As Companies Turn Attention to Commercial Paper – THISDAY Newspapers


With the uncertainty surrounding access to capital needed to expand business operations, companies have found solace in the Commercial Paper (CP) of the FMDQ Exchange. Kayode Tokede writes on how leading companies have accessed the short-term fund to develop their businesses and contribute to Nigeria’s Gross Domestic Product 
The likes of Union Bank of Nigeria Plc and MTN Nigeria Plc, among others, have announced raising Commercial Paper (CP) programme to expand working capital. 
The CP, championed by FMDQ Exchange, has contributed to business expansion lately and Small and medium-sized enterprises (SMEs) companies have also utilised the platform to raise capital. 
CPs are short-term debt obligations of corporations. 
It can be issued for tenors of up to 270 days in the Nigerian financial markets. Like Treasury Bills, CPs are typically issued at a discount and redeemed at par (face value amount) upon maturity. 
CPs are similar to Treasury bills (“T-Bills”) because they are issued at discount rates, which may be paid upfront or capitalised.
For instance, an investor could choose to receive N1m in the future (maturity amount/face value), which would require an ‘upfront’ investment below that face value (for instance N980,000 for a 90-day instrument at 8.0%), or could choose to invest N1m today to receive a ‘capitalised’ return above the investment amount (for instance N1.02million for a 90-day instrument at 8.0%).
The programme has played a critical economic role in bringing about reform in various ways as local companies have accessed the FMDQ market to raise fresh capital instead of borrowing from banks that come with high-interest rates.
The FMDQ Exchange in 2022 had listed numerous issuances and the outcome has further enhanced corporate earnings and as a result, drive stock prices and boost investors’ confidence.
An investigation by THISDAY revealed that in the seven months of 2022, companies have listed N524.84billion CPs with a total outstanding value of N2.52trillion. 
In July, about N21.16billion worth of CPs were quoted on the FMDQ Exchange market and were issued by institutions from various sectors including Financial Services (3), Manufacturing (2), Chemical Supply & Oil Field Services (1), Health & Pharma (1) and Real Estate (1).
In June, a total of N40.85billion was quoted and it was issued by institutions from various sectors including Financial Services (2), Consumer Goods (2), Commodities Trading (2), Agriculture (1) and Real Estate (1), sectors.
Further findings revealed that the total value of CPs quoted on the FMDQ Exchange in May 2022 was N166.48billion and the companies involved were in Financial services (4), Telecommunications (2) Real Estate (2), Retail (1) and Manufacturing (1), sectors.
FMDQ Securities Exchange in September 2022 approved the registration of Union Bank of Nigeria’s N100 billion CP Programme, on the Exchange platform.  
This registration will bring the total number of securities admitted on the FMDQ Exchange to 110 with a total market value of N3.36 trillion. 
The financial institution is one of Nigeria’s long-standing banking institutions that offers a portfolio of banking services to individuals, small and medium-scale enterprises, and commercial and corporate clients.  
According to a statement, the Company Secretary, Union Bank of Nigeria, Somuyiwa Sonubi, said: “Following Union Bank of Nigeria Plc’s notification in December 2021 of the execution of a Share Sale and Purchase Agreement (SSPA) between the Bank’s majority shareholders – Union Global Partners Limited, Atlas Mara Limited, et al. – and Titan Trust Bank Limited (TTB), and the subsequent receipt of all necessary regulatory approvals, Union Bank hereby notifies Nigerian Exchange Limited (NGX), the Securities & Exchange Commission and members of the public of the completion of the transaction under the SSPA, which effectively transfers 93.41per cent of Union Bank’s issued share capital to TTB. 
“Consequently, in compliance with NGX, Rulebook and the Amendments to the Listing Rules, Union Bank hereby notifies NGX, our esteemed stakeholders and the investing public of the following: ‘Union Bank hereby notifies NGX that with the completion of the transaction, TGI Group, parent of TTB, now becomes the majority shareholder and core investor in Union Bank. 
“Union Bank hereby notifies NGX of the completion of the divestment of the Bank’s entire shareholding interest (direct and indirect) in its subsidiary, Union Bank (UK) Plc (“UBUK”), to all the shareholders in the Bank’s records as of 4th March 2022, pro rata to their existing shareholding interests in the Bank. Consequently, UBUK is not included in the transaction with Titan Trust Bank”. 
However, MTN led with the issuance of a historic N127 billion Series 1 & 2 CP under its registered N150 billion programme.
The issuance consisted of two tenors – a 184-day series issuance priced at a 7.50% yield and a 254-day Series 2 issuance priced at an 8.50% yield.
According to MTN Nigeria, the issuance was in line with its strategy to diversify financing options, with the proceeds being deployed towards working capital and general corporate purposes.
Speaking at the signing ceremony, the Chief Executive Officer, MTN Nigeria Communication, Mr. Karl Toriola explained that the N127 billion CP issuance would go into the record books as the largest CP issuance in Nigeria.
According to him, “The success of our CP issuance is a clear demonstration of the strength and acceptance of the MTN brand, and the trust placed by the investor community in MTN Nigeria’s company’s leadership, strong financial performance and corporate strategy.”
He noted that MTN Nigeria with the completion of the N127 billion CP aimed at improving customer services and high-quality bouquet services that included a 5G spectrum that awaits regulatory approval.
On the flip side, the NGX has listed new issuance worth N1.08 trillion and Eurobonds of $4 billion on its platform in H1 of 2022.
These issuances listed across both the bonds and stock markets are essential in deepening the market, tradability, and improving liquidity as well as increasing access to capital to fund growth returns.
Another organisation in this category is Lekki Gardens Estates Limited which recently signed a N25 billion commercial paper approved for the company by the FMDQ Security Exchange Limited.
The Chief Executive Officer, Lekki Gardens Estates Limited, Dr. Richard Nyong, during the ceremony, described the approval for the registration of the commercial paper issuance programme by FMDQ Exchange on its platform as a big step for the company, saying it would help to deepen its market offering to customers and unlock value for all stakeholders.
According to a report by Nairametrics, others include NOVA Merchant Bank, which also announced the issuance of N20 billion Series 1 & 2 Commercial Paper issuance under the Nova Merchant Bank Limited N50 billion CP Programme.
Also, UAC of Nigeria Plc during the period under review completed its N18.7 billion Series 1 and 2 Commercial Paper issuance under its established N45 billion programme. There is also FBNQuest Merchant Bank Limited, a subsidiary of FBN Holdings Plc which issued commercial paper worth N15 billion to investors.
The Rand Merchant Bank (RMB) Nigeria Limited sold N15 billion in Commercial Paper to investors. The exercise started on Friday, April 1, 2022, and closed on Wednesday, April 6, 2022.
What Analysts Say
The Nigerian economy in 2022 has witnessed a hike in the inflation rate and uncertainty surrounding the global economy due to the ongoing war between Russia and Ukraine. Also, increasing oil theft has impacted negatively on oil revenue and Nigeria is not benefitting from the current oil boom. 
In delivering on its mandate as a market organizer, FMDQ Exchange over the year expressed that it remains committed to articulating and pioneering, with the support of its key stakeholders, innovative ways to improve and make the Nigerian financial markets globally competitive, operationally excellent, liquid, and diverse.
As is the corporate tradition for FMDQ Exchange, these Eurobonds shall be availed of all the benefits of FMDQ Exchange’s prestigious listing and quotation service, including global visibility through the FMDQ Exchange website and systems, governance, credible price formation, and continuous information disclosure to protect investor interest, amongst others.
Commenting, Vice Chairman, Highcap Securities, David Adonri said: “Issuance of CPs in 2022 has improved because interest rate fell drastically to a lower single digit. The cost of borrowing via CPs was to the benefit of corporate borrowers more than traditional bank credit. There was also an incentive for investors to invest in CPs due to their higher rates than deposit rate and Treasury Bill rate”
Analyst at PAC Holdings, Mr Wole Adeyeye attributed increasing CPs to severe macroeconomic factors, stressing that a hike in production input has forced companies to raise capital.
 The minimum purchase amount in the primary market may vary depending on the issue size. However, the minimum limit is typically set at N5m, while in the secondary market there are no standard lot sizes, but a minimum of N100m should be prepared for any purchase.
 The major limitation for the secondary market trading of commercial papers is the illiquidity within the market, given that purchasers of these instruments typically only sell instruments in large volume sizes. Consequently, purchasing CPs is easier in the primary market.
Founded on January 22, 1995, THISDAY is published by THISDAY NEWSPAPERS LTD., 35 Creek Road Apapa, Lagos, Nigeria with offices in 36 states of Nigeria , the Federal Capital Territory and around the world. It is Nigeria’s most authoritative news media available on all platforms for the political, business, professional and diplomatic elite and broader middle classes while serving as the meeting point of new ideas, culture and technology for the aspirationals and millennials. The newspaper is a public trust dedicated to the pursuit of truth and reason covering a range of issues from breaking news to politics, business, the markets, the arts, sports and community to the crossroads of people and society.
You can email us at: or visit our contact us page.


Leave a Comment