Commercial papers up 89% in H1 as firms raise N789 bn

The issuance of business papers in Nigeria surged by 89 % within the first half of 2023, with companies elevating a complete of N789 billion from the short-term debt instrument, BusinessDay’s findings have revealed.

Information sourced from FMDQ Group confirmed the worth of business papers recorded 104 issuances with a complete worth of N789.20 billion in comparison with 55 issuances with a complete worth of N498.52 billion within the first half of 2022.

“The business paper market skilled a surge in actions as corporations sought to handle their working capital and financing wants amidst the money crunch firstly of the yr,” Merristem stated in a report.

Henry Obiekea, managing director of FairMoney Nigeria, a monetary expertise firm and credit-led digital financial institution stated his agency’s determination to situation N2.5bn business paper within the first half of 2023 was a key technique geared toward accessing native capital to drive enterprise progress.

“The business paper and the primary issuance are a part of our underlying funding technique to assist drive the enterprise. After we began this enterprise about 6 years in the past, one of many issues that was crucial and a key pillar for progress was to make sure that the enterprise persistently has enough capital and funding to develop,” Obiekea instructed BusinessDay.

Aside from FairMoney, Quick Credit score additionally introduced the profitable completion of its N3 billion business paper collection 1, 2 & 3 issuance within the first half of 2023.

“This was the primary try of the corporate to boost funds from the capital market and its oversubscription was a transparent reaffirmation of the boldness of our traders and stakeholders within the distinctive worth we’re creating within the monetary business,” Emeka Iloelunachi, CEO of Quick Credit score stated.

Kelvin Atafiri, the CEO of Cavazanni Human Capital Restricted stated the present low yield within the cash market is a significant attraction for companies to play in that phase of the market.

“We’ve seen an rising issuance just lately as a result of present low yield within the cash market atmosphere amid the expectation of an additional rise in yield,” Atafiri stated.

On the sustainability of this supply of funding, Atafiri stated it “relies on the monetary well being of the corporate. The capability of a borrower to repay is a vital a part of the credit score business. This, coupled with the trajectory of yields throughout the market will dictate the sustainability of the technique.”

BusinessDay findings confirmed that corporations issued business papers throughout monetary companies, data and communication expertise, cement, commerce, agriculture, manufacturing, companies, and actual property sectors.

The businesses embrace MTN Nigeria, Flour Mill Julius Berger, DLM Capital and Dangote Cement.

Within the first half of 2023, MTN Nigeria led the pack with the issuance of N125 billion in business papers to spice up its short-term working capital and funding necessities.

MTN Nigeria issued 188-day business papers at a yield of 11.00 % and 267-day business papers at 12.50 %.

The corporate had two business papers of comparable maturities issued final April. The primary having a tenor of 184 days was priced at 7.5 % whereas the second working for 254 days carried an 8.5 % yield.

BusinessDay’s findings confirmed Flour Mills of Nigeria Plc collection 1 and a pair of Business Paper (CP) issuance of as much as N40 billion beneath its N200 billion business paper programme closed final February.

“Corporations are exploring the debt market, together with searching for business papers, that are short-term and should present some type of bridge finance pending when there may be readability within the charge atmosphere,” Sunday Oyeyemi, a Lagos-based analyst stated.

Business papers are money-market securities issued by giant companies to acquire funds to satisfy short-term debt obligations like payroll and are backed solely by an issuing financial institution or firm’s promise to pay the face quantity on the maturity date, which is often in 270 days or much less.

“We will’t say business paper is healthier than fairness or vice versa. They each have benefits and downsides. The usage of funds determines the aim of funds and the funding supply required,” Oyeyemi stated.