By Dipo Olowookere
The Securities and Exchange Commission (SEC) has hinted that companies listed on the Nigerian Stocks Exchange (NSE) may raise up to N200 billion from the debt market this year through the issuance of bonds.
If this is done, it would be an all-time high in the country. In 2016, a total of N103 billion was raised from the debt market, which remains Nigeria’s all-time high.
The Nigerian economy fell into recession in the second quarter of 2016 due to drop in oil price in the global market and decline in output of crude oil in the country as a result of attacks on oil facilities in the Niger Delta region of Nigeria.
With the Africa’s largest economy now out of recession, some companies are considering issuing bonds to expand their operations to increase their yields.
In an e-mailed response to Bloomberg, SEC said local firms could raise N200 billion ($554 million) of bonds in 2018, almost double the all-time high set two years ago.
It added that five companies have already submitted plans for debt sales totalling N60.5 billion.
For example, Sterling Bank Plc is planning to approach the market after it abandoned a N65 billion bond issuance in 2016 as a result of high cost of borrowing in the country, 16.5 percent for N7.9 billion debt.
But with things getting back in shape, the lender may consider reviving the bonds sale later this year.
“We’re still watching the market closely and will only issue when rates moderate to acceptable levels.
“With the recent inflation data, we expect to see improvement in interest rates in the coming months,” the Chief Executive Officer (CEO) of Sterling Bank, Mr Abubakar Suleiman, told Bloomberg.
Also, Managing Director of C&I Leasing, Mr Andrew Otike-Odibi, stated that, “The macro-economy is encouraging now,” giving companies the boost to mull the issuance of bonds to raise capital.
According to the CEO of Coronation Merchant Bank, Mr Abubakar Jimoh, the Nigerian bond market is big enough “to accommodate the size of the offers” expected this year.
He said there is “very massive” demand from local pension, insurance and asset-management companies as well as foreign investors for Nigerian assets.
“Owing to the recent strong liquidity in the market, largely driven by the reduction in domestic borrowing and the consequent downward trend in rates, we expect to see an increase in corporate bond issuance in 2018,” Mr Jimoh said.
He disclosed that Coronation Merchant Bank plans to raise short-term loans to fund trade deals between companies, while the bonds will help meet customers’ project-finance needs.
