MTN Nigeria Plans N100bn Commercial Paper Issuance to Bolster Short-Term Financing

MTN Nigeria, a prominent player in the country’s telecommunications sector, has unveiled its intention to issue N100 billion commercial paper notes as part of its ongoing Commercial Paper Issuance Programme.

The announcement was made in a corporate notice filed on the Nigerian Exchange Limited on Wednesday.

This strategic move by MTN Nigeria aims to diversify its financing avenues while directing the raised funds toward short-term working capital and other immediate funding needs. The company’s planned commercial paper notes are labeled as series 6 and 7 within its established issuance program.

MTN 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.”

MTN Nigeria’s debut issuance of commercial paper in June 2020 proved to be highly successful, with the company raising N100 billion, an offering that was met with an overwhelming subscription of 400 percent.

In the current economic landscape marked by escalating funding costs, several enterprises are opting for commercial paper issuance to secure short-term funds.

According to data from the FMDQ Exchange, the value of quoted commercial papers reached N539.22 billion by the close of the first quarter of 2023, indicating a sustained rise in commercial paper activity since the beginning of the year.

Industry experts attribute this trend to a combination of factors. Johnson Chukwu, CEO of Cowry Asset Management Limited, explained that the prevailing high-interest rate environment is pushing companies toward short-term borrowing solutions, alongside 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.

In light of the recent spike in inflation, as reported by the National Bureau of Statistics, which indicated a jump to 24.08 percent in July from 22.79 percent in June, MTN Nigeria’s decision to raise short-term funds through commercial paper issuance aligns with prudent financial management and adaptability in a challenging economic environment.