CBN interest hike stops companies from borrowing, as corporate bond issuance dips 24.90%

Nigerian businesses concerned about rising interest rates and macro-economic issues have halted borrowings from the bond market.

According to data from Afrinvest Securities, there were 13 corporate bond issuances with a total value of N170.80 billion in 2022, which is 24.90 per cent lower than 2021’s N227.50 billion in 10 issuances.

The biggest issuances were Geregu Power (N40.10 billion), Presco, (N34.50 billion), and LFZC (N25.0 billion).

In 2022, the Central Bank of Nigeria (CBN) increased the monetary rate four times to fight inflation which rose to 21.47 per cent in November 2022.

The last interest rate was increased by 100 bps to 16.5 per cent at its November 2022 meeting.

These decisions made many companies skeptical about issuing bonds for expansion for fear of paying more than budgeted.

Afrinvest Securities also reported that the average corporate bond yield rose to 14.60 per cent from 12.10 per cent.

While average commercial papers rose to 15.10 per cent from 11.25 per cent.