By Chinwendu Obienyi
Owing to the growing reliance on debt instruments, the Nigerian corporate landscape experienced a significant shift in fund-raising strategies as 56 companies raised N1.5 trillion through commercial papers (CPs) in 2023, data from the FMDQ revealed.
This represents 500 per cent increase from N251 billion raised by the companies in the corresponding year of 2022. The surge in CP issuances showed that companies resorted to commercial papers as well as corporate bonds due to the high lending rates from commercial banks.
Commercial papers, unsecured, short-term debt instruments issued by corporations and are typically used to finance short-term liabilities such as payroll, accounts payable, and inventories.
It has emerged as a beacon for both borrowers and investors seeking favourable terms and security. For instance, 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. Dangote followed, raising N221.28 billion in six issuances in the year under review, as part of its N300.00 billion commercial paper issuance program.
Other notable amounts raised through commercial papers 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.
Further analysis showed that some companies also utilized the corporate bonds route to raise funds. For example, about N110.39 billion was raised through corporate bonds but when compared with the figure (N679.61 billion) recorded in 2022, this represented an 84 per cent decrease.
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%, bank lending rates to companies have skyrocketed, soaring as high as 30 per cent.