The management of FMDQ Securities Exchange Limited says Commercial Paper issuance has gained wide acceptance in the Nigerian financial market over the years, as evidence by the by the FMDQ’s milestones in the Nigerian CP market, especially given the number and diversity of companies that have so far raised through the instrument.
As evidence of this success and acceptance, according to Oluwaseun Afolabi, the Head, Market Architecture at FMDQ said since the company’s entry into the CP market till date, “the Nigerian CP market has grown from near zero levels about a decade ago in terms of capital raised to a market where about N3.17tr has been raised.”
Investdata News recalls that Dangote Industries Limited, parent company of the Dangote Cement, last year registered a ₦300bn Multi-Instrument Issuance Programme on the FMDQ platform, shortly after the successful registration of the Dangote Cement Plc ₦100bn Commercial Paper Programme within the same period. The Multi-Instrument Programme allows Dangote Industries raise funds from the Debt Capital Market by issuing of various medium- to long-term debt securities such as green bonds, sukuk etc., to leverage the depth and breadth of the Nigerian DCM.
The proceeds of the Dangote Cement PLC Series 1 Tranches 1- 3 bonds was to be utilized in funding expansion projects, refinancing short-term debts, as well as working capital expenditure.
Afolabi, who spoke at the 2022 annual conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos, said FMDQ hopes to launch Exchange Traded Derivative (ETD) products that will help government raise cheaper funds, especially at this time the nation grapples under a debt burden with high borrowing cost.
This, he said is being done, referencing sovereign securities like the Federal Government of Nigeria Bonds and Treasury Bills to aid hedging and risk management by investors in these securities.
Continuing, he said, “a useful benefit of these ETD products is that they could help spur investors’ interest in the underlying sovereign securities thereby possibly reducing the government’s cost of capital.
“The Nigerian debt market organised by FMDQ Exchange is fairly developed enough to facilitate the raising of debt capital by the government and corporate issuers.
“The FMDQ Exchange markets facilitate the issuance and secondary market activity in a range of debt securities, as well as having the optimised matrix of financial market intermediaries/participants and most importantly supported by robust financial market infrastructures (FMIs) across the secondary market value chain,” he stressed.
On how the FMDQ has helped to deepen the Nigerian debt market, Afolabi said the company in its capacity as a market organiser and self-regulatory organisation, has over the years pioneered and led various initiatives geared at deepening and promoting liquidity in the Nigerian debt markets.
These initiatives, he said, range from those targeted at spurring activity in the primary markets for money market debt securities such as Commercial Papers (CPs) and facilitating the issuance of short-term bonds.
Afolabi added that the company engaged in secondary market initiatives such as market making, securities valuation, benchmark development and administration and expansion of the bouquet of debt securities and other financial instruments on boarded on the Exchange.
“FMDQ Exchange is at the forefront of regulatory advocacy and stakeholder engagements targeted at driving collective action by all relevant stakeholders towards deepening the Nigerian debt market.
“This is evidenced by its activities and collaboration with various financial market regulators such as the Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN), the Debt Management Office (DMO), and the National Pension Commission (NAICOM), on various initiatives and programmes focused on developing the Nigerian debt markets,” he stressed.