Nigerian companies ignore banks, raise funds from commercial papers worth N339bn

Nigeria’s low interest rate and rising inflation presented an opportunity for several top Nigerian companies to use the debt market to raise short-term loans through commercial papers(CP) totalling more than N339.9 billion in 2021.

The interest paid on the CP is far lower than what they would have paid if they had contacted commercial banks for a short-term loan.

Commercial paper is a form of unsecured, short-term debt issued by a corporation typically for the financing of payroll and other short-term liabilities with a payback date between 15 to 270 days.

Data compiled from FMDQ securities shows that some of the top companies who make good use of the debt market include Coronation Merchant Bank, MTN Nigeria, Dangote Cement plc, Union Bank of Nigeria, and United Capital plc.

The above-mentioned companies issued a combined N245.6billion 72.3 percent of the total CP that was raised in the review period.

The interest paid on most of the loans averaged 10.03 percent far lower than the average inflation rate of 17 percent reported in 2021 and CBN/banks’ interest rate on loan of 11.5 percent.

In fact, depending on the customer’s profile, commercial banks can charge up to 36% interest on loans (prime or max).

Read also: World Bank blacklists 18 Nigerian companies, individuals

Other companies that tapped into the market included FSDH Merchant Bank raised N12 billion under its various CP Issuance Programme in 2021.

Others are Total Nigeria, (N15bn); Mixa Real Estate, (N13.36bn); Valency Agro Nigeria, (N12.36bn); FBNQuest Merchant Bank Limited, (N7.34bn); Nigerian Breweries, (N4.66bn); Prima Corporation Limited, (N3.57bn); Eunisell Limited, (N3.50bn); DLM Capital Group Limited, (N2.25bn), while TrustBanc Holdings Limited, (N0.20bn).

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