Nigerian companies raise N1.5trn through commercial papers in 2023

According to data from the FMDQ Group, 56 Nigerian companies raised N1.504 trillion through commercial papers in 2023, representing a whopping 499 percent increase from the N251 billion raised in 2022.

Based on the data tracked by journalists, MTN Nigeria Plc raised the highest amount, with N375 billion raised in 7 issuances, as part of its N250.00 billion commercial paper issuance program.

They were followed by Dangote Cement which raised N221.28 billion in six issuances in 2023, as part of its N300.00 billion commercial paper issuance program.

Other notable amounts raised through commercial papers in 2023 include N150.97 billion raised by Flour Mills of Nigeria Plc through its N200.00 billion commercial paper issuance program and N116.49 billion raised by Nigerian Breweries Plc as part of its N100.00 billion commercial paper issuance.

Completing the list of the top ten CP issuers for 2023 were Sterling Bank with N47.86 billion raised, Dufil Prima Foods Plc with N47.19 billion, FSDH Merchant Bank with N46.08 billion, Julius Berger Nigeria with N30.00 billion, FBNQuest Merchant Bank with N29.42 billion, and Mixta Real Estate with N28.94 billion.

Outside of commercial papers, some companies also utilized the corporate bonds route to raise funds.

According to data from FMDQ Group tracked by Nairametrics, N110.39 billion was raised through corporate bonds. However, this significantly declined by 83.8 percent from the N679.61 billion raised in the FMDQ through corporate bonds in 2022.

Aradel Holdings raised N10.31 billion as part of its N20.00 billion bond issuance program, and Lagos Free Zone Company raised N17.70 billion as part of its N61 billion bond issuance program.

FCMB Group raised N20.69 billion as part of its N300 billion bond program, while Flour Mills of Nigeria raised N46 billion as part of its N200.00 billion bond issuance program.

With the monetary policy rate at 18.75 percent, bank lending rates to companies have skyrocketed, hitting as high as 30 percent.

Thus, there is a general opinion that companies have resorted to debt instruments such as commercial papers to raise funds, hence the high amount of CP issuances recorded in 2023.

Commercial papers, a staple in the financial world, have emerged as a beacon for both borrowers and investors seeking favourable terms and security.

These debt instruments, often sporting interest rates lower than those offered by traditional banks, have become a preferred avenue for borrowing capital.

For example, the CPs issued out by MTN Nigeria were issued between 10.41% and 14.33 percent, however, the lending rate to ICT companies as of December 15, 2023, ranged between 28.50 percent and 32.00% in UBA, and 22.00 percent and 28.50 percent in Access Bank.