In the first half of the year, 11 companies raised and listed N272.832 billion in the bond market to finance their operations on the Nigerian Exchange (NGX) Limited.
These companies used the capital market to raise bonds to fund their operations to grow and improve returns.
Furthermore, many businesses are having difficulty obtaining money, and the stock market (primary market); a reliable source of capital, has been largely dormant for many years due to investor disinterest.
Meanwhile, the majority of publicly traded companies, as well as some private ones, have found a way out through the bond market in the country’s capital market. The debt capital market has aided many NGX-listed companies in obtaining capital with relatively low coupons of less than 10%.
A bond is a type of loan in which the borrower receives external funds to finance long-term investments. Bonds, like stocks, are securities, but the main difference is that stockholders own equity in a company, whereas bondholders are simply lenders to the company. As a result, bondholders are given precedence over stockholders.
Companies raised N272.832 billion from the debt market through bond issuances from January to June 2021. BUA Cement Plc, for example, raised the most money, N115 billion. Flour Mills of Nigeria Plc received N29.890 billion, while Fidelity Bank Plc received N41.213 billion.
In addition, some firms that are not listed on the NGX have used the bond market to raise new funds too to improve their performance.
Coronation MB Funding SPV Plc raised N25 billion, Nigeria Mortgage Refinance Company Plc raised N10 billion, NOVA Merchant Bank raised N10 billion, and Mecure Industries raised N3 billion in the capital market.
Emzor Pharmaceuticals, CardinalStone Financing SPV Plc, TSL SPV Plc, and FBNQuest Merchant Bank SPV Funding Plc also raised money from the market, raising N13.729 billion, N5 billion, N12 billion, and N8 billion respectively.
Mr Olumide Bolumole, NGX’s divisional head of Listings Business, said the exchange would continue to provide issuers with a platform that allows them to meet their strategic business objectives, and that it is the exchange’s pleasure to see issuers take full advantage of its products and services to support their growth story.
The issuers are ecstatic about their capacity to raise funds from the market and list their securities on the exchange to give liquidity to investors.
“It is particularly exciting for us at CardinalStone since it symbolizes the realization of our desire to list some of the securities in our capital structure on the exchange,” said Mr Michael Nzewi, group managing director of CardinalStone Partners Limited. We are grateful to NGX for allowing us to list on their platform; without their help, we would not be where we are today.
“We would like to assure NGX that we are committed to finding ways to leverage its products and services and drive participation in the capital market from other institutions. Of course, we appeal to our colleagues in the industry to take advantage of the opportunity to raise capital on NGX just like we have.”
The N115 billion bond issued by BUA Cement Plc, the company’s first bond offering, is also the largest corporate bond issued in Nigeria’s debt capital market. The proceeds will be used to refinance the issuer’s current debt obligations, finance the issuer’s working capital, and fill its Debt Service Reserve Account, according to the business.
BUA Cement is Nigeria’s second-biggest cement producer and the largest in the country’s northwest.
Abdul Samad Rabiu, Chairman of BUA Cement, stated of the bond issuance, “This is the largest corporate bond issue in the history of Nigeria’s debt capital market” (DCM). As a truly Nigerian company, we made the strategic choice to list the shares of BUA Cement in 2020.”
The bonds would help Flour Mills of Nigeria Plc improve its capital basis and provide essential operational cash, according to Mr Omoboyede Olusanya, the company’s group managing director. He stated that the Flour Mills of Nigeria would continue to replace short-term financing with longer-term and lower-cost financing to optimize capital structure and minimize financing.