Despite the market and economic uncertainty due to the coronavirus pandemic, investors expressed a lot of confidence in Nigeria’s debt market.
The Debt Management Office (DMO) has announced an oversubscription of the third sovereign Sukuk for which it offered N150 billion to investors. The offer attracted a very high level of subscription from investors, with total subscriptions of N669.124 billion. This represents a subscription level of 446%.
The DMO said, “This impressive demand for the Sukuk came from a wide range of investors which included Ethical Funds, Insurance Companies, Fund Managers and Retail Investors amongst others. This participation by a wide range of investors is in line with the DMO’s objectives of diversifying the investor base for Government Securities and promoting financial inclusion.
“The issuance of the third Sovereign Sukuk, which followed the debut issuance of N100 billion in September 2017 and a second issuance of another N100 billion in December 2018, is based on the DMO’s commitment to using borrowed funds to finance infrastructure. The Sukuk issuances are project tied and are used to finance specific projects which are disclosed to investors.”
It allotted N162.557 billion to investors in the third Sovereign Sukuk. The proceeds of the issuance will be used to finance 44 critical road projects across the 6 geopolitical zones of Nigeria.
The earlier Sukuk issuances were also used to finance road projects which improved safety on the roads, ensured faster travel times, access to markets for farm produce, and it opened up parts of the country for development.
Other important benefits of using Sukuk to finance road projects are job creation and increased level of activity for service providers, many of whom are small businesses.
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The DMO expects to continue to raise funds through Sukuk to support improvement in infrastructure and development of the domestic capital market.
MTN invests N121 billion in fixed deposits, treasury bills, etc
MTN Nigeria invested a whopping N121.5 billion in bonds, treasury bills and foreign currency deposits in 2020.
Nigeria’s largest telecommunications company, MTN Nigeria invested a whopping N121.5 billion in bonds, treasury bills and foreign currency deposits in 2020. This compares to just N9 billion in 2019 suggesting the GSM giant had challenges deploying the capital raised during the year.
MTN raised N143.96 billion in several syndicated facilities during the year which was to be utilized for its network expansion plans. However, the Covid-19 induced lockdowns affected capex activities forcing most companies to freeze spending on anything that is capital intensive. Effective Interest Rates for most of the loans obtained by MTN range between 3.5% and N5.8% per annum.
From the breakdown seen by Nairametrics, MTN invested N93 billion in naira denominated fixed deposits, equivalent of N19 billion in US dollar deposits and another N34.8 billion in treasury bills. The total amount invested earned MTN about N15.84 billion in income which it used to offset its finance cost of over N129 billion.
Why it matters
Interest rates for risk-free government securities fell drastically in 2020 as investment outlets dried up locally. This triggered a massive influx of money into the stock market helping it to close above 50%, one of the best performing in the world last year.
- For companies like MTN with a significant cash hoard, treasury operations are a significant part of the activities of its finance department.
- The investments in risk-free treasury bills despite the negative real return (when interest rate is adjusted for inflation) suggest corporates will rather fix their money in treasury bills than leave it idle in commercial banks.
- It also suggests corporates like MTN are more favourably disposed to lending to the government despite Nigeria’s ballooning public debt and its attendant risk to its credit ratings.
- Despite the investments, MTN still closed the year with about N275 billion cash in its balance sheet.
Emzor Pharmaceuticals accesses capital markets for the first time, lists N13.7bn Bond on NGX
Emzor Pharmaceutical Industries Limited, has listed its N13.7bn 5-Years Series 1 Bond exclusively on NGX.
Wholly-owned, indigenous pharmaceutical manufacturing group, Emzor Pharmaceutical Industries Limited, has listed its N13.7 billion 5-Years Series 1 Bond exclusively on the Nigerian Stock Exchange Limited “NGX” Platform.
Information contained in a statement published on the NGX website revealed that the N13.7Bn 5-Years Series 1 Senior Unsecured Fixed Rate Bond due by 2026, under the company’s N50 billion Debt Issuance Programme, is the first public instrument listed by the Nigerian pharmaceutical group.
Why this matters
In line with the objective of the NGX Group, Emzor capitalized on the robust size of the Nigerian Capital Market to bridge funding gaps and restructure its existing debt profile, through its N50 billion Debt Issuance Programme.
Details of the transaction revealed that Emzor was able to access the domestic debt capital markets for the first time and raise 5 years of financing in local currency using a corporate bond, with the issuance of its N13.73 billion 5-Year 10% Series 1 Senior Unsecured Fixed Rate Bond.
The proceeds from the bond initiated by Emzor Pharma Funding SPV Plc, a special purpose vehicle set up to finance Emzor’s funding requirements, will be used to finance the purchase of notes and other debt securities issued by Emzor, in accordance with the terms of the Master Notes Purchase Agreement (the “MNPA”).
The N13.73 billion Series 1 Unsecured Bonds accorded with an ‘A-’ credit rating by Global Credit Rating Co., was undersubscribed by 8.47% as the intended capital was pegged at N15 billion.
What you should know
- Emzor Pharmaceutical Industries Limited is a renowned manufacturer of quality pharmaceutical products and medical consumables. The company has grown its product portfolio from a modest four products in 1987, to more than 120 different products in recent times.
- The company has a wide range of products in the analgesic, anti-malaria, vitamin/haematinics/multivitamin supplement, anti-helmintic, antibiotics and therapeutic categories.
Nairametrics | Company Earnings
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