Stanbic IBTC Plc will today, Monday, be the first company to quote its commercial paper (CP) on the trading platform of FMDQ OTC Plc, BusinessDay can disclose.
Sources close to the development told BusinessDay at the weekend that the bank has a blanket approval of N100 billion commercial paper programme which would be raised in different tranches.
This is the first commercial paper to be quoted on the FMDQ platform. It is also a multi-currency programme targeting the naira, dollar, and other currencies of the world.
“The whole idea is that it is going to be quoted on the FMDQ OTC platform. To the issuer, (Stanbic IBTC) its commercial paper will be given visibility and liquidity, as dealers will be trading in it. To the investors, it will provide transparency on the CPs,” the source said.
When contacted, a source at FMDQ confirmed the development, and said that in addition to the debut of Stanbic IBTC’s N100 billion CP on its platform “we have other potential issuers speaking to us on CPs quotation. We will be seeing more CPs issues going forward.”
The source further said, “We are excited about this development and look forward to more CPs quotation.”
Analysts said at the weekend that the epoch making development is capable of engendering confidence and transparency in the use of money market instruments used mostly by blue chip companies to raise funds to meet their financial obligations.
The implication is that the financial papers, which had been subjected to ‘on and off-balance sheet items’, during computation of banks’ financials some years ago, will be traded on the platform of the FMDQ OTC Plc and is expected to improve the velocity of money in circulation.
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This will also mean conferring visibility and confidence on the issuer, Stanbic IBTC. With this liquidity, investors will have more confidence to put their money in those firms.
The Central Bank of Nigeria (CBN) gave approval for the commercial papers (CPs) market take-off on the trading platform of the FMDQ OTC, about two months ago.
Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations and is backed only by an issuing bank or corporation’s promise to pay the face amount on the maturity date specified on the note.
It was further learnt that investors would be provided information they need to know about the issuer, while the FMDQ ensures post-quotation compliance on the side of the issuer.
BusinessDay had exclusively reported that the commercial papers market would take-off in the third-quarter (Q3) of 2014 after the FMDQ OTC Plc expressed its readiness to revive the market, for which the value as at 2008 was put at N1 trillion.
Financial market dealers say the re-organisation of the CPs market couldn’t have come at a better time, as banks, in compliance with Basel 3 capital and liquidity provisions are beginning to re-position their balance sheets.
An active and vibrant CP market is also of immense benefit to domestic and offshore investors – fund managers, pension fund administrators (PFAs), other corporates seeking investments in alternative asset classes and to corporates desiring more efficient ways to raise funds.
