Nigerian companies raise N478.4 billion through Commercial Paper issuances
Despite the challenges ravaging the world economy as a result of the coronavirus pandemic, Dangote Cement, MTN Nigeria, Nigerian Breweries, and nine other companies have been able to raise the sum of N478.4 billion from commercial paper issuances between January and September 2020.
According to a report, 12 Nigerian companies raised the fund through Commercial Paper issuances from the capital market in nine months, even amid COVID-19 crises and present economic downturn bedeviling the country.
The major reason for the string of capital raise was said to be the low interest rates attributable to risk free securities such as Treasury bill, FGN bonds and CBN OMO bills.
And with interest rates low, corporates have moved to fill the gap by issuing debt securities at interest rates that are higher than risk free securities but affordable compared to previous times.
This is why some of the largest businesses in the country have tapped into the market to fill in the demand for fixed income debt securities.
While some companies used the funds to finance working capital, for others, it was a useful bridge to stay ahead of long term capital once the Covid-19 Pandemic lowers pressures.
Dangote Cement, MTN, Nigerian Breweries and the 9 other companies were in the shows due to their focus.
Dangote Cement (N150 billion)
The Africa largest cement manufacturer and the most capitalized company on the Nigerian Stock Exchange, Dangote issued series 15 and 16 of its commercial paper in May 2020 and another series 17 and 18 in September 2020, summing up to N150 billion.
Series 15 and 16 was said to have a tenor of 175 days and 266 days with a respective yield of 5% and 6%, while the issued amount was N34 billion and N66 billion under its N150 billion commercial paper issuance programme.
While series 17 had a tenor of 177 days and an implied yield of 4%, series 18 had a tenor of 268 days with a 5% implied yield. They have a maturity date of 4th March 2021 and 3rd June 2021 respectively.
According to the cement giant, the capital raised was aimed at funding short-term working capital requirements, as well as general corporate purposes.
It is also worth noting that Dangote Cement also announced the successful issuance of N100 billion series 1 fixed rate Senior Unsecured Bonds in April 2020, which is due for April 2025.
MTN Nigeria (N100 billion)
The second most capitalized company on the Nigerian Stock Exchange, MTN, completed the issuance of N100 billion Commercial Paper in June 2020.
MTN Nigeria issued Commercial Papers in two series (series 1 & 2) with the intent of raising N50 billion, but due to the oversubscription of the offer, opted to raise the bar by making an issuance of N100 billion
Series 1 had a tenor of 180 days and 270 days (CP2) with an effective yield of 4.9% for a N20 billion size (CP1) and 5.95% for an N80 billion size (CP 2) respectively. The issuance represents MTN Nigeria’s debut in the domestic debt capital market.
According to MTN, the proceeds from the Commercial Paper issuance were aimed at supporting the company’s working capital and general corporate purposes.
Nigerian Breweries (N93 billion)
The largest brewing company in Nigeria, Nigerian Breweries listed commercial papers over 7 series (series 5 – 11).
Series 5 and 6 of the programme opened on the 3rd of February, 2020; Series 7 and 8 opened on 6th April, 2020; while Series 9 – 11 opened on 26th October, 2020.
Series 5 had a tenor of 180 days, Series 6 (270 days) raising up to N45 billion, Series 7 (182 days), Series 8 (270 days), raising N48 billion, Series 9 (120 days), Series 10 (183 days); while Series 11 was for a tenor of 240 days with an undisclosed issue amount.
NB explained that the Commercial papers programme was aimed at supporting the Company’s cost management initiatives with the overall aim of reducing its cost of fund, which also serves as an additional source of funding for the company.
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