Amid steady growth in the nation’s economy, the primary segment of the nation’s capital market is beginning to gain traction as a total of 28 companies raised N418.07billion on the Nigerian Exchange Limited (NGX) between January and November 2021.
The companies got approval by the Exchange management to access capital through listing by introduction, private placement, corporate bond and block divestment.
However, THISDAY checks revealed that most companies adopted dual listings of corporate bond on NGX and FMDQ Securities Exchange Limited.
In 2006 to 2008 during the banking consolidation when banks needed to shore up their capital to N25 billion, activity at the primary market reached all time high with close N2 trillion raised by banks and other listed and none listed companies via public offerings and private placements.
However, following the global economic meltdown that wrecked economies all over the world, new entrants into the capital market who didn’t understand how the market works got their fingers burnt, a situation that made the primary market segment dormant
Meanwhile, analysis of market activity revealed that Dangote Cement Plc, BUA Cement Plc, Fidelity Bank Plc, Flour Mills of Nigeria Plc, among others raised capital on the NGX and FMDQ via corporate bond this year, while companies such as Ronchess Global Resources, Briclinks Africa and Nigerian Exchange Group were listed on NGX through listing by introduction.
With N115 billion corporate bonds, BUA Cement leads other companies that raised capital on NGX and FMDQ Exchange in the period under review.
The Cement manufacturing company issuance, is largest corporate bond issued in the Nigerian debt Capital Market (DCM) this year on the Exchange.
The Exchange in a report said it approved and list BUA Cement’s N115billion -7years 7.50% Series 1 Bonds Due 2027 under the N200billion bonds issuance program.
The Chairman, BUA Cement, Abdul Samad Rabiu had expressed that bond was the largest corporate bond issue in the history of Nigeria’s DCM.
According to him: “In 2020, we made a strategic decision as a proudly Nigerian company to list the shares of BUA Cement. This was in line with our core strategy to continue seeking out viable investment and growth opportunities within Nigeria.
“This bond issue – a first by BUA Cement, demonstrates our confidence in the Nigerian DCM as well as continued investor confidence in BUA Cement’s business model, our management team, and long-term strategy, all supported by strong credit ratings. We remain committed to unlocking opportunities within the industry for Nigeria.”
According to NGX X-compliance report, Dangote Cement in three tranches raised N50 billion in August this year.
The breakdown revealed that the company listed Series 1 – Tranche A: N3.64billion 11.25% 3-Year, Tranche B: N10.45 billion12.50% 5-year and Tranche C: N35.91billion 7-year senior unsecured fixed rate bonds due 2024, 2026, and 2028 under its N300 billion debt issuance programme.
The only bank that raised corporate bond listed on NGX was Fidelity bank in March this year, while Jaiz bank Plc raised capital through private placement.
The Tier-2 bank applied for listing of N41.2billin 10-year 8.5% subordinated unsecured fixed rate series one bonds under the N100 billion debt issuance program.
The Jaiz bank had raised additional 5,076,923,077 ordinary shares of 50 kobo each and it was listed on the Daily official list of the NGX.
The additional shares listed on NGX arose from Jaiz Bank’s private placement of 5,076,923,077 ordinary shares of 50 kobo each to Muhammadu Indimi at N0.65 per share.
With this listing of additional 5,076,923,077 ordinary shares, the total issued and fully paid-up shares of Jaiz Bank Plc has increased from 29,464,249,300 to 34,541,172,377 ordinary shares of 50 kobo each.
However, the new listing, Ronchess Global Resources in November announced listing of N7.37billion through listing by introduction
The company had joined the growth board of the NGX and it is listing 91,000,000 units of ordinary shares of N1.00 each at a unit price of N81.00.
To make this happen, the firm had instructed its stockbroker, FSDH Capital Limited, to file an application to the Nigerian exchange for the listing by introduction.
In addition to list of companies that raised capital,
Analysts expressed that the steady growth in Gross Domestic Product (GDP) and Nigeria’s recovery from COVID-19 pandemic aided companies renewed interest in raising capital on the NGX and FMDQ.
The GDP grew by 5.01 per cent in Q2 2021 following 0.51 per cent growth in Q1 2021. The recent report by National Bureau of Statistics (NBS) said the country’s GDP closed Q3 2021 at 4.03 per cent.
This growth, which continues the progress of the preceding three quarters, is a continuing trend reflecting Nigeria’s economic rebound, following the COVID-19-induced contractions seen in Q1 and Q2 2020.
They attributed borrowing a corporate bond to lower interest that is below inflation rate that borrowing from banks.
Speaking with THISDAY, APT Securities, Chief Executive Kasimu Garba Kurfi noted that increasing growth in economy indicators have aided companies to raise capital at the debt market.
He said, “The economy is growing and it is expected for companies to raise capital in order to boost productivity.”
The Vice President, Highcap Securities, Mr. David Adnori noted that companies raising fund on the NGX this year hs been encouraging, stressing that the economy opening up has increased demand and supply.
According to him: “the debt market this year is building up its debt market and the capital market is absorbing all the issuances so far.”
On his part, analyst at Analyst at PAC Holdings, Mr. Wole Adeyeye attributed companies renewed interest in raising debt capital to economy recovery from COVId-19 pandemic.
According to him: “The economy is recovering from COVID-19 pandemic, and it has resulted to increase in demand on goods and services. Most companies need additional capital to meet the improved demand in the country, hence, it s required of them to raise additional capital in debt market and equity market.”