By Nkiruka Nnorom

The total value of Commercial Papers (CPs) quoted on the FMDQ Securities Exchange rose Year-on-Year (YoY) by 130.68 percent to N715.3 billion in April 2023 from N310.07 billion in the corresponding period in 2022.

CPs are short-term debt instrument used by corporate organisations to borrow from the public. They are quoted and traded on relevant platforms of the FMDQ Exchange. They can be issued for tenors of up to 270 days in the Nigerian financial markets.

The Financial Markets Monthly Report of the FMDQ showed that the figure also increased Month-on-Month (MoM) by 6.86 percent from N669.36 billion in March 2023.

However, the value of new CPs listed on the Exchange in the month of April 2023 declined to N114.27 billion, representing a MoM decrease of 67.74 percent from N354.18 billion quoted in March 2023.

The figure on new listings had risen by 22.4 percent between January and February, 2023 to N101.84 billion in February from N83.20 billion in January.

It rose again by 252.3 percent between February (N101.84bn) and March (N354.18bn) before dropping to its current level in April.

The Report showed that quoted CPs during the month (April) were issued by institutions from various sectors including financial services, manufacturing, real estate, retail and health and pharmaceuticals.

Ayodeji Ebo, Managing Director, Optimus by Afrinvest, explaining the development in the CPs market, in a series titled, ‘Avalanche of Commercial Paper Issuances: Understanding the Basics’, said: “On the back of Nigeria’s high inflation environment, (22.04 percent as of March 2023), investors are seeking opportunities with higher returns above the risk-free government treasury bills. Investors do this to bring their returns closer to inflation rate to protect the value of their investment.

“As a result, we have seen significant interest in commercial paper in the last few months, which has led to an avalanche of commercial paper issuances.”

He noted that CPs are not vulnerable to rate fluctuations, and hence are very low risk compared to other instruments.

He said that CPs are a credible alternative to treasury bills for investors that seek investment with higher returns.