Nigerian firms can tap into domestic debt market on lower rates  

Corporate firms in Nigeria may have to consider borrowing at this time, as treasury bills yields are falling and government is cutting down on it domestic borrowing to tap in the foreign market, thereby giving room for Nigeria firms to borrow through bond issuance.

The Federal Government usually issue domestic bonds at a more attractive rates than the firms in the country can beat, and as such it was a challenge for most firms to tap in the market as investors would prefer to subscribe to the government bond with ‘no risk’ to corporate firms.

Analysts are however of the opinion that firms will tap into the bond market as rates which were up 15- 16 percent last year are now as low as 13 percent.

The 13th consecutive decline in inflation rate, increase in FX liquidity and government repayment of domestic debt which has resulted in a precipitous drop in yields on treasury bills, were the reasons for the forecast by the analysts.

In order to lower costs, government repaid N198 billion worth of treasury bills in December 2017, instead of rolling them over,

The Director General of Debt Management Office (DMO) said there is money on the table; rates are lower and as such stressed on the need to encourage corporate bonds, and was also of the opinion that the reason there were no many corporate bonds in Nigeria was because interest rates were too high.

However, firms like Mixta, Dufil, Lapo and Viathan Funding Plc issued corporate bonds in 2017.

Mixta issued on January 17 with a 17 percent coupon, outstanding value of N4.5 billion and yield valuation of 14.59 percent, which is to mature in January of 2022.

While Dufil which issued in August of the same year is expecting yield valuation of 15.32 percent to mature in September 2022 and has an outstanding value of N10 billion, while Lapo and Viathan both issued in December of last with outstanding values of N3.15billion and N10 billion respectively. They both are to mature in December of 2022.

Meanwhile, Dangote Cement Plc said it got approval from Nigerian regulators to issue 300 billion naira ($833 million) in local-currency bonds as it seeks to fund expansion and refinance debt.

Africa’s largest producer of building material plans to issue the debt over three years, Chief Financial Officer Brian Egan said during an investor conference call on Tuesday. The bond will be issued in tranches of 50 billion naira at a time whenever interest rates are favourable.

Domestic Debt issuances since the start of 2017

Source: FMDQ

Endurance Okafor