Economy
How to Make More Money Investing in Commercial Papers
By FSDH Research
As most savvy investors will tell you, it is important to put your money to work in order to grow your wealth.
In this report, we will show you how you can achieve this goal through investing in Commercial Papers (CPs).
If you have ever bought an item from a discount shop, then you have a basic understanding of how you can invest in a commercial paper to grow your wealth.
Investing in a CP may be likened to buying items from a discount shop or buying items that are on sale in a supermarket. Usually, a discount shop gives you an opportunity to pay a price that is lower than the price tag on the item.
For instance, if the price tag on a perfume is N20 but the shop places a 10% discount (i.e. N2) on the perfume, it means that you will pay N18 (i.e. N20 less N2) for it.
The only difference between this simple calculation and a case of CP investment is that you must take into account the number of days the investment will run, so as to determine the actual discount you will receive on the investment.
So, when you invest in a CP, you pay an amount that is lower than the amount you will receive on the day the investment is ripe for harvest (matures).
CPs are notes of promise that large companies use to borrow money from people or companies. The company issuing the CP usually borrows the money for a short period of time, always less than one year. CPs are issued in tenors ranging between a minimum of 15 days and a maximum of 270 days.
Companies typically use the money they borrow to finance their operations in order to generate more income.
The Securities and Exchange Commission (SEC) regulates the CP market in Nigeria. The primary duty of SEC in Nigeria is to formulate rules and guidelines that protect investors’ interests and ensure orderly development of the investment market.
Usually, the investment window in CPs opens for a short period of time – in most cases, one week. The issuing company determines the minimum amount that investors can invest, which is typically N5 million but may be lower in some cases.
Investment in CPs is similar to investment in Nigerian Treasury Bills (NTBs) in that both instruments are discounted instruments.
However, the main difference is that while NTBs are used by the Federal Government of Nigeria (FGN) to borrow money, CPs are used for the same purpose by companies.
FSDH Research notes, however, that despite being relatively low-risk because of their short maturity period, the risks inherent in investing in CPs are still higher than the risks inherent in investing in NTBs.
FSDH Research believes that a number of companies may issue CPs this year to raise funds to finance their operations, as against using Bonds to raise long-term funds.
This is based on our view that interest rates will increase because of an expected increase in the inflation rate.
This will create more investment opportunities for investors in the CP market, especially given that the yields on CPs are usually higher than those on NTBs.
In addition to higher yields, another advantage of CPs is that the income investors earn from them is not subject to taxes.
This is an incentive from the FGN to encourage the development of the CP market in Nigeria. Investment banks or investment management companies regularly introduce available CPs in the market to their clients whenever the offer is open for subscription. The FMDQ OTC Securities Exchange provides a platform for trading in CPs in Nigeria.
As such, CP investments are relatively liquid as they can be traded in the secondary market if investors wish to sell before maturity.
Now that you have a full understanding of the potential of CPs for wealth creation, we know you would not want to miss any opportunity to invest in CPs.
By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries (OPEC) has once again trimmed its 2024 and 2025 oil demand growth forecasts.
The bloc made this in its latest monthly oil market report for December 2024.
The 2024 world oil demand growth forecast is now put at 1.61 million barrels per day from the previous 1.82 million barrels per day.
For 2025, OPEC says the world oil demand growth forecast is now at 1.45 million barrels per day, which is 900,000 barrels per day lower than the 1.54 million barrels per day earlier quoted.
On the changes, the group said that the downgrade for this year owes to more bearish data received in the third quarter of 2024 while the projections for next year relate to the potential impact that will arise from US tariffs.
The oil cartel had kept the 2024 outlook unchanged until August, a view it had first taken in July 2023.
OPEC and its wider group of allies known as OPEC+ earlier this month delayed its plan to start raising output until April 2025 against a backdrop of falling prices.
Eight OPEC+ member countries – Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman – decided to extend additional crude oil production cuts adopted in April 2023 and November 2023, due to weak demand and booming production outside the group.
In April 2023, these OPEC+ countries decided to reduce their oil production by over 1.65 million barrels per day as of May 2023 until the end of 2023. These production cuts were later extended to the end of 2024 and will now be extended until the end of December 2026.
In addition, in November 2023, these producers had agreed to voluntary output cuts totalling about 2.2 million barrels per day for the first quarter of 2024, in order to support prices and stabilise the market.
These additional production cuts were extended to the end of 2024 and will now be extended to the end of March 2025; they will then be gradually phased out on a monthly basis until the end of September 2026.
Members have made a series of deep output cuts since late 2022.
They are currently cutting output by a total of 5.86 million barrels per day, or about 5.7 per cent of global demand. Russia also announced plans to reduce its production by an extra 471,000 barrels per day in June 2024.
By Aduragbemi Omiyale
A minority equity stake in Chappal Energies Mauritius Limited has been acquired by a Nigerian energy firm, Aradel Holdings Plc.
This deal came a few days after Chappal Energies purchased a 53.85 per cent equity stake in Equinor Nigeria Energy Company Limited (ENEC).
Chappal Energies went into the deal with Equinor to take part in the oil and gas lease OML 128, including the unitised 20.21 per cent stake in the Agbami oil field, operated by Chevron.
Since production started in 2008, the Agbami field has produced more than one billion barrels of oil, creating value for Nigerian society and various stakeholders.
As part of the deal, Chappal will assume the operatorship of OML 129, which includes several significant prospects and undeveloped discoveries (Nnwa, Bilah and Sehki).
The Nnwa discovery is part of the giant Nnwa-Doro field, a major gas resource with significant potential to deliver value for Nigeria.
In a separate transaction, on July 17, 2024, Chappal and Total Energies sealed an SPA for the acquisition by Chappal of 10 per cent of the SPDC JV.
The relevant parties to this transaction are working towards closing out this transaction and Ministerial Approval and NNPC consent to accede to the Joint Operating Agreement have been obtained.
“This acquisition is in line with diversifying our asset base, deepening our gas competencies and gaining access to offshore basins using low-risk approaches.
“We recognise the strategic role of gas in Nigeria’s energy future and are happy to expand our equity holding in this critical resource.
“We are committed to the cause of developing the significant value inherent in the assets, which will be extremely beneficial to the country.
“Aradel hopes to bring its proven execution competencies to bear in supporting Chappal’s development of these opportunities,” the chief executive of Aradel Holdings, Mr Adegbite Falade, stated.
By Adedapo Adesanya
Afriland Properties Plc helped the NASD Over-the-Counter (OTC) Securities Exchange record a 0.04 per cent gain on Tuesday, December 10 as the share price of the property investment rose by 34 Kobo to N16.94 per unit from the preceding day’s N16.60 per unit.
As a result of this, the market capitalisation of the bourse went up by N380 million to remain relatively unchanged at N1.056 trillion like the previous trading day.
But the NASD Unlisted Security Index (NSI) closed higher at 3,014.36 points after it recorded an addition of 1.09 points to Monday’s closing value of 3,013.27 points.
The NASD OTC securities exchange recorded a price loser and it was Geo-Fluids Plc, which went down by 2 Kobo to close at N3.93 per share, in contrast to the preceding day’s N3.95 per share.
During the trading session, the volume of securities bought and sold by investors increased by 95.8 per cent to 2.4 million units from the 1.2 million securities traded in the preceding session.
However, the value of shares traded yesterday slumped by 3.7 per cent to N4.9 million from the N5.07 million recorded a day earlier, as the number of deals surged by 27.3 per cent to 14 deals from 11 deals.
Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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