Attractive Rates Drives Investors to FMDQ as Corporates Raise N869.39bn CPs in H1

Kayode Tokede

Corporate giants seeking to expand their business and raise quick money for working capital are taking advantage of investors’ drive for better deal to raise funds via Commercial Papers (CP) on the FMDQ Exchange, THISDAY checks has revealed.

THISDAY findings revealed that listed a whooping N869.39illion Commercial Papers on the platform of the FMDQ Exchange in the first half of 2023. 

CP is an interest-bearing promissory note exchanged for capital. It is a credit instrument or a channel to obtain loans from the securities market without approaching the bank.

The commercial paper is issued by a corporate organisation in need of funds for short-term financial obligations, which include; working capital, and refinancing debt, amongst others.

A breakdown of data obtained from FMDQ showed a total N83.20 billion CPs was listed in January and the figure increased to N101.84 billion in February 2023.

It closed March 22023 at N354.18billion but dropped to N114.27billion in April 2023.

The total value of CPs quoted on FMDQ Exchange in June 2023 was N52.13billion, representing a Month-on-Month (MoM) decrease of 68.17 per cent (N111.64 billion) from the value of CPs quoted in May 2023.

In the period under review, Flour Mills of Nigeria Plc, Nigerian Breweries Plc and MTN Nigeria Communication Plc were some of heavy weights that have listed CPs on FMDQ Exchange while FGN Bonds dominated listings on the Nigeria Exchange Limited (NGX).

For instance, MTN Nigeria Communication in the period under review successfully completed its series 4 & 5 CP issuance under N150 billion CP issuance Programme.

Company secretary, MTN Nigeria, Mr. Uto Ukpanah stated that it sought to raise N100 billion and the transaction was 125 per cent subscribed with a total of N125billion to enable the company to disburse the fund on short-term working capital and funding requirements.

In a statement, he said; “MTN Nigeria sought to raise N100 billion, and the transaction was 125% subscribed, with a total of A125 billion raised.

“MTN Nigeria issued 188-day commercial papers at a yield of 11.00% and 267-day commercial papers at a yield of 12.50%. The CP Issuance was completed on 1 March 2023.

“The CP Issuance is part of MTN Nigeria‘s strategy to diversity its funding options. The proceeds will be utilised for its short-term working capital and funding requirements,” the document reads.”

Dangote Cement quoted N44.00 billion Series 4 and N46.00 billion Series 5 CP under its N150 billion CP Programme while Nigerian Breweries listed N16.49 billion Series 1, N5.03 billion Series 2, and N45.74 billion Series 3 CPs under its N100 billion CP.

In addition, Flour Mills of Nigeria declared N13.33 billion Series 1 and N51.64 billion Series 2 CP under its N200.00 billion CP Issuance programme.

According to THISDAY findings, corporate entities listed on the NGX stood at N204.66billion and was dominated by Dangote Industries Funding Plc that listed N112.42billion in March 2023.

Among the top corporate listings were; Africa Plus Partners Nigeria Limited with N21.65billion mutual fund, Africa Infra Plus 1, the first Carbon Plus naira-denominated fund to be listed on the Exchange.

Speaking with THSIDAY, the chief operating officer, InvestData Consulting Limited, Mr. Ambrose Omordion, attributed increasing CPs by corporate firms operating in Nigeria to attractive interest rate amid 18.75 per cent Monetary Policy Rate (MPR).

According to Omordion, rates at CPs are attractive and firms are utilizing that opportunity to access capital needed to expand and boost their working capital.

He explained further that potential in Nigeria’s economy despite contractions in February and March of 2023 gives room for firms to borrow.

On his part, the Vice President, Highcap Securities Limited, Mr David Adnori said that corporate firms opted to access corporate bond and CPs over hike in inflation rate and cost of accessing capital from financial institutions.

Meanwhile, the FMDQ in its monthly report disclosed that dollar at the investors & Exports Foreign Exchange (I & E FX) appreciated against the naira, with the spot exchange rate increasing by 35.07per cent or N162.51/ dollar to close at an average of N625.90 /dollar n June 2023 from N463.39/ dollar recorded in May 2023.

Further, exchange rate volatility spiked in June 2023 as the Naira traded within an exchange rate range of N464.67 – N770.38/ dollar compared to N462.23 – N465.13/ dollar recorded in May 2023.

Analysts at Coronation in a report said, “In our base case scenario, we see the foreign exchange rate at the I&E FX window at N505/ USD by end-2023.

“We considered: stable growth in non-oil exports boosted by the RT 200 foreign exchange program, continuous injections by the CBN (avg. seven per cent of total inflows on a m/m basis), halt to fuel subsidy payments by end-H1 2023.”

Analysts at Emerging Africa expressed that there is a possibility of another devaluation of the Naira   by the CBN in 2023 in order to enable the reflection of current economic realities.

They stated, “We expect the trend of failing reserves to be sustained in 2023 on the back of the limited foreign investment inflows and increasing foreign exchange demand barring any major structural reforms in the Nigerian foreign exchange market.

“However, the possible removal of fuel subsidiary will improve the growth of the reserves and provide the CBN with resources to defend the Naira.”