Much like the visibility, liquidity and transparency listing of bonds on a securities exchange avail the issuers, investors and regulators, the introduction of the quotation of commercial papers (CPs) by FMDQ OTC PLC (FMDQ) on its platform is poised to bring the same benefits (and more) to the Nigerian CP market, an event never before experienced in the country.
FMDQ admitted the first CP for quotation on its platform, the “Stanbic IBTC Bank PLC (Stanbic Bank) N100bn Multi-Currency Commercial Paper Issuance Programme”, at the start of November 2014. The Nigerian CP market, through this initiative, is set for a resuscitation to an active and vibrant market of world-class standards.
This will also be to the advantage of domestic and offshore investors – fund managers, pension fund administrators (PFAs), other corporates etc. – seeking investments in alternative asset classes and corporates desiring more efficient ways to raise working capital funds.
The benefits of quoting CPs on a securities exchange like FMDQ to issuers, investors, dealers and regulators, should not be underestimated and cannot be over emphasised. To the issuers, the benefits include: Visibility, Price Formation, Secondary market liquidity, Benchmark pricing, Development of Asset-backed CPs, and Development of derivative products, among others.
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To the investors and regulators, the benefits they stand to gain include:Transparency – Detailed issuer and issue information; Corporate interest rate fixing; Secondary market liquidity; Visibility of outstanding CP issues; Macro prudential analysis; CP Auction governance; and Online up-to-date credit status of obligors. The quotation of CPs and the attendant processes and practices FMDQ has put in place are bound to position the Nigerian money market for global competitiveness.
FMDQ will continue to expand on the information provided on the quoted CPs. Information will cover; (a) Secondary market activities, analyses of flow of credit to the sectors of the economy; (b) List of issues rolled over (which may be a signal for emerging weakness in the issuer’s repayment capacity); (c) On-line real time information of defaults (these will also be published on our website thereby providing quicker information to regulators and investors on obligor’s credit status and facility rankings much quicker than the Credit Bureau service or banks’ disclosure).
With the attendant transparency of the well-structured FMDQ CP Quotation, one is encouraged to advise the significantly important corporate organisations (SICOs) to issue CPs so the market can gain insight into their financial operations.
In short, questions should be asked of a sound corporate treasury that has no transparent market indication of the price of its debt as that price says a lot about the brand, operations, corporate treasury etc. This would also help in achieving the credible corporate debt pricing benchmark that has eluded this country for years. Investment Bankers are optimistic about FMDQ’s strategic approach to the development of the Nigerian financial market in general, and particularly the debt capital market.
A specialised debt capital market securities exchange like FMDQ is a sine qua non for the required long-term debt financing needed to bridge the infrastructure gaps.
Tumi Sekoni works with the Business Development, FMDQ OTC plc
