Nigeria’s stock exchange proposes allowing dollar-denominated bond listings and potentially expanding this to stocks, with the aim of easing foreign currency access for companies in Africa’s biggest economy.

Nigerian Exchange Ltd. is targeting companies operating from the country’s special economic free trade zones and those earning foreign currency, according to Chief Executive Officer Temi Popoola.

“Our primary objective is to enable these companies to issue bonds denominated in dollars and eventually offer equity in dollars as well,” he said in an interview. “It could potentially address the challenges posed by fluctuations in foreign currency.”

Oil companies in Africa’s biggest producer of crude consistently cite access to dollars for raw materials as their biggest challenge. Even an overhaul of the foreign-exchange market in June under the new administration of President Bola Tinubu, which led to a 40% depreciation of the naira to attract inflows, is yet to ameliorate the shortage.

The naira traded at 770.72 per dollar at the official market on Tuesday, according to FMDQ OTC Securities Exchange, a Lagos-based platform that oversees foreign-exchange trading. However, it was 906 naira on the parallel market, said Abubakar Mohammed, chief executive officer of Forward Marketing Bureau de Change Ltd., which compiles data on the informal market.

Market Reforms

Popoola couldn’t give a timeline for when the proposals may be implemented, but said the government had shown it was keen on broad market reforms. Changes to listing regulations can be achieved within a “relatively short time,” he said.

Other than easing foreign-exchange controls, Nigeria has also ended fuel subsidies that cost $10 billion last year and started overhauling farming to curb soaring food inflation.

Besides listing and issuing foreign-currency bonds, the bourse is working with the local Securities and Exchange Commission to amend regulations so selected companies can pay dividends in dollars, Popoola said.

“Given the proactive stance of the current administration, it is reasonable to anticipate that these objectives can be achieved,” he said.

Both retail and institutional investors have “substantial” amounts of dollars that domestic capital markets can tap to encourage more local listings.

“If the target companies cannot access dollars within our market, many of them may opt to list abroad,” he said.

(Updates with exchange rate in fifth paragraph)