FCMB Asset Management raises N10.4 billion in Nigeria’s first private debt fund issuance

FCMB Asset Management raised N10.4 billion in Series 1 of its N100 billion private debt fund issuance programme, the first in Nigeria’s history.

FCMB Asset Management runs the N100 billion private debt fund in collaboration with TLG Capital, which is the fund’s technical partner. The fund was announced in June 2024, and according to FCMB Asset Management’s Managing Director, it is targeted towards pension funds.

The FCMB Group subsidiary offered N10 billion in Series 1 of the fund, however, it received total applications of N10.44 billion, representing a 104.3 per cent oversubscription. N10.43 billion was allotted as applications worth N12.9 million were rejected due to late account funding. Seventeen applications were received, with three of those application accounting for about 66 per cent of the total applications.

In August, James Ilori, the MD of FCMB Asset Management spoke to Bloomberg highlighting that the fund’s returns are benchmarked to the yield of the FGN 10-year bond plus 3%. He also noted that the fund is expected to run for 10 years. According to Ilorin, the fund is targeting pension funds as investors whilst targeting mid-sized firms as investees.

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He noted during the interview, “We found that for small companies they could borrow from micro-finance institutions and large corporates could get loans from banks, but between them are the mid-sized firms generating roughly 15 billion naira to 1.5 trillion naira in revenue a year, they struggle to access funds,”

Ilori also noted that funds will be lent to companies at an average interest rate under 28.67%, which was the average interest rate for lending to mid-sized companies.

Pension Fund Administrators (PFAs) which are targets of the fund are heavily invested in FGN securities, with about 63% of Nigeria’s N20.9 trillion pension fund assets invested in Federal Government bonds and treasury bills. Of the N13.2 trillion invested in FGN securities, about N12.4 trillion is invested in long-term FGN bonds.

With year-on-year inflation at approximately 32.15% as of August 2024, and FGN 10-year bonds offering annual yields of around 19%, these bonds are delivering significant negative real returns. Considering that these PFAs are heavily leveraged on these debt securities, pension fund assets have been posting negative real returns over the last two years.

Hence, the presence of long-term instruments such as this is projected to help PFAs improve their returns.