As companies needed short-term capital to stay afloat, data obtained by THISDAY has revealed that 14 companies raised N103.34 billion worth of Commercial Paper (CPs) on FMDQ Exchange platform between January and February of 2022.
Data obtained by THISDAY from FMDQ Exchange revealed that five companies were quoted in January and raised CP worth N5.52billion, while 14 in February quoted a total value of CPs worth N97.82billion.
The Exchange on Monday hinted that corporate institutions have continued to explore alternative financing options with the admission of 21 CPs valued at over N128.25 billion thus far in 2022.
CP is a short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded.
Due to its relatively short maturity period, CP is referred to as low-risk investments, and offering competitive returns to investors in compensation for the issuer’s credit risk.
Among the noted CPs in the months under review was FMDQ Exchange on January 14, 2022 approving for quotation, the MeCure Industries Limited N0.49 billion Series 1 and N1.44 billion Series 2 CPs under its N20.00 billion CP Issuance Programme.
FMDQ Exchange had noted that an active CP market provides companies with the opportunity to raise capital to meet their short-term funding obligations.
They explained that the instrument typically does not create a lien on the company’s assets, and this creates room for enhanced operational flexibility.
The Managing Director, Highcap Securities Limited, Mr. David Adnori attributed trudge in corporate raising CPs through FMDQ to urgent short-term capital obligations.
He noted CPs instrument not on the NGX and a money market instrument.
Speaking on the interest rate, he said: “Not that the interest rate on CP is low, just that these companies need short-term fund to meet their daily business obligations. Some of these companies might be having a short fail in working capital. Short term fund is to finance working capital to remain in business. Some might have short-term opportunities to grow their businesses and decided to take advantage of CP to remain buoyant.”
FMDQ said the timely admission of the CP issues, and in general, all securities on the exchange was a testament of the efficiency of the exchange’s securities quotation process.
“As is tradition for FMDQ Exchange, the Coronation Merchant Bank CPs, which were sponsored on the Exchange by Chapel Hill Denham Advisory Limited, a Registration Member (Quotation) of FMDQ Exchange, shall be availed global visibility through the Exchange’s website and systems, governance and continuous information disclosure to protect investors’ interest, credible price formation, amongst other benefits derived from the FMDQ Exchange platform,” it said.
