, domestic investors primarily allocate their Assets under Management (AuM) to FGN bonds due to the high-interest rate environment. This has resulted in more outflows than inflows from Foreign Portfolio Investments (FPIs), negatively impacting the performance of equities in recent times.

In light of this, Chiemeka called on the government to adopt deliberate and enabling policies that incentivize companies to list on the NGX platform. By encouraging more listings, the government can stimulate economic growth and benefit from increased tax revenue generated by publicly traded companies. Chiemeka emphasized that publicly traded companies offer better governance structures, making them attractive investment options.

In conclusion, the collaboration between NGX, CSCS, and Euroclear to establish a dollar settlement platform for tech startups is a significant step in facilitating capital raising in foreign currency. This initiative not only provides new opportunities for tech firms but also encourages domestic investors to actively participate in the growth of the Nigerian economy.

Source of content: OOO News 2023-08-11 News

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