Nigerian corporates pick expensive debt over equity raise

The Boardroom of Primal Nigeria Limited (not real name) smelled of stale filter coffee and unspoken panic.

On the left side of the mahogany table sat Kunle Abayomi, the Chief Financial Officer (CFO), flanked by three thick, leather-bound folders containing the terms for a fresh Commercial Paper (CP)—a short-term debt instrument.

On the right side sat Emeka Madu, a bright-eyed investment banker who had spent three weeks pitching an Initial Public Offering (IPO) or a private equity injection.

“Kunle, look at the numbers,” Emeka pleaded, tapping his iPad. “If you pull this debt lever, you are locking in a 26 percent interest rate.

“That is a chokehold! Meanwhile, the equity market is liquid right now. Investors are hungry for consumer goods stocks like ours. You can raise N10 billion in equity, and it carries zero structural interest. It’s cheap money!” Emeka added.

“Emeka, my brilliant friend,” Kunle smiled faintly. You see cheap equity. I see the most expensive mistake this company could ever make,” Kunle said.

He stood up and walked to the floor-to-ceiling window overlooking the chaotic, beautiful stretch of Broad Street, Lagos.

If we go the equity route, we dilute the ownership of the company’s founder, he said.

“Suddenly, he has institutional investors sitting in this very room asking why we spent money on corporate social responsibility (CSR) in the founder’s home village, or why our quarterly margins dipped by 1.5 percent. In Nigeria, control isn’t just about power—it’s about agility. Debt lets us keep the steering wheel.”

“But at 26 percent?” Emeka countered, exasperated. “The interest expense will cannibalise your net profit! You’ll be working entirely for the banks.”

Like Primal Limited, many Nigerian corporate issuers are aggressively shifting their gaze toward the short-term debt market.

The cooling of the Initial Public Offering (IPO) landscape – stifled by macro headwinds, stringent regulatory bottlenecks, and muted investor appetite – has forced companies to re-evaluate their capital raising strategies, favouring alternatives like the Commercial Paper (CP) market.

The NGX All-Share Index has gained 57.27 percent year-to-date (YtD), equities market capitalisation is approaching N157 trillion, while market turnover has exceeded N4.3 trillion, reflecting strong investor participation and confidence.

Despite this positive, companies’ preference for Commercial Papers over the equities market has become a massive trend for corporate finance teams across Nigeria.

Government policy can stimulate IPOs

“The strength of a capital market should not be assessed solely by the number of IPOs recorded within a given period,” said David Adonri, Vice President, Highcap Securities Limited.

He noted that government policy plays a critical role in stimulating listings.

“Measures such as privatisation through the capital market, incentives for publicly listed companies, reforms that improve the ease of doing business, tax incentives for issuers and investors, and policies that strengthen investor confidence can significantly expand the pipeline of new listings,” Adonri added.

Nigerian corporates route to CPs because they offer a fast, non-dilutive, and highly flexible way to keep the wheels of business turning without making permanent compromises on the company’s ownership structure. Trading data show that between 2024 and year-to-date 2026, Nigerian Exchange recorded approximately N26.398 trillion in value-bearing listings across equities, fixed income securities, Sukuk, REITs and closed-end funds.

Though the equities market has seen moments of incredible bullish growth in terms of value and volume of shares traded, companies are increasingly routing their financing strategies through the FMDQ debt market via CPs for several highly strategic reasons.

Unlike the lengthy and cumbersome process of staging an IPO, launching a CP programme allows creditworthy companies to tap into a deep pool of institutional liquidity—such as pension fund administrators and asset managers—seeking yield in a high-inflation environment.

“A vibrant capital market is one that efficiently mobilises capital, creates wealth for investors, provides diverse financing options for issuers, and supports economic growth. On these measures, the Nigerian capital market has remained resilient and vibrant.

According to Adonri, a more comprehensive assessment of market performance should consider the breadth and depth of capital formation across the market.

“This underscores the market’s continued ability to facilitate capital mobilisation and investment opportunities beyond traditional IPO activity,” Adonri said.

He noted that while IPO issuance has been relatively subdued, mirroring trends observed in several markets globally, listing activity is influenced by a range of factors including macroeconomic stability, interest rate conditions, exchange rate certainty, regulatory efficiency, and government policies designed to encourage private sector participation in the capital market.

“As ongoing economic reforms begin to yield results, we expect more companies across strategic sectors of the economy to consider the capital market as a preferred platform for raising long-term capital and achieving sustainable growth.”

He added that sustained collaboration among government, regulators, market operators and private sector stakeholders would be essential to deepening the market, broadening participation and unlocking the next wave of listings that will further strengthen Nigeria’s capital market and economy.

As the equity market undergoes a prolonged fallow period, the CP market is no longer just an alternative—it has become the primary engine driving corporate liquidity and short-term growth in Nigeria’s evolving financial landscape.

“Commercial paper issuance remained vibrant, supporting short-term funding needs across diverse sectors, from manufacturing to energy and agriculture. These figures are not just numbers; they represent confidence in our regulatory framework and the resilience of our market architecture,” according to Emomotimi Agama, Director-General of the Securities and Exchange Commission (SEC).

The primary trends governing 2026 issuances reflect the Central Bank of Nigeria’s (CBN) monetary policy adjustments (including an early 2026 MPR cut), with gross yields generally settling between 19 percent to 22 percent for AAA/AA-rated corporate giants and 22 percent to 26 percent for mid-tier issuers.

Several prominent Nigerian companies have advanced their Commercial Paper programmes, registrations, and quotations on FMDQ.

“Nigeria’s banks increasingly rely on short-term commercial papers to navigate liquidity challenges amid stringent cash reserve policies enforced by the CBN, making it a vital but costly tool to navigate the liquidity squeeze,” according to Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co.

Samuel Ndata, managing director, Fundvine Capital and Securities Limited, said that while concerns about ownership dilution may influence financing decisions, they do not fully explain the pace of IPO activity in Nigeria.

“Many business owners prefer funding options that allow them to retain control, making debt financing attractive where repayment capacity exists. However, IPO activity is influenced by several factors, including valuation, investor appetite, macroeconomic stability, regulatory efficiency and government policies.

“The growth in Commercial Paper issuances reflects strong corporate demand for short-term funding. FMDQ has played an important role in the development of the market, and NGX further broadened access with the launch of its Commercial Paper Listing and Quotation Service in 2025,” Ndata noted.

“The growing activity across both platforms demonstrates the capital market’s ability to provide flexible financing solutions for corporates. At the same time, debt instruments serve a different purpose from equity capital, and a healthy market requires both channels to support business growth,” he added.

“As economic reforms gain traction and investor confidence strengthens, we expect more indigenous companies to consider the equity market as a platform for long-term growth capital,” Ndata noted.

FMDQ has registered over 167 Commercial Paper programmes valued at over N1 trillion ($6.19 billion) historically. The total outstanding value of active, quoted CPs on the exchange has hovered around the N826.67 billion to N1.03 trillion range depending on the month and corporate repayment schedules.

Some notable companies and their CPs

Some of the notable companies and CP activities on FMDQ are Accion Microfinance Bank Limited, which actively quoted a N2.02 billion Commercial Paper on the FMDQ Exchange to accelerate its micro-lending capabilities and promote financial inclusion across the country.

Also, Providus Bank Limited successfully registered its massive N100 billion Commercial Paper Programme on the platform, reinforcing the financial institution’s capacity to source competitive short-term funding.

Sycamore Integrated Solutions Limited, a digital lending firm, established a footway in the institutional market with the registration of a N20billion CP Programme on FMDQ Exchange.

Furthermore, UAC of Nigeria (UACN) Plc continued its robust market presence by launching a N65 billion Commercial Paper Issuance Programme to support its FMCG, real estate, and animal feeds operations.

Also, Sunbeth Global Concepts Limited registered an expansive N200 billion CP Programme on FMDQ, signalling aggressive working capital expansion within the agricultural commodities export sector.

Daraju Industries Limited, a major player in the household consumer goods manufacturing market, registered a N50 billion CP Issuance Programme.

Champion Breweries Plc positioned itself strongly for liquidity management by establishing a N15 billion Commercial Paper Issuance Programme.

Zeenab Foods Limited also registered a N20 billion CP Issuance Programme on FMDQ to expand its domestic supply chain and agricultural commodity export pipelines.

Neveah Limited, the commodity trading and logistics firm, continues to scale its activities, registering a N30 billion CP Issuance Programme. In addition, SKLD Integrated Services Limited, which focuses on corporate supply chain and procurement, listed its N10 billion CP Issuance Programme on the platform.

Issuing new shares to raise capital means existing shareholders—often founders, core investors, or parent companies—must dilute their ownership stakes and give up voting power.

Commercial Papers are short-term debt instruments (typically maturing within 15 to 270 days). Raising funds through CPs allows a company to bring in billions of Naira for working capital without giving up a single percentage of ownership or board control.

Launching an Initial Public Offering (IPO) or a Public Offer requires exhaustive regulatory approvals from the Securities and Exchange Commission (SEC), complex underwriting, and extensive prospectus drafting. This process can take many months, if not over a year.

Registering a CP programme on the FMDQ Exchange is significantly faster. Once a company sets up an umbrella CP programme (e.g., a N50 billion programme), they can tap into the market and draw down cash in tranches (Series 1, Series 2, etc.) within days whenever a sudden liquidity need arises.

Eye on expected IPOs

After a prolonged dry spell on IPO, the Nigerian capital market is positioning itself for a major resurgence. For instance, the Dangote Petroleum Refinery and Petrochemicals IPO is indisputably the most highly anticipated market event in African capital market history. It is targeted for the third quarter (Q3) of 2026. Also, Flutterwave
is eyeing a dual listing—floating shares on a major U.S. exchange (likely the NASDAQ) alongside a local listing on the NGX.

The NNPC Limited (Nigerian National Petroleum Company), following its commercialisation under the Petroleum Industry Act (PIA), is undergoing intensive restructuring to transition into a publicly traded entity. Structural and corporate governance overhauls are actively underway, targeting full readiness for an IPO roadshow leading up to 2028.

Telecom giant MTN Nigeria has already seen massive success with its primary equity and retail offers on the NGX. Its next major capital-raising frontier is its highly successful fintech arm, MTN Nigeria MoMo (Mobile Money) spin-off.

These blockbuster pipelines are heavily backed by a renewed domestic retail appetite. Driven by massive capital inflows from recent banking recapitalisation exercises and a booming equities market—which yielded over 50 percent returns in the first half (H1) of 2026 alone—the NGX is finally primed to absorb these mega-listings.