The value of corporate bonds issued by Nigerian companies plummeted by 98 percent between Q4 2022 and Q1 2024 due to high yield demands, according to a BusinessDay analysis of FMDQ Securities Exchange Limited’s data.
In Q1 2024, corporate bonds were valued at N5.5 billion, down from N249.4 billion in Q4 2022, indicating a N244 billion or 98 percent decrease.
Similarly, commercial papers (CPs) dropped to N331.81 billion in Q1 2024 from N537.47 billion in Q1 2023, a 38 percent decline, though up from N148.72 billion in Q4 2022.
Opeyemi Babalola of Comercio Partners Asset Management attributes this to companies’ reluctance to issue debt at high levels, especially with one-year Nigerian Treasury Bills yielding 25 percent, necessitating CP issuance at even higher premiums.
To combat inflation, the Yemi Cardoso-led Monetary Policy Committee increased interest rates thrice by 750 basis points, with Q1 witnessing a hike to 24.75 percent from 18.75 percent last year, and another rise to 26.25 percent in May 2024.
CP issuers in Q1 2024 included firms from financial services, agriculture, manufacturing, health, pharmaceuticals, and retail sectors. Some companies also resort to bank loans for financing.
(Business Day)