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More Firms Eye Commercial Paper Funding, Market Attracts N240bn

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the Sovereign Wealth Funds (SWFs)
  • More Firms Eye Commercial Paper Funding, Market Attracts N240bn

Strong indications have emerged that more companies will go for commercial papers (CPs) to meet their short-term funding needs following rising investors’ interest in the short term instruments.

CPs are unsecured promissory notes with a fixed maturity of about nine months issued by companies to raise money to meet short term finance obligations.

The notes are backed by the promise of the issuers to repay based on certain agreed terms.

The once active CP market had its average monthly outstanding value dip from N1trillion in 2008 to N9.8 billion in 2013 due to an unprecedented lull.

However, FMDQ OTC Securities Exchange, a Securities and Exchange Commission (SEC)-licensed platform for over-the-counter (OTC) trading of fixed income securities, got the approval of the Central Bank of Nigeria (CBN) to revive the CP market.

Since then it has become active again with financial institutions and other corporate bodies raising short term funds from the CP market. So far companies have raised over N239.985 billion via CPs.

And a securities dealer on the FMDQ OTC Securities Exchange said on Monday that more companies are eying CPs to fund their short term financial needs.

“More corporate are getting interested in CPs because of the quick time to market for short- term instruments enabled by FMDQ’s efficient listings and quotations process. Also, issuers accessing CP market for short term funding are doing so at a relatively competitive interest rate. Most especially, there have been an increased investor interest in short-term instruments,” the dealer said.

Some of the firms that have patronised the CPs market are: Stanbic IBTC Bank Plc, Wema Bank Plc, Nigerian Breweries Plc, Guinness Nigeria Plc, Access Bank Plc, FSDH Merchant Bank Limited, Ecobank Nigeria Limited, and UACN Property Development Company Plc.

Commenting on the CP market, Managing Director/Chief Executive Officer of FMDQ, Mr. Bola Onadele.Koko had said the platform had brought an unprecedented transparency, governance and integrity.

“The benefits of transparency and governance offered by FMDQ around its CP quotation process and post issuance of the CPs cannot be over-emphasised as they directly impact, not just the issuers, but investors and the market regulators,” he said.

According to him, FMDQ has developed a Quoted Commercial Papers Status Report (QCSR) which gives the status of all CPs quoted from live CPs to matured CPs.

“Information provided include, among others, rolled-over CPs, failed attempted roll-over CPs, matured CPs with default and matured & paid CPs. A wealth of information is available on FMDQ’s website on all CPs quoted on the Exchange, ranging from issuer, value, issuer rating, information memorandum to issuer CP quotation history,” he said.

He explained that information provided by this report would allow investors perform their independent risk assessments of any issuer/issue and also allow regulators monitor effectively, the activities of their supervisees.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Oil 1

Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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