MTN Nigeria has revealed plans to issue N100 billion commercial paper notes under its Commercial Paper Issuance Programme.
This was disclosed in a corporate notice filed on the Nigerian Exchange Limited on Wednesday, according to The Punch.
The company said, “The issuance is part of the company’s strategy to diversify its financing options with the funds being deployed towards short-term working capital and funding requirements.”
The commercial papers notes are series 6 and 7 in the firm’s issuance programme.
In its debut issuance of commercial paper in June 2020, MTN raised N100bn and the issuance was 400 per cent subscribed.
A number of firms have been issuing commercial papers to raise short-term funds in the midst of a rising cost of funds.
The value of quoted commercial papers on the FMDQ Exchange stood at N539.22bn at the end of the first quarter of 2023.
According to monthly reports from the FMDQ exchange, there has been a sustained increase in commercial paper quotations since the beginning of the year.
Speaking on the trend, the Chief Executive Officer at Cowry Asset Management Limited, Johnson Chukwu, said that the high-interest rate was making companies head to the money market to seek funding as well as the ease of issuing commercial papers.
He said, “Second and most important fact is that we are now dealing with a high-interest environment. During this period of high-interest rates, borrowers do not want to borrow long-term debts at such high-interest rates.
“So, if interest rates are high, borrowers would rather want to borrow short term, because if you borrow long-term, you get yourself locked in a long-term obligation and commitment for maybe four to five years, sometimes, longer than that. What you find is that the temporary funding needs of companies are now being made at the CP/money market space,” Chukwu said.
The financial expert added that commercial papers reduce the cost of borrowing from banks.
In a bid to combat inflation, the Central Bank of Nigeria further hiked the interest rate to 18.75 per cent; its fourth consecutive rate hike in 2023.
Meanwhile, the National Bureau of Statistics on Tuesday revealed that the inflation rate had jumped to 24.08 per cent in July compared to 22.79 per cent in June.
