IPO Market Remain in Limbo as Corporates Raised N1.74trn Via CPs, Bonds in Nine Months

Kayode Tokede

As investors appetite for Nigeria’s Initial Public Offering (IPO) marker continue to dwindle, firms operating in Nigeria have resorted to Commercial Papers or CPs and bonds raising a whooping N1.74 trillion via CPs and Corporate Bonds in nine months of 2023.

This represents an increase of 92.6 per cent from N905.37 billion raised in nine months of 2022 and it is coming on the backdrop of expanding business operations.

Analysis of trading numbers showed that the total outstanding value of new CPs in nine months of 2023 stood at N1.401trillion as against N576.29 billion total outstanding value of new CPs in nine months of 2022, while total corporate bonds was N341.92billion in nine months of 2023, representing an increase of 3.9 per cent over N329.08 billion in nine months of 2022.

CP is an unsecured form of promissory note that pays a fixed rate of interest. It is typically issued by large corporations to cover short-term receivables, and meet short-term financial obligations, such as funding for a new project.

According to FMDQ Exchange’s financial markets monthly report, the firms varied across real estate, financial services, agriculture and manufacturing, technology, among other sectors.

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 N125 billion 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 125per cent 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 per cent. 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.

The telecommunication giant in August 2023 also disclosed that it successfully completed its Series 6 & 7 CP issuance under its upsized N250billion CP Issuance Programme with 146 per cent oversubscription by investors.

The telecommunication giant in a notice said it wanted to raise N100 billion, and the offer recorded 146 per cent subscription with N125 billion issued across both series

Ukpanah had said the offer represents the largest aggregate CP issuance within a calendar year by any corporate in Nigeria’s debt capital markets.

MTN Nigeria issued 181-day CP at yield of 13 per cent and 265-day CP at a yield of 13.50 per cent, with an issue date of August 23, 2023.

Ukpanah stated that the CP issuance aligns with MTN Nigeria’s strategy to continue diversifying its funding sources and reducing its average cost of debt.

“The proceeds will be applied towards short-term working capital requirements,” he said.

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.

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.

Early in the year, Nigerian Breweries Plc quoted N16.49 billion Series 1, N5.03 billion Series 2, and N45.74 billion Series 3 CPs under its N100 billion CP Programme were admitted on the FMDQ Securities Exchange Limited.

The brewer’s CPs met the FMDQ Exchange Commercial Paper quotation requirements and was approved by the Board Listings and Markets Committee of FMDQ Securities Exchange Limited (FMDQ Exchange).

According to the report by FMDQ Exchange, the outstanding value of admitted CPs securities stood at N6.5trillion in nine months of 2023, while outstanding value of admitted corporate bonds stood at N15.03trillion.

In September 2023, FMDQ Exchange total outstanding value of admitted CPs dropped to N926.41billion from N N1.03trillion in August.

The total outstanding value of admitted CPs on the exchange was N949.26 billion in July 2023, N831.94 billion in June, and N788.43 billion in May. In April it stood at N715.28 billion, N669.36 billion in March, N366.25 billion in February and N221.56 billion in January.

Commenting, 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 explained that corporate firms opted to access corporate bond and CPs over hike in inflation rate and cost of accessing capital from financial institutions