In accessing stable long-term finance to fund their key activities, five quoted companies on the Nigerian Stock Exchange (NSE) have raised and listed a total amount of N55.965 billion corporate bonds on the equities market and FMDQ OTC Securities Exchange.
The companies, which are Flour Mills of Nigeria, Union Bank of Nigeria (UBN), C&I Leasing, Nigeria Mortgage Refinance Company (NMRC) and UAC Property Development Company.
In reviewing the amounts listed by the companies, FMDQ and NSE admitted the listing of the Flour Mills N20.11 billion bonds, comprising N10.11 billion Series 1 and N10 billion Series 2 Senior Unsecured Fixed Rate Bonds under its N70 billion Bond Issuance Programme.
Union Bank listed N13.50 billion bonds, comprising N7.19 billion Series 1 and N6.31 billion Series 2 Senior Unsecured Fixed Rate Bonds under its N100 billion Debt Issuance Programme, while C & I Leasing listed N7 billion Series 1 Fixed Rate Bond under its N20 billion Bond Issuance Programme on both Exchanges.
Nigeria Mortage Refinance Company and UAC Property Development Company also listed N11 billion 13.80 per cent Series 2 Bond under the N440.billion Medium Term Note Program and N4.355 billion, 16 per cent series 1 senior guaranteed fixed rate bond on the NSE.
Bonds are fixed income instruments issued by entities to raise funds. The issuer of a bond presents the bond as a promise to make available regular, fixed, income payments to the investor or the buyer of the bond who is also the bondholder. These income payments are known as coupons and bonds which pay coupons twice a year are known as semi-annual coupon bonds. There are also bonds that make coupon payments annually, known as annual coupon bonds.
Capital market analysts said that Nigeria has witnessed the resurgence of debt issuances in the last five years and the tempo has been on the increase, saying that from corporates in the banking sector, to real estate and to those in the FMCG, businesses are seizing the opportunity to raise capital from a debt market that has seen its risk appetite grow in recent times.
However, they said that Nigeria’s corporate bond market is still relatively small compared to FGN Bond Market.
Managing director/CEO of FMDQ, Mr. Bola Koko, said that “FMDQ has supported the enhancement of market credibility which has, in turn, boosted investor confidence in the Nigerian Debt Capital Market (DCM), through the provision of unprecedented transparency, spearheading of initiatives to boost secondary market liquidity and facilitating effective price formation, among other activities via its platform.
Onadele reiterated that through consistent collaboration with its stakeholders, FMDQ shall continue to further deepen and effectively position the Nigerian DCM for growth, and invariably contribute to the growth of the economy at large.”
Also, associate executive director of FMDQ, Ms. Tumi Sekoni, noted that the OTC Exchange’s commitment to continue to innovate and provide efficient services, as may be necessary, to support issuers and investors, towards achieving an operationally excellent and globally competitive debt capital markets (DCM).
At the listing of Four Mills bonds, the managing director of Flour Mills, Mr. Paul Gbededo said, “Flour Mills is delighted to return to the capital markets with such a successful outing, especially with the level of interest shown by investors.
“The response from the market vindicates the company’s decision to have taken this additional step in diversifying its financing options.”
He stated that the transaction will help the company achieve its strategic objective of sustaining its market leadership position with our foods and agro-allied businesses.
The managing director of HighCap Securities Limited, Mr. David Adnori said “the private sector did woefully last year for equities issue in the capital market, we were able to raise about N32 billion, which was lower than expected.”
He said that the public sector, which is the government raised about N1 trillion from the capital market, essentially what the capital market did last year was to form capital for the public sector, while for private sector, capital formation was dismal and low.
He noted that the government has been weak in term of creating the enabling environment for corporate enterprises to raise funds from the capital market, pointing out issuance for bonds during this period is low due to companies crowded out by the government, which was raising funds at any cost.
According to Adonri, last year, the government raised funds through Sukuk bonds at 16 per cent interest rate and at that rate the corporate bond was less competitive. Private companies could not compete with the government in accessing funds through bonds.
Going into 2019, Adonri emphasised that if the public sector continued to approach the capital market at any costs, the private enterprises will remain uncompetitive and will not be able to raise funds through bonds instrument.
The MD/CEO, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo, said companies partaking in corporate bond and commercial papers realised the attractiveness.
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