Economy
FMDQ Commercial Paper Market Hits N12.3tr
By Dipo Olowookere
Following an extended period marked by a dearth of activity, significantly weakened issuer interest and diminished investor confidence, the Nigerian Commercial Paper (CP) market may now have accomplished a full and clear revival as registered CP Programmes on the platform of FMDQ OTC Securities Exchange (FMDQ or the OTC Exchange) have crossed N1 trillion in value.
Stark opacity and extreme market irregularities which characterised the Nigerian CP market prior to the necessary release of the Central Bank of Nigeria (CBN) Guidelines on the Issuance and Treatment of Bankers’ Acceptances and Commercial Paper [2009] (the Guidelines), saw the sharp decline of the then market from trillions worth to zero levels by 2013.
There however, appears to be hope for businesses looking to tap the debt market for short-term capital and investors looking to diversify their portfolios, as the FMDQ-championed CP market reform since 2014, which was predicated on the back of the CBN Guidelines, has contributed, in no small measure, to the revival of the activities in the CP market; providing issuers a renewed opportunity to grow their businesses and meet short-term funding obligations as well as restoring the much-needed confidence required by investors to actively participate in the market.
Having made the decision to embark on key initiatives and strategies for the restoration of the Nigerian CP market back in 2014, FMDQ, in collaboration with the CBN and other relevant market stakeholders, relentlessly sought to realise this objective.
FMDQ released the FMDQ Commercial Paper Quotation Rules & Process in 2014, following the receipt of the CBN’s “No Objection” on same, and focused efforts and the requisite resources to organise and resuscitate the undeniably extremely important market.
In addition to providing what issuers and market participants have described as a reliable and efficient platform for registering, quoting and trading CPs, amongst other debt securities, FMDQ has taken the most crucial steps towards promoting transparency, governance, integrity and efficiency, thereby regaining the lost interest and confidence in the Nigerian CP market, by adopting initiatives specifically targeted at achieving the objective to revive the market.
Transparency, price discovery, liquidity, rollover governance (i.e. matured CPs are approved for rollover only with the consent of investors), efficient quotation processes are some of the transformation elements now evident in the Nigerian CP market today. Issuers and investors alike, are now able to effectively and sustainably contribute to the development of the nation’s debt markets.
Coming at a time when the OTC Exchange has recently affirmed its commitment towards the development of the Nigerian debt capital markets (DCM) and its subsequent deepening and integration to its international counterparts, one can expect that the successes recorded by the Nigerian CP market can be cascaded into other aspects of the Nigerian financial markets within FMDQ’s purview.
Indeed, FMDQ continues to validate its position as the foremost debt capital and OTC derivatives-focused exchange in the nation and the commendable strides made by the OTC Exchange in its product and market development agenda, notable of which include the launch of Short-Term Bonds process to enhance speed to market in bond issuance, the commencement of the Private Companies’ Bonds Noting Service and most recently, and the embarkment on initiatives aimed at the development of the Sukuk and Green Bonds/Sustainable Finance markets to support infrastructure and economic development in Nigeria, have begun to put the Nigerian DCM on the global map.
FMDQ has ably embraced the role of a change agent in the Nigerian financial market and it is expected that the OTC Exchange will not rest on it oars but continue to deploy initiatives to improve the prosperity of all categories of capital raising, investing and trading stakeholders – governments, businesses, and individuals – through its compelling activities in promoting access to capital, democratising investment, enhancing transfer of value and championing transfer of risk in the DCM.
CPs, which are short-term debt financing instruments issued for a period not exceeding two hundred and seventy (270) days, present a cost-effective and stable means of sourcing scarce capital when compared to traditional bank loans and enable businesses diversify their funding sources.
It is therefore, commendable that at such time when banks, non-bank financial institutions and small & medium-scale enterprises are striving to flourish despite the economic challenges in the country, the CP market can be looked to, to provide a viable, stable and cost-effective means for the achievement of their business objectives/goals.
In addition, by accessing the CP market, businesses can build confidence in their brand as well as raise their corporate profiles ahead of tapping the market for longer-term debt such as bonds in preparation for the impact of banks implementation of Basel 3 liquidity management principles.
As an investible asset class, CPs are often sought by investors to diversify their portfolios, thus, enhancing overall portfolio return, with their short-term nature permitting high relative return on investment, and allowing these investors to remain relatively liquid. Companies that have tapped the CP market have achieved significant reduction in their borrowing costs.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed higher by 1.41 per cent on Friday, May 15, supported by four securities on the platform.
During the session, FrieslandCampina Wamco Plc added N14.24 to its share price to sell for N159.00 per unit, in contrast to the previous day’s N144.76 per unit.
Further, Central Securities and Clearing System (CSCS) Plc appreciated by N1.34 to N72.34 per share from N71.00 per share, Geo-Fluids Plc improved its price by 4 Kobo to N2.94 per unit from N2.90 per unit, and Industrial and General Insurance (IGI) Plc gained 1 Kobo to trade at 61 Kobo per share compared with Thursday’s closing price of 60 Kobo per share.
As a result, the NASD Unlisted Security Index (NSI) rose by 58.20 points to 4,188.41 points from 4,130.21 points, and the market capitalisation soared by N34.82 billion to N2.506 trillion from N2.471 trillion on Thursday.
During the session, the volume of trades went up by 180.8 per cent to 1.2 million units from 417,349 units, and the value of transactions increased by 29.8 per cent to N29.8 million from N23.2 million, while the number of deals fell by 22.6 per cent to 24 deals from 31 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 60.8 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.9 million units valued at N1.9 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
By Dipo Olowookere
The bears overpowered the Nigerian Exchange (NGX) Limited on Friday, sinking it further by 0.76 per cent when the closing gong was struck by 4 pm.
The nation’s flagship equity market was under selling pressure during the session, as investors booked profits after the shares witnessed price appreciation in the past trading sessions.
The energy sector was the most impacted, as it shed 4.43 per cent. The consumer goods index declined by 0.90 per cent, the banking counter decreased by 0.15 per cent, and the industrial goods sector lost 0.08 per cent, while the insurance counter gained 2.42 per cent, which was not enough to salvage the situation.
Consequently, the All-Share Index (ASI) contracted by 1,912.19 points to 250,330.92 points from 252,243.11 points, and the market capitalisation moderated by 1.225 trillion to N160.444 trillion from N161.669 trillion.
Zichis was the worst-performing stock for the session after it gave up 9.97 per cent to close at N29.43, FTN Cocoa slipped by 9.95 per cent to N8.96, The Initiates slumped by 9.90 per cent to N32.30, LivingTrust Mortgage Bank tumbled by 9.88 per cent to N3.83, and International Energy Insurance dropped 9.71 per cent to trade at N2.79.
The best-performing stock was ABC Transport, which grew by 10.00 per cent to N6.27. May and Baker also appreciated by 10.00 per cent to N47.30, SCOA Nigeria surged by 9.98 per cent to N33.05, Trans-Nationwide Express expanded by 9.97 per cent to N7.06, and DAAR Communications jumped 9.76 per cent to N2.25.
Yesterday, investors traded 1.1 billion shares worth N44.3 billion in 65,744 deals compared with the 1.0 billion shares valued at N41.6 billion transacted in 74,822 deals a day earlier. This indicated a dip in the number of deals by 12.13 per cent, and a rise in the trading volume and value by 10.00 per cent and 6.49 per cent, respectively.
Chams was the busiest equity for the day, with 328.5 million units sold for N1.1 billion. UBA traded 61.6 million units worth N2.7 billion, First Holdco transacted 58.7 million units valued at N4.2 billion, Secure Electronic Technology exchanged 51.9 million units worth N45.0 million, and Access Holdings traded 51.8 million units valued at N1.3 billion.
By Adedapo Adesanya
The last trading session of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended on a negative note for the Naira on Friday, May 15, as it lost N15 Kobo or 0.1 per cent against the Dollar to trade at N1,371.04/$1 compared with the previous day’s N1,370.89/$1.
However, it further appreciated against the Pound Sterling in the same market segment yesterday by N20.77 to close at N1,830.61/£1 versus Thursday’s value of N1,851.38/£1, and gained N7.91 against the Euro to settle at N1,595.07/€1 versus N1,602.98/€1.
At the GTBank FX desk, the Naira lost N2 against the US Dollar during the session to sell at N1,383/$1 compared with the preceding session’s N1,381/$1, and at the black market, it remained unchanged at N1,385/$1.
The Naira is forecast to be broadly stable, supported by Dollar sales by the Central Bank of Nigeria (CBN) amid steady, higher oil receipts, with the market settling into a balance.
Policy direction is also expected to give the market some boost as the CBN said the new edition of the FX market guidelines will deepen liquidity, improve transparency and strengthen confidence in the country’s foreign exchange market.
According to the Governor of the CBN, Mr Yemi Cardoso, the update is due to changing global economic realities, domestic reforms and the need for a more coherent and forward-looking regulatory framework. According to him, the last edition of the FX manual was issued in 2018, making the latest review both timely and necessary.
Meanwhile, the cryptocurrency market plunged into the red zone as rising bond yields hit risk assets across markets, while traders are increasingly betting the Federal Reserve may need to raise rates again. Rising energy prices and resurging inflation could force central banks back into tightening mode.
Cardano (ADA) shrank by 4.4 per cent to $0.2557, Dogecoin (DOGE) slid by 3.7 per cent to $0.1104, Ripple (XRP) depreciated by 3.5 per cent to $1.41, Solana (SOL) crashed by 3.5 per cent to $87.81, and Binance Coin (BNB) slumped by 3.4 per cent to $659.64.
Further, Bitcoin (BTC) declined by 2.6 per cent to $78,547.49, Ethereum (ETH) lost 2.1 per cent to quote at $2,209.19, and TRON (TRX) tumbled by 0.7 per cent to $0.3509, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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