Nigeria: NGX Creates Hybrid Market, Access To Capital Via Bonds

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It is believed that the short term funding profile of the money market makes it unsuitable for project infrastructure investment hence the capital market which creates an enabling environment for the generation of long-term financing, active private sector participation in infrastructure development can also provide the platform to raise or get access to capital.

In addition, the capital market provides a variety of financing instruments and investor categories which could lead to a larger pool of funds than other financing options. However, having the access to funding is not very easy for many of the companies and the equities market (primary market), which used to be a very good source of funding has remained mostly inactive due to the impact of the global economic crisis as well as investor apathy.

According to a World Bank Report (2010), Nigerian’s stock market significance measured by total market capitalisation as percentage of the Gross Domestic Product (GDP) was as high as 52 per cent in 2007 but declined to 24 per cent and 19.7 per cent in 2008 and 2009 respectively.

However, Daily Sun investigations revealed that most listed companies and some private ones have found the bond segment of the nation’s capital market as the way out. The debt capital market has assisted many companies listed on the Nigerian Exchange Limited (NGX) to access capital with relatively low coupons below 10 per cent.

A bond is a form of loan that provides the borrower with external funds to finance long-term investments. Just like stocks, bonds are securities but a major difference between them is that stockholders own equity in a company while bond-holders are just lenders in the company. As a result, bondholders have priority over stockholders.

Further investigations reveal that between January to June 2021, Federal Government and corporates have so far raised N4.58 trillion from the capital market via the fixed income segment despite the weak macroeconomic situation, leading to credence that the NGX continues to provide issuers with a platform that allows them meet their strategic business objectives.

Data obtained from NGX’s X-Compliance Report on new listings in the fixed income market in 2021, revealed that the total number of issues within the period under review stood at 41 with 6.812 trillion units admitted till date. The data further revealed that the Federal Government was the most active player in the fixed income segment while the value or market capitalization of the new listings till date (June 3, 2021) stands at N4.58 trillion, from 12 issuers.

Specifically, some of the issuers that have listed on NGX in the period under review include; NOVAMBL Investments SPV Plc, Federal Government of Nigeria, Mecure Industries Funding SPV Plc, CardinalStone Financing SPV Plc, Fidelity Bank Plc, FBNQuest Merchant Bank SPV Funding Plc, BUA Cement Plc, Etranzact International Plc, Kogi State Government, TSL SPV Plc, Lagos State government and Flour Mills of Nigeria Plc.

At a recent virtual conference organised by the NGX in collaboration with the Bureau of Public Enterprises (BPE) and the Nigerian Investment Promotion Commission (NIPC), its Chief Executive Officer, Temi Popoola, said the local bourse remains one of the best platforms for unlocking investment opportunities in the capital market.

He said: “I would like to reiterate that the ability to unlock the investment opportunities in Nigeria’s privatisation and economic reform programmes will be impacted by our collective ability to overcome our prevailing challenges and to leverage the opportunities that abound amid these challenges.

As you seek to leverage these opportunities, please be reminded that NGX remains a veritable platform for all investment needs. At NGX, we continually work with all key stakeholders to develop products and services that meet the needs of stakeholders, while deepening the Nigerian capital market,”

Also speaking, the Divisional Head, Listings Business, NGX, Olumide Bolumole, said the exchange would continue to provide issuers with a platform that allows them meet their strategic business objectives and it is the Exchange’s delight to see issuers take full advantage of its products and services to support their growth story.

“NGX remains committed to driving sustainable products and safe investments in a market that is orderly and transparent, while leveraging cutting edge technology. In terms of capital formation on the NGX platform, this year, the exchange has facilitated needed financing of over N4.6 trillion raised by governments and corporates across various asset classes”, he said.

For his part, the Chief Executive Officer (CEO), BUA Cement Plc, Yusuf Haliru Binji, said: “As part of our growth strategy, we took the deliberate decision to access the debt capital market with the intent to raise N100 billion in the first tranche of our N200 billion programme.

Given the overwhelming response and following the Securities and Exchange Commission’s (SEC) guidelines, we accepted N115 billion as the total subscription amount.”

– Thesun

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