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Debt Securities

FMDQ Clear gets SEC approval as Nigeria’s premier central counterparty clearing house

FMDQ Clear has been granted Approval-In-Principle for Central Counterparty Registration by the SEC.

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FMDQ Clear gets SEC approval as Nigeria’s premier central counterparty clearing house

FMDQ Clear, a subsidiary of the FMDQ Group and Nigeria’s premier counterparty, has been granted Approval-In-Principle by the Security and Exchange Commission (SEC) for Central Counterparty Registration.

This disclosure was made by the FMDQ Group through a statement in a series of tweet posts on its official Twitter handle on Wednesday, September 30, 2020.

This groundbreaking and game-changing milestone will help redefine the landscape for financial transactions and introduce endless possibilities of permissible products that can be developed and deployed within the ecosystem towards delivering long-standing prosperity for the Nigerian economy.

READ: CBN warns banks against rising level of Non Performing Loans

The statement from FMDQ reads, “FMDQ Clear, Nigeria’s first Central Clearing House, landmarks as Nigeria’s Premier Counterparty, as the Security and Exchange Commission grants Approval-In-Principle for Central Counterparty Registration.”

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It states that this game-changing milestone is to usher in the actualization of strategic initiatives that will enable the development of thriving repurchase agreements, derivatives and commodities market in Nigeria like other developed economies and markets.

READ: Bitcoin whale transfers 11,230 BTC worth $116 million

Going further, it also pointed out that as a critical Financial Market Infrastructure, FMDQ Clear, as a Central Counterparty, will de-risk the market by interposing itself between counterparties, becoming the buyer to every seller and seller to every buyer, thereby aggregating and consolidating counterparty risk.

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The regulatory environment for the establishment of central counterparty was set with the publishing of the robust and world-class rules on central counterparty in December 2019 after having actively engaged with market participants for several years on them.

READ: NG Clearing gets SEC’s approval to launch Central Counterparty Clearing House

A central clearing counterparty, also known as central counterparty (CCP), is referred to as a financial institution that takes on counterparty credit risk between parties to a transaction and provides clearing and settlement service for trades in foreign exchange, securities, options and derivative contracts. CCPs are highly regulated institutions that specialize in managing counterparty credit risk.

 

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Debt Securities

Nigeria’s treasury bills rate falls to 0.5% per annum

Nigeria’s treasury bills rate was oversubscribed despite falling to 0.5%.

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CBN approves new cheque standard for banks

The latest treasury bills auction by the Central Bank of Nigeria reveals a 91-day bill sold for an interest rate of 0.34% one of the lowest in the history of the auction.

Treasury bills rate has fallen sharply since the central bank switched monetary policy from fighting inflation and attracting foreign portfolio inflows to boosting domestic credit. The CBN has frequently deployed heterodox policies over the years adopting what Nairametrics research has come to characterize as Meffynomics.

In the last action two weeks ago treasury bills stop rates for a 91-day bill was 1%. The latest auction also reveals 182 and 364-day bills have fallen to 0.5 and 0.98% respectively. Despite the drops, subscription rates for the bills more than doubled the actual bills on offer. For example, N84.8 billion subscription as against N49.8 billion for a 91-day bill. Even more shocking was the one year bill with investors staking a whopping N694.9 billion in subscription against N93.9 billion on offer.

What this means: The current rates are the closest we have seen to 0% suggesting that investors are willing to earn next to nothing rather than take risks in a failing economy.

  • Nigeria’s inflation rate is 13.71% and galloping towards stagflation. Nigeria is expected to announce it is formally in a recession in the coming weeks as the National Bureau of Statistics collates its data.
  • Billions have poured into the stock market in recent weeks as investors search for investments with better yields.
  • However, there are limited stocks out there that can guzzle up the hundreds of billions of naira available for investing.

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Companies

NB Plc to raise additional N20 billion from its N100 billion Commercial Paper

Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme.

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dividend, Nigerian Breweries reports reduced profits for first three quarters of 2019 , Analysis: Nigeria Breweries, the glory days are gone, Nigerian Breweries to raise additional N20 billion from its N100 billion CP programme

Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme in a bid to raise up to N20 billion to support its short term funding needs. The company has launched Series 9 and 10 of the programme for this purpose.

This information was disclosed in a notification signed by the Company’s Secretary, Uaboi G. Agbebaku, and sent to the Nigerian Stock Exchange.

The notification reads;

“[Nigerian Breweries Plc] is pleased to inform the Nigerian Stock Exchange and the investing public of the continuation of its “CP” (Commercial Paper) programme with the launch of Series 9 and 10 of the programme.

“Series 9 of the Commercial Paper programme would be for a tenor of 180 days, while Series 10 would be for 270 days. However, the launch of the CP opens today 23rd October 2020.”

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(READ MORE:Nigerian Breweries stock up by 58% since August )

What you should know

According to data obtained from Financial Market Dealers Quote (FMDQ), Nigerian Breweries has raised up to N90.12 billion since the start of the year.

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  • N52.76 billion was raised from Series 6 between February 12 to November 6, 2020.
  • N13.03 billion was raised from Series 7 from April 15 to October 14, 2020.
  • N24.33 billion was raised from Series 8 from April 15 to January 8, 2021.
  • The recent issuance of the Series 9 and 10 CP will bring the total funds raised to N110.12 billion.

Why it matters

  • The CP will help the company navigate through the recent impact of COVID-19 and other trade disruptions.
  • The programme will strengthen the balance sheet of the company, and enable the brewer to execute its plans while delivering value to customers and creating wealth for shareholders,
  • In like manner, the CP programme is expected to provide opportunities for non-equity investors to invest in the company and support its cost management initiatives.

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Debt Securities

Commercial Paper value appreciates by N243 billion YOY, hits N539.8 billion in H1, 2020

Commercial Paper value appreciated by 81.9% to N539.8 billion in 45 issuances as of H1, 2020.

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Commercial Paper value appreciates by N243 billion YOY, hits N539.8 billion in H1, 2020, Financial literacy campaign in Nigeria, Securities and Exchange Commission, National Insurance Commission, Dantata Success & Profitable Company

Commercial Paper value hits N539.8 billion as of June 2020, as the value appreciated by 81.9% from N296.8 billion in 44 issuances as of H1, 2019 to N539.8 billion in 45 issuances as of H1, 2020. This is according to a recent report by PWC titled, “Nigeria Capital Market Update.”

READ: CBN invests over N120 billion on 320,000 farmers across CTG within four years

As regards industry spread, the financial services sector accounted for 32% of the proceeds raised as of H1 2020, followed by the consumer goods sector representing 26% of total proceeds. ICT raised 19% and Industrial goods contributed 18%.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion

In terms of yearly appreciation, Commercial Paper value has maintained an upward trend, recording N114 billion as of the end of 2016, N221 billion in 2017, N402 billion in 2018, and N540 billion in H1, 2020.

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What this means

Activities in the Commercial Paper market maintained its upward trajectory as more blue-chip companies continue to access short term funding from a diversified investor base, through the capital market and on favorable terms.

READ: TradeDepot raises $10 million in pre-Series B equity round

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What you should know

Commercial Paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities. Maturities typically last several days and rarely range longer than 270 days.

It is usually issued at a discount from face value and reflects prevailing market interest rates.

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