"Gold Rush: Nigeria is in the Middle of a Commercial Paper Boom"

" Gold Rush: Nigeria is in the Middle of a Commercial Paper Boom \r\n\r\nNigeria\u2019s financial landscape has witnessed a notable shift in corporate financing patterns, with Commercial Papers (CPs) emerging as a preferred short-term funding tool.\r\n\r\n 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.\r\n\r\nAt 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%.\r\n\r\n Other issuers include:\u00a0 \r\n \r\n \t MeCure Industries Plc , which raised\u00a0 N10 billion \u00a0at a 26% yield \r\n \t Daraju Industries , with a\u00a0 N4 billion \u00a0issuance offering up to 25% \r\n \t Finceptive Ltd ., a newcomer that launched an oversubscribed\u00a0 N3 billion \u00a0CP with a 268-day tenor \r\n \t FCMB Limited, \u00a0which entered with a\u00a0 N70 billion \u00a0dual-series offer \r\n \t Others like\u00a0 FSDH Merchant Bank, C & I Leasing, Stanbic IBTC, Dangote Sugar, Dangote Cement, Addosser Microfinance Bank , etc. \r\n \r\nAccording 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.\r\n Why companies are turning to CPs\u00a0 \r\nThe surge in CP issuance reflects how Nigerian companies are adjusting to a tough borrowing climate.\r\n\r\nWith the Central Bank\u2019s 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.\r\n\r\nTo avoid these high borrowing costs, many businesses are now turning to Commercial Papers (CPs) as a cheaper, faster, and more flexible financing option.\r\n\r\nCommenting on this trend, Oluwafemi Adetuberu, Fixed Income Analyst at Rhodium Capital, explained:\r\n\r\n \u201cIssuers are also responding to tighter credit conditions. CPs offer a cheaper source of funds compared to bank loans priced off the 27.5% MPR.\u201d \r\n \u00a0For example:\u00a0 \r\n \r\n \t MeCure Industries, a listed company on the NGX, issued its Series 5 CP at a 22.54% yield. \r\n \t Daraju Industries, a non-listed company, issued Series 36 at a 23.548% yield, both below the typical bank loan rates. \r\n \r\n Other reasons include:\u00a0 \r\n \r\n \t Faster Access to Cash: \u00a0Easier and quicker than going through bank loan processes. \r\n \t More Flexibility : CPs can be issued in parts (tranches) when needed, under a larger programme. \r\n \t No Collateral Needed : CPs are unsecured, making them accessible for companies without hard assets to pledge. \r\n \t Possible regulatory shift: \u00a0According 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. \r\n \r\n Why investors are flocking in \r\nFrom an investor\u2019s 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:\r\n \r\n \t FGN Savings Bonds: 15% \u2013 17% \r\n \t Money Market Mutual Funds: 12% \u2013 22% (net of fees) \r\n \t 364-day Treasury Bills: 17% \u2013 18.5% \r\n \r\nThough he earlier pointed out the appeal of CPs to issuers, Oluwafemi Adetuberu also noted that CPs remain compelling on the demand side:\r\n\r\n \u201cDespite 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.\u201d\u00a0 \u00a0He added.\r\n\r\nIn 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.\r\n<div class=\"ai-viewport-1\" data-insertion-position=\"prepend\" data-selector=\".ai-insert-19-85127880\" data-insertion-no-dbg=\"\" data-code=\"PGRpdiBjbGFzcz0nY29kZS1ibG9jayBjb2RlLWJsb2NrLTE5JyBzdHlsZT0nbWFyZ2luOiA4cHggMDsgY2xlYXI6IGJvdGg7Jz4KPCEtLSBBY3RpdmUgLS0+CjwhLS0KPGRpdiBhbGlnbj0iY2VudGVyIj48YSBocmVmPSJodHRwczovL2phaXpiYW5rcGxjLmNvbS8iIHRhcmdldD0iX2JsYW5rIiByZWw9Im5vb3BlbmVyIG5vcmVmZXJyZXIiPjxpbWcgY2xhc3M9ImFsaWduY2VudGVyIHdwLWltYWdlLTE3NzAzMyBzaXplLW1lZGl1bSIgc3JjPSJodHRwczovL2kuaWJiLmNvL2JkdlFjRGcvTkFJUkFNRVRSSUNTLUNSRUFUSVZFLUZPUi1SRU5FV0FMLTEuanBnIiBhbHQ9IkphaXogYmFuayIgLz48L2E+PC9kaXY+LS0+CjwvZGl2Pgo=\" data-block=\"19\">\r\n \r\n \r\nThis setup allows investors to reinvest proceeds quickly, potentially at higher yields a key advantage in a rising interest rate environment.\r\n Investor takeaway\u00a0 \r\nCPs outperform most traditional fixed-income instruments.\r\n\r\nMost 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.\r\n\r\nWhile this creates what\u2019s known as reinvestment risk (since you need to reinvest after each maturity), in Nigeria\u2019s rising rate environment, that risk becomes a strategic advantage.\r\n\r\nInstead of being locked into a lower rate for a long time, you get the flexibility to reinvest at higher yields as they emerge.\r\n\r\nSome 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.\r\n\r\nHowever, CPs are still unsecured instruments. If the issuer defaults, there\u2019s no collateral backing. That\u2019s why investors should still:\r\n \r\n \t Review the issuer\u2019s credit rating. \r\n \t Understand the use of proceeds \r\n \t Consider if there\u2019s any credit enhancement (like a guarantee) \r\n \r\nMost issuances target institutional investors and high-net-worth individuals (HNIs), with minimum investment sizes often starting at N5 million.\r\n\r\nThis high entry threshold makes CPs less accessible to the average retail investor, at least in the primary market.\r\n\r\nTo invest in CPs, investors must:\r\n \r\n \t Open a trading account with a stockbroking firm or issuing house \r\n \t Obtain a CSCS (Central Securities Clearing System) account number \r\n \t In some cases, qualify as a high-net-worth individual or a qualified institutional buyer \r\n \r\n The Outlook:\u00a0\u00a0 \r\nCPs 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\u2019s debt capital market.\r\n\r\nWith investor confidence growing and issuance volume climbing, CPs are no longer just a niche instrument\u2014they\u2019re now a strategic financing vehicle that reflects both macro realities and market innovation."

"Gold Rush: Nigeria is in the Middle of a Commercial Paper Boom"

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