Following uncertainty about accessing fresh capital for expansion, companies have found solace in Nigeria’s debt capital market. Kayode Tokede examines how Nigerian Exchange Limited (NGX) and FMDQ Exchange have facilitated the growth and development of Nigeria’s debt capital market and economy at large.
In addition to creating wealth and facilitating the flow of liquidity, stock exchanges around the world also play a crucial role when companies seek to raise capital through either debt or equity financing.
Another important function is a commitment to fostering an efficient, transparent and well-regulated market that attracts and retains both domestic and foreign investors, including through the provision of a first-class listing and listing service in accordance with the mandate of the securities regulator and Exchange Commission (SEC).
In particular, The Nigerian Exchange Limited (NGX) and FMDQ Exchange have championed economic reforms in various ways, as local and foreign companies have accessed these markets to raise fresh capital rather than borrowing from banks with high interest rates.
Both exchanges have listed numerous issues this year and the result has further boosted corporate profits and as a result boosted share prices and boosted investor confidence.
The Debt Management Office (DMO) has consistently supported the federal government in raising capital on both exchanges in order to bridge the budget deficit.
An investigation by THISDAY revealed that companies and the government have combined listings/listings of N185.8 billion and N689.48 billion in the first half (H1) of 2022 on the FMDQ exchange, including bonds and commercial paper (CP). , respectively.
The FMDQ reported in its monthly Financial Markets Monthly Report a total outstanding value of corporate bonds and CPs of N5.9 trillion and N2.00 trillion respectively as of June 30, 2022.
The report also revealed that the total amount of Treasury bills sold between January and June 2022 was N2.31 trillion and the total amount of FGN bonds sold during the period was N1.84 trillion.
Notable issues this year included the listing of FGN’s $4 billion Eurobond and MTN Nigeria Plc’s 127 billion CP.
The FMDQ Exchange in February gave the Nigerian federal government listing of 6.125 percent US$1.25 billion SEP 2028, 7.375 percent US$1.50 billion SEP 2033 and 8.250 percent US$1.25 billion SEP 2051 Eurobonds under of their Global Medium-Term Note Program on their platform.
The listing of these foreign currency denominated debt instruments is another commendable achievement by the Federal Government of Nigeria (FGN) through the Debt Management Office (DMO) and demonstrates the government’s relentless commitment to supporting the development of the country’s debt capital markets (DCM) towards a sustainable economy Development.
These issuances represent FGN’s seventh Eurobond issuance, following issuances in 2011, 2013, 2017 and 2019.
However, the telecom giant led the way with the issuance of a historic N127 billion Series 1 and 2 CP under its registered N150 billion program.
The issue consisted of two maturities – a 184-day series issue with a yield of 7.50% and a 254-day series 2 with a yield of 8.50%.
According to MTN Nigeria, the issuance was in line with its strategy of diversifying funding options, with proceeds being used for working capital and general corporate purposes.
At the signing ceremony, MTN Nigeria Communication’s Chief Executive Officer, Mr. Karl Toriola, stated that the N127 billion CP issue would enter the record books as the largest CP issue in Nigeria.
According to him, “The success of our CP offering is a clear testament to the strength and acceptance of the MTN brand and the confidence of the investment community in the leadership, strong financial performance and corporate strategy of the MTN Nigeria company.”
He pointed out that with the completion of the N127 billion CP, MTN Nigeria aimed to improve customer service and high quality bouquet services including 5G spectrum awaiting regulatory approval.
On the other hand, NGX has listed N1.08 trillion in new issues and US$4 billion in Eurobonds on its platform in the first half of 2022.
Listed on both the bond and equity markets, these issues are essential for market deepening, tradability and improving liquidity, as well as increasing access to capital to fund growth returns.
On the stock exchange, NGX began the year with the landmark listing of BUA Foods’ 18 billion shares, which were listed at N40 per share, increasing NGX’s market capitalization by N720 billion. Abbey Mortgage Bank also listed its rights issue of approximately N3.028 billion while Access Holdings listed new shares of 35.545 billion shares valued at N353.675 billion following its merger and acquisition.
In NGX’s bond market, the Nigerian federal government dominated issuance, raising approximately N2,494,110,547,000.00 locally and listing US$4 billion worth of Eurobonds.
In addition, NPF Microfinance Bank listed 3,107,001,335 common shares at 50 kobo each resulting from the offering of 2,286,657,766 common shares at 50 kobo each at N1.50 per share via a rights issue on a basis of 1 new common share for every common share held resulted in public offering of 713,342,234 common shares at N1.50 per share of NPF Microfinance Bank Plc for N4.66 billion while other memorandum listings occurred at N2 billion.
According to NGX, capital is critical to company growth, either in the form of debt through bonds or equity through stocks.
SUPPORT FOR SHAREHOLDERS
In fulfilling its mandate as market organizer, FMDQ Exchange has expressed throughout the year that it remains committed, with the support of its key stakeholders, to articulating and driving innovative ways to make Nigeria’s financial markets globally competitive, operationally excellent and liquid make , and varied.
According to FMDQ, “in line with FMDQ Exchange’s corporate tradition, these Eurobonds should benefit from all the advantages of FMDQ Exchange’s prestigious listing and listing service, including global visibility through FMDQ Exchange’s website and systems, governance, credible pricing and continuous disclosure of information to under other things, to protect the interests of investors.”
David Adonri, Vice Chairman of Highcap Securities, commented: “CP issuance has improved in the first half of 2022 as the interest rate has fallen sharply to lower single digits. The cost of borrowing through CPs benefited corporate borrowers more than traditional bank loans. There was also an incentive for investors to invest in CPs because they have higher interest rates than the deposit rate and the Treasury Bill rate.”
NGX Limited Chief Executive Officer Temi Popoola noted that as a significant component of the capital market, NGX will continue to play a significant role in the capital formation process due to the tremendous opportunities arising from its operations.
“A thriving exchange is expected to continue to mobilize long-term savings to fund long-term investments by providing venture capital in the form of equity or quasi-equity to entrepreneurs, a role NGX continues to prioritize,” he said.
As a reminder, earlier in the year NGX highlighted five key areas of focus in 2022 in its efforts to deepen access and attract a new generation of investors to the market.
Popoola had said the NGX will seek to consolidate its historical status with a new push of digitization, creating an innovative and automated approach to the market while ensuring the overall quality of the listed companies and the ease of the capital raising process.
According to him, The Exchange would take strategic initiatives to lure financial technology (fintech) companies public, including introducing a Nasdaq-style board for listing tech companies.
“Today there are a lot of capital raisings from technology companies around the world. Our market can be a source to raise this capital. SEC has already taken the lead. It will help spur economic growth and mobilize capital from surplus-to-deficit sectors,” Popoola said.
He added that NGX would also accelerate the digitization of its processes and operations to attract more investors, particularly millennials and youth, who are increasingly turning to alternative investment opportunities.
He said NGX will work to integrate the market with digital banks and other transaction channels to make the market a viable and accessible investment option.