Firms sourced N258.59bn from bond market in 2020, despite COVID-19

Data from the Securities and Exchange Commission (SEC) Nigerian has shown that companies raised a total of N258.59 billion from bond market in 2020 despite the effect of COVID-19 pandemic

According to the SEC data, the corporate bonds issued in 2020 rose by 45.91 per cent from the N177.22 billion raised in 2019, as companies leveraged on the low yield environment to fund expansion objectives and pursue debt refinancing.

Flour Mills of Nigeria Plc, Dangote Cement Plc, United Capital Plc, Coronation Merchant Bank, Axxela Limited, Nigeria Mortgage Refinance Company Plc, FBNQuest Merchant Bank Limited, TSL SPV Plc and Cardinalstone Financing SPV Plc were some of the companies who sourced money from the market in the said period.

Bond, which is a debt instrument, represents a long-term financial obligation of an entity. It enable an investor loans funds to the entity who borrows the funds for a defined period of time at a variable or fixed interest rate.

The borrower commits to pay a specified sum of money periodically (coupon) as well as repay the principal at stipulated future dates.

Corporate bonds, according to FMDQ Securities Exchange Limited, are long-term debt securities issued by corporations in order to raise finance for a variety of reasons, from building facilities and purchasing equipment to expanding their businesses.

According to it, “Corporate bonds are usually characterised by higher yields than government bonds because there is a higher risk of a company defaulting than a government.

“They, however, can also be the most rewarding fixed-income investments because of the risk the investors must take on.

“A corporation’s credit quality is very important as the higher the quality, the lower the interest rate the investors receive.”

It would be recalled that the Group Managing Director/Chief Executive Officer, NGX Group Plc, Mr. Oscar Onyema, said in January that capital-raising activities in the fixed income market increased significantly in 2020.

He said the then Nigerian Stock Exchange’s bond market capitalisation rose by 35.52 per cent from N12.92 trillion in 2019 to N17.50 trillion, with the Federal Government dominating issuances.