No fewer than eight Small and Medium-sized Enterprises (SMEs) have leveraged the short-term funding opportunities at the commercial papers (CP) market this year in a bid to raise about N140 billion.
The companies that have their CPs either registered or quoted on the platform of the FMDQ Securities Exchange Limited include MeCure Industries Limited, which has its N20 billion CP Issuance Programme registered, and Mixta Real Estate Plc (N25 billion).
Others are Babban Gona Farmers Services Nigeria Limited (N15 billion); Coleman Technical Industries Limited (N20 billion); NECIT Nigeria Limited (N20 billion); Skymark Partners Limited (N5 billion); Veritasi Homes & Properties Limited (N10 billion); and Prima Corporation Limited (N30 billion).
CPs are unsecured short-term debt instruments (in the form of a promissory note) used by corporate entities to meet their working capital requirements and pay off short-term debts. Put simply, a CP is an unconditional promise by the issuer to pay to the order of an investor a certain sum at a future date.
Analysts say that if many SMEs can access the market for commercial papers, other mezzanine financing, bonds, and even equity, there would be enhanced financial inclusion.
They said this would foster capital formation requisite for developing the manufacturing, industrial and service sectors and ultimately creating jobs, reducing dependency on imports and enhancing the welfare and overall lifestyle of Nigerians in an inclusive and sustainable manner.
Abiola Rasaq, a Lagos-based financial analyst, told BusinessDay that SMEs occupy a very important position, stressing the need for them to be strengthened and given access to diverse sources of funding and capital.
According to him, while the SMEs are increasingly positioning to meet the requirements to access funding through the capital market, including issuance of commercial papers and bonds, a larger percentage are still excluded due to their inability to meet relevant standards and sometimes due to their relatively small size, which discourages financial advisers and other relevant parties from taking on their transactions.
On the platform of FMDQ Securities Exchange, there are 62 registered CP programmes valued at over N3.63 trillion and 340 quoted CPs valued at N2.71 trillion.
“As a survey by PwC revealed, Nigerian SMEs contribute more than half of the country’s gross domestic product and employ over three-quarter of the labour force, yet less than half of them can access credit, mainly through the banking sector and sometimes at terms that may not support the fundamental reality of their businesses,” Rasaq said.
According to the financial analyst, while banks often justifiably or otherwise have very low appetite for SME financing, these businesses often do not meet the requirement to access financing from the capital market.
“Notably, the need for investor protection against probable abuse of issuers and other market participants reinforces the need to ensure all issuers of securities in the capital market meet minimum standards, including having an investment grade rating from any of the SEC-approved credit rating agencies like DataPro, Agusto and GCR, amongst other requirements such as the existence of up-to-date audited financial statements and relevant governance standards,” Rasaq added.
As Africa’s first vertically integrated financial market infrastructure group, the FMDQ Securities Exchange has continued to avail its platform as well as its listing and quotation services to suit the needs of issuers looking to seamlessly raise finance from the debt capital market.
FMDQ Securities Exchange currently has an average annual market turnover of N165.78 trillion. On its platform are 88 bonds/Sukuk (excluding Eurobonds) valued at over N1.96 trillion; 474 listed/quoted Federal Government of Nigeria debt securities worth N91.96 trillion; listed/quoted corporate debt securities valued at N3.71 trillion; and $59 billion worth of OTC FX Futures traded.
At the start to this year, FMDQ Exchange approved for quotation the MeCure Industries Limited N490million Series 1 and N1.44 billion Series 2 CPs under its N20billion CP Issuance Programme on its platform.
“The issuance will help the company meet its short-term working capital and funding requirements. It will also strengthen our commitment to building and positively shaping the healthcare industry in Nigeria,” said Samir Udani, chairman/CEO of MeCure Industries.
MeCure Industries is a human therapeutics company in the pharmaceutical industry in Nigeria.
Coming on the heels of the quotation of MeCure Industries CPs, FMDQ Securities Exchange approved the registration of the Mixta Real Estate N25 billion CP Issuance Programme on its platform.
Mixta, a subsidiary of Mixta Africa, is a real estate development company in Nigeria, with operations spanning the residential, commercial, and retail sectors of the Nigerian real estate industry.
In January, FMDQ Exchange approved the registration of the Babban Gona Farmers Services Nigeria N15 billion CP Programme on its platform. Babban Gona is a social enterprise that seeks to sustainably improve the lives of smallholder farmers in Nigeria through the provision of comprehensive farming services.
“We are an agricultural franchise committed to curbing the growing trend of poverty and violence in Africa by creating opportunities of dignified and fulfilling work for the rural farmer youths. We aim to make farming more profitable for smallholder farmers as we support them across the entire production chain,” said Bukola Masha, managing director of Babban Gona.
“With the successful registration of this N15 billion CP Programme, we are a step closer to achieving this goal; we are delighted at the opportunity to diversify our short-term funding sources and look forward to the participation of the investment community when we launch Series 1 of the CP Programme,” he added.
In March, the Exchange approved the quotation of the Coleman Technical Industries N2.40 billion Series 3 and N3.65 billion Series 4 CPs under its N20billion CP Issuance. Coleman Technical Industries Limited is a producer and distributor of electrical wires and cables.
NECIT Nigeria got approval last month for the quotation of its N2.17 billion Series 1 CP under its N20billion CP Issuance Programme.
“With this support, our capacity to unlock value for all stakeholders has been further enhanced,” said Emmanuel Iheagwazi, MD/CEO of NECIT Nigeria, an indigenous company that deals in the manufacturing of car lubricants and engine oil, as well as the importation and sale of base oil.
The Exchange also approved the registration of Skymark Partners Limited N5billion CP. “We expect funds raised under this CP programme to enable us to expand our investment opportunities,” Egie Akpata, the chairman of the company, said.
Early this month, the registration of Veritasi Homes & Properties N10billion CP Programme was approved.
Veritasi is a real estate company providing marketing, advisory and developmental services across the real estate value chain in Nigeria. “We are delighted that the proceeds from the issuance of the CP will be applied to develop superior real estate projects designed for clients at home and in the diaspora,” said Nola Adetola, its MD.
Last week, approval was given for the registration of the SKLD Integrated Services Limited N2billion CP Programme on the FMDQ Exchange platform.
SKLD Integrated Services is an integrated corporate entity providing educational and office supplies, branded product distribution, technology, garment manufacturing and humanitarian aid procurement services through contracts, wholesale, retail and online channels.
“The successful establishment of our N2billion CP Programme confirms SKLD Integrated Services Limited’s ambition to harness the Nigerian capital market, in funding its operations and strategy. It also gives credence to SKLD’s belief in the Nigerian DCM and puts the Company in a position to broaden its potential funding sources and create superior value,” Tayo Osiyemi, the company’s deputy MD, said.
The Exchange has also welcomed on its platform the quotation of the Prima Corporation Limited N7.02 billion Series 2 CP under its N30 billion CP Programme. Prima Corporation Limited is a manufacturer of preforms and caps in West Africa, supplying a host of international and local brands.
