By Chinwendu Obienyi
To aid investors access to ordinary shares of offshore companies or foreign securities, the Nigerian Exchange Limited (NGX), on Thursday, announced that it is looking at introducing Nigerian Depository Receipts (NDRs).
The Exchange also identified the tokenisation of Nigerian assets as a smart way to attract “Gen-Zs and Millennials” to the investment market.
The Chief Executive Officer, Jude Chiemeka, stated this at an Investor Education Series webinar themed; Nigerian Depository Receipt: Unlocking Global Investment Opportunities in Nigeria’s Capital Market.
While stating that the webinar was part of the exchange’s ongoing efforts to drive innovation and diversify investment offerings within the capital market, Chiemeka explained that the exchange is exploring innovative avenues to modernize its operations and attract a broader range of investors, including the introduction of depository receipts.
“As we stand at this pivotal moment in Nigeria’s capital market, the introduction of NDRs will serve as a novel product and will be a landmark achievement as the first of its kind in West Africa, thus representing a transformative milestone in our financial ecosystem. This instrument will provide investors with diversified opportunities by granting access to foreign securities and play a significant role in enhancing market liquidity and encouraging portfolio optimisation”, he said.
According to him, the concept of depository receipts which dates back to 1927 with JP Morgan’s pioneering efforts, has since become a cornerstone of international finance.
“Recent data from JP Morgan indicate that depository receipts trading value reached $22.1 billion as at December 16, 2024. The B3 is a remarkable success story with its Brazilian Depository Receipt Programme listing over 1000 Brazilian Depository receipts and that will be 833 stocks BDRs and 234 ETL BDRs and managing assets over $4.3 billion as at the end of 2023.
The achievement has attracted more than 1 million retail investors, international securities, significantly enhancing market liquidity and demonstrating how depository receipts can effectively connect local investors to global opportunities”, the NGX CEO said.
He added that this innovative financial instrument aligns Nigeria with global trends and aims to attract diverse investor classes, including Pension Fund Administrators (PFAs), institutional investors, high-net-worth individuals, and retail investors.
Chiemeka also the NGX will leverage tokenisation and blockchain-like solutions to appeal to Gen-Zs and Millennials, offering modernized, high-yield investment opportunities.
Gen Zs and Millennials may not find assets with 40% returns exciting enough. They are more drawn to opportunities that promise double or triple those returns,” he said.
On how the exchange has improved market liquidity, the CEO pointed to strategies such as efficient market-making, securities lending, and increasing retail participation. These efforts, he noted, aim to bring the NGX closer to the standards of international markets.