How Nigeria's interest rate is impacting commercial papers, bond issuances
A report by FMDQ shows that number of commercial papers issued in 2024 dropped by five per cent to 133 from 140 in 2023. The amount issued by corporates also dropped by 12.2 per cent to 790 billion naira. Similarly, corporate bonds issuances became costlier as about 1.2 billion naira was raised, a 98.8 per cent fall from 2023. What’s the market sentiments so far this year? Egie Akpata, the Chairman of Skymark Partners, joins CNBC Africa for this discussion.
Thu, 13 Mar 2025 14:33:52 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Fluctuations in the Treasury Bills market have influenced rising yields, driven by consecutive auctions and increased supply.
- Amendments to the Treasury Bills auction calendar have introduced uncertainties for investors, leading to market volatility.
- Resurgence in the commercial paper market due to favorable rates contrasts with the quiet nature of the corporate bond market, affected by the inverted yield curve.
A recent report by FMDQ has shed light on the current state of Nigeria's financial markets, revealing a decline in the number of commercial papers issued in 2024 compared to the previous year. Egie Akpata, the Chairman of Skymark Partners, joined CNBC Africa to discuss the impact of Nigeria's interest rate on commercial papers and bond issuances. The number of commercial papers issued in 2024 dropped by five per cent to 133 from 140 in 2023, while the amount issued by corporates also decreased by 12.2 per cent to 790 billion naira. Additionally, corporate bond issuances became more expensive, with only about 1.2 billion naira raised, marking a significant 98.8 per cent fall from the previous year. What does this mean for the market sentiments in 2024?
During the interview, Egie Akpata highlighted several key factors influencing the market trends in Nigeria. The discussion touched upon the recent Treasury Bills auction, amendments to the auction calendar, and the performance of the commercial paper and corporate bond markets. Akpata explained that the rise in Treasury Bills yields can be attributed to consecutive auctions within a short period, leading to an increase in supply and subsequently driving up rates. The amended Treasury Bills auction calendar for the first quarter of the year introduced new uncertainties for investors, contributing to market volatility.
In terms of the commercial paper market, Akpata noted a resurgence driven by the drop in Treasury Bills rates. The favorable market conditions have enabled corporate issuers to raise funds at lower rates compared to the previous year. On the other hand, the corporate bond market has remained relatively quiet, with investors favoring short-term instruments due to the concept of an inverted yield curve. This preference for higher-yielding short-term investments has limited the depth of the corporate bond market, primarily attracting pension funds.
Overall, Nigeria's financial landscape is experiencing fluctuations influenced by interest rates, market dynamics, and investor behavior. The delicate balance between Treasury Bills, commercial papers, and corporate bonds reflects the evolving nature of the country's capital markets. As stakeholders navigate these challenges, adaptability and strategic planning will be key to unlocking opportunities and sustaining growth in Nigeria's financial sector.
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