Securities and Exchange Commission

By Goddy Egene

The revival of the Nigerian commercial papers (CPs) market by the FMDQ OTC Securities Exchange has facilitated the raising of about N80.4 billion by corporates, thereby contributing to the growth of the Nigerian economy.

CPs are unsecured promissory notes with a fixed maturity of about nine months issued by companies to raise money to meet short term finance obligations. The notes are backed by the promise of the issuers to repay based on certain agreed terms.

However, the CP market’s average monthly outstanding value dipped from N1trillion in 2008 to N9.8 billion in 2013 due to an unprecedented lull.

But the FMDQ, a Securities and Exchange Commission (SEC)-licensed platform for over-the-counter (OTC) trading of fixed income securities, got the approval of the Central Bank of Nigeria (CBN) to revive the CP market.
Consequently, FMDQ developed the Commercial Paper Quotations Process (CPQP) that brought unprecedented transparency, governance and integrity to the CP market.

Over one year after the revival of the market, THISDAY checks showed that companies have raised N80.4 billion from the CP market.

An analysis of the funds raised indicates that two banks and two brewing firms accounted for the funds. They are: Stanbic IBTC Bank Plc, Wema Bank Plc, Nigerian Breweries Plc, and Guinness Nigeria Plc. Stanbic IBTC raised N44.54 billion; Wema Bank Plc, N8.15 billion; Nigerian Breweries N17.71 billion; and Guinness Nigeria N10 billion.

Commenting on the CP market, Managing Director/Chief Executive Officer of FMDQ, Mr. Bola Onadele.Koko said the platform has brought an unprecedented transparency, governance and integrity, saying these factors were not present in the erstwhile CP market. “The benefits of transparency and governance offered by FMDQ around its CP quotation process and post issuance of the CPs cannot be over-emphasised as they directly impact, not just the issuers, but investors and the market regulators,” he said.

According to him, FMDQ has developed a Quoted Commercial Papers Status Report (QCSR) which gives the status of all CPs quoted from live CPs to matured CPs.

“Information provided include, among others, rolled-over CPs, failed attempted roll-over CPs, matured CPs with default and matured & paid CPs. A wealth of information is available on FMDQ’s website on all CPs quoted on the Exchange, ranging from issuer, value, issuer rating, information memorandum to issuer CP quotation history

Onadele noted that the information provided by this report would allow investors perform their independent risk assessments of any issuer/issue and also allow regulators monitor effectively, the activities of their supervisees.

“The added governance by FMDQ in the CP market is of particular and crucial importance to the market regulators, the CBN and the National Pension Commission (PenCom) as their supervisees, the Nigerian banks and Pension Fund Administrators (PFAs) respectively, are major players in the CP market. The CBN should ensure that banks are involved with only CPs that are quoted on FMDQ and similarly, PenCom should ensure that the PFAs invest only in CPs that are quoted on FMDQ, in order to guarantee that the Nigerian CP market has the requisite disclosure, integrity, due diligence, transparency, price formation and overall governance evident in a thriving and efficient market. This will not only improve market confidence but assure investor protection.”