Gold Rush: Nigeria is in the Middle of a Commercial Paper Boom
Nigeria’s financial landscape has witnessed a notable shift in corporate financing patterns, with Commercial Papers (CPs) emerging as a preferred short-term funding tool.
From N3 billion to N193 billion: these CPs span a wide range of industries from banking and healthcare to manufacturing and microfinance, highlighting how businesses of all types are tapping into this market.
At the top of the list is Access Bank Plc, which issued a record-breaking N193.25 billion in Series 3 and 4, offering yields of 21.50% and 24.75%.
Other issuers include:
- MeCure Industries Plc, which raised N10 billion at a 26% yield
- Daraju Industries, with a N4 billion issuance offering up to 25%
- Finceptive Ltd., a newcomer that launched an oversubscribed N3 billion CP with a 268-day tenor
- FCMB Limited, which entered with a N70 billion dual-series offer
- Others like FSDH Merchant Bank, C & I Leasing, Stanbic IBTC, Dangote Sugar, Dangote Cement, Addosser Microfinance Bank, etc.
According to the FMDQ Securities Exchange, total registered CP programmes now stand at over N8.19 trillion, while quoted CPs have reached N7.23 trillion as of 2025.
Why companies are turning to CPs
The surge in CP issuance reflects how Nigerian companies are adjusting to a tough borrowing climate.
With the Central Bank’s Monetary Policy Rate (MPR) stuck at 27.5%, borrowing from banks has become very expensive, often crossing 30% when fees and risk premiums are factored in.
To avoid these high borrowing costs, many businesses are now turning to Commercial Papers (CPs) as a cheaper, faster, and more flexible financing option.
Commenting on this trend, Oluwafemi Adetuberu, Fixed Income Analyst at Rhodium Capital, explained:
“Issuers are also responding to tighter credit conditions. CPs offer a cheaper source of funds compared to bank loans priced off the 27.5% MPR.”
For example:
- MeCure Industries, a listed company on the NGX, issued its Series 5 CP at a 22.54% yield.
- Daraju Industries, a non-listed company, issued Series 36 at a 23.548% yield, both below the typical bank loan rates.
Other reasons include:
- Faster Access to Cash: Easier and quicker than going through bank loan processes.
- More Flexibility: CPs can be issued in parts (tranches) when needed, under a larger programme.
- No Collateral Needed: CPs are unsecured, making them accessible for companies without hard assets to pledge.
- Possible regulatory shift: According to market sources, some issuers may have accelerated their CP filings ahead of a potential rule change that would require all commercial papers to be approved by the Securities and Exchange Commission (SEC) instead of only FMDQ. This change, reportedly set to take effect from July 1, 2025, could introduce longer approval timelines and stricter compliance procedures, prompting a flurry of activity before the deadline.
Why investors are flocking in
From an investor’s perspective, Commercial Papers (CPs) have become significantly more attractive than many traditional fixed-income instruments. With yields ranging from 19% to 30%, they consistently outperform:
- FGN Savings Bonds: 15% – 17%
- Money Market Mutual Funds: 12% – 22% (net of fees)
- 364-day Treasury Bills: 17% – 18.5%
Though he earlier pointed out the appeal of CPs to issuers, Oluwafemi Adetuberu also noted that CPs remain compelling on the demand side:
“Despite the recent moderation in inflation and bond yields, we expect risk-tolerant investors to continue favouring commercial papers due to their attractive premiums relative to government securities.” He added.
In addition to offering higher returns, CPs are attractive to investors because of their short-term duration (typically 90 to 270 days) and discounted pricing structure.
This setup allows investors to reinvest proceeds quickly, potentially at higher yields a key advantage in a rising interest rate environment.
Investor takeaway
CPs outperform most traditional fixed-income instruments.
Most CPs are issued at a discount, meaning investors receive upfront interest income and receive the face value at maturity, often within 90 to 270 days.
While this creates what’s known as reinvestment risk (since you need to reinvest after each maturity), in Nigeria’s rising rate environment, that risk becomes a strategic advantage.
Instead of being locked into a lower rate for a long time, you get the flexibility to reinvest at higher yields as they emerge.
Some CPs are registered and quoted on FMDQ. This provides transparency, tradability, and disclosures, making it easier to assess risk and exit if needed. Quoted CPs are viewed as more credible and liquid, a big win for investors seeking flexibility and safety. So, investors should consider CPs registered and quoted on the FMDQ.
However, CPs are still unsecured instruments. If the issuer defaults, there’s no collateral backing. That’s why investors should still:
- Review the issuer’s credit rating.
- Understand the use of proceeds
- Consider if there’s any credit enhancement (like a guarantee)
Most issuances target institutional investors and high-net-worth individuals (HNIs), with minimum investment sizes often starting at N5 million.
This high entry threshold makes CPs less accessible to the average retail investor, at least in the primary market.
To invest in CPs, investors must:
- Open a trading account with a stockbroking firm or issuing house
- Obtain a CSCS (Central Securities Clearing System) account number
- In some cases, qualify as a high-net-worth individual or a qualified institutional buyer
The Outlook:
CPs have become indispensable for short-term liquidity management. As yields remain attractive and companies seek alternatives to expensive credit, CPs will continue to dominate Nigeria’s debt capital market.
With investor confidence growing and issuance volume climbing, CPs are no longer just a niche instrument—they’re now a strategic financing vehicle that reflects both macro realities and market innovation.
