Corporate Nigeria snubs bond market for lending market

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Corporations in Nigeria have failed to take advantage of lower yields accessible from corporate bond listing as compared to the prime lending rate of 18.23 percent last reported in the country. Just 20 companies currently have corporate bonds listed on FMDQ.

Corporate bonds are long-term debt securities issued by corporations in order to raise finance for a variety of reasons, from building facilities and purchasing equipment to expanding their businesses.

With an outstanding value of N389.92 billion at an average yield of 15.66 percent, the value of corporate debt on FMDQ is far below the N15.23 trillion overall worth of loans collected by customers of Deposit Money Banks. A large proportion of the loans to customers is to corporate individuals at a rate above the prime lending rate.

Obinna Uzoma, a Lagos based economist told Businessday that “there are vast ways to negotiate interest rates when corporates want to borrow from banks but the requirements for listing with FMDQ might push a number of companies away, thereby having to deal with

just DMBS.”

Corporate bonds are usually characterized by higher yields than government bonds because there is a higher risk of a company defaulting than a government. They, however, can also be the most rewarding fixedincome investments because of the risk the investors must take on. A corporation’s credit quality is very important as the higher the quality, the lower the interest rate the investors receive.

The companies who are taking advantage of cheaper rates are Flour Mills of Nigeria, Union Bank of Nigeria (UBN), C&I Leasing, Nigeria Mortgage Refinance Company (NMRC) and UAC Property Development Company.

In reviewing the amounts listed by the companies, FMDQ admitted the listing of the Flour Mills N20.11 billion bonds, comprising N10.11 billion Series 1 and N10 billion Series … Read More...

DMO says 220% Green bond subscription level on increased awareness by subscribers

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The Debt Management Office (DMO) has attributed the 220% subscription of the second Sovereign Green Bond to increased knowledge and awareness of Green bonds by investors.

The DMO further described the appreciation in the subscription as a demonstration of a greater level of commitment from the general public towards protecting the environment.

The stronger participation of retail investors, DMO said, showed that financial inclusion and deepening of the domestic financial market, which are some of the key objectives of the DMO in its issuance activities, were being achieved.

In a statement on Thursday, DMO said the ‎total value of subscriptions received was N32.93 billion, representing 220% of the N15 billion offered.

It explained further that the number of subscribers doubled compared to the figure for the first Sovereign Green Bond issued in December 2017.

According to DMO, retail investors were not left out, as the number of individuals who subscribed for the second Sovereign Green Bond more than doubled.

The amount of subscriptions grew by almost 201% with the share of total subscriptions rising to 1.43% compared to 0.67% for the 2017 Sovereign Green Bond.

Although the Offer was oversubscribed, the DMO allotted only the N15 billion that was offered for a tenor of seven years, at a coupon of 14.50% a year.

The proceeds of the Green Bond will be used to finance projects in the 2018, which will contribute to Nigeria’s commitments to the Paris Agreement on Climate Change, DMO stated.

The projects include Off-Grid Solar and Wind Farm, Irrigation, Afforestation and Reforestation, as well as, Ecological Restoration.

The financial advisors to the offer were Chapel Hill Denham Advisory Limited, Capital Assets Limited, Rand Merchant Bank Nigeria Limited, and Stanbic IBTC Capital Limited.

 

‎HARRISON EDEH, ABUJA

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