Dangote Sugar Targets N50bn From Series 4, 5 Commercial Papers Issuance

Dangote Sugar Plc seeks to raise N50 billion through Commercial Papers (CPs) issuance across different tranches.

In its most recent issuance the Series 4 and 5, it plans to raise N50 billion each at 23 per cent for the six month tenor and 25 per cent for nine months.

The offer which opened on May 16, 2024, will close on May 22, 2024, with settlement occurring on May 23.

The Company is a subsidiary of Dangote Industries Limited and is engaged in the refining, distributing, and marketing of granulated sugar to wholesalers and top players in the skin care, food and beverage, and pharmaceutical industries.

Dangote Sugar Refinery is Sub-Saharan Africa’s largest sugar refinery, with a combined installed refining capacity of 1.49 MMT per annum. In the medium term, the Company is targeting an additional 1.5MMT of refined sugar from locally grown sugarcane, and is on track to becoming a leading global integrated sugar producer with its backward integration plan.

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Since Dangote Sugar Refinery’s N150 billion commercial paper issuance program was admitted to FMDQ on February 9, the company has raised about N99.01 billion in Series 1, 2, and 3.

In Series 1, N39.39 billion worth of the CPs were issued at a discount rate of 17.08 per cent and a tenor of 266 days. 

For Series 2, N6.15 billion of the CPs were issued at a 19.81 per cent discount rate and a tenor of 184 days. In Series 3, N53.47 billion worth of the CPs were issued at 21.30 per cent and a tenor of 254 days.

Since the initial increase in benchmark interest rates by 600 basis points to 24.75 per cent by the Cardoso led Monetary Policy Committee, the private sector has had to increase rates on its debt instruments.

This is because government securities have since witnessed strong investor demand as the true yield on treasury bills went as high as 27 per cent and now average 26 per cent.

The FGN Savings Bonds are currently issued at stop rates of over 19 per cent.

It also caused Nigerian banks to increase their lending rates, making businesses and individuals with existing loan facilities with the banks pay more to service those loans.

Today the Monetary policy committee increased rates by 150 basis points to 26.25 per cent further pushing rates across investment instruments high.

Oladipo Samuel, senior portfolio manager at Lead Asset Management Limited, raised concerns about the implication of the rise in federal government rates on companies.

He said with rates on federal government instruments currently at an average of 19 per cent, it means that corporations must offer a more competitive rate on their instruments to attract investors.

Last week VFD Group also announced its intention to raise N6 billion at a yield of 30 per cent.