Corporate and subnational bond issuances in Nigeria has increased by 502.4% in the last five years spanning 2017 and 2022, managing Director of Investment Banking at Chapel Hill Denham Advisory Limited, Mrs Kemi Awodein has disclosed.
Awodein stated this at the Association of Corporate Trustees’ 2023 Business Luncheon themed ‘Corporate Trustee as Ombudsman in the Debt Market: Reality or Aspiration’
She noted that the Nigerian capital market has seen considerable growth in recent years adding that FGN domestic debt stock grew by 76.4% in the same period.
According to her, in May 2023, the FGN issued Bonds worth N368 billion across four tenors, at stop rates ranging from 14.10% – 15.80%.
Awodein noted that Lagos State Government also raised N115 billion 10-year bond and a debut N19.815 billion Sukuk, being the second registered subnational sukuk and the largest sukuk issuance in the domestic capital markets.
She noted that Pension Funds represent the largest pool of investible capital with AUMs of N15.4 trillion growing at a CAGR of 17.0%.
Awodein said 65% of the fund is invested in Government Securities, and 22% is invested in corporate securities and money market funds.
“The market for corporate and sub-national bond issuances has grown at a compounded rate of 43.2% annually since FY 2017. From FY 2019 to FY 2020, issuances increased by 177%, spearheaded by notable debut issuances of N100 billion and N115 billion by Dangote Cement Plc and BUA Cement Plc. Other notable issuances by MTN Nigeria Communications Plc, Dangote Industries Funding Plc, and Dangote Cement Plc have also aided the growth of the debt capital markets with serial issuances in both short and long-term capital markets.
The market for commercial paper issuances has grown at a compounded rate of 31.3% annually since FY 2017.
This growth is due in part to the establishment of the FMDQ Group, which has provided suitable regulations to govern the issuance of commercial papers in Nigeria in line with the SEC Rules and Regulations.
The value of quoted commercial papers on the FMDQ Exchange stood at N251.46 billion at the start of Q1 2023 with the total outstanding value of CPs rising to N744.73 billion as of May 25, 2023,” she said.
Awodein noted that in recent years, there has been increasing interest in expanding the role of the corporate Trustee to also act as an Ombudsman in the debt capital market.
“This would involve the corporate Trustee taking on additional responsibilities, such as resolving disputes between bond issuers and bondholders and overlooking the overall conduct of the debt capital market. However, whether this expanded role could become a reality or remain an aspiration depends on several factors.
If regulators support expanding the role of corporate Trustees and providing clear guidelines on their Ombudsman functions, this role could become a reality.
However, if regulators prefer other mechanisms for addressing disputes and overseeing market conduct, this role may remain an aspiration.
Corporate Trustees need to possess the necessary expertise, resources, and capacity to handle their added Ombudsman responsibilities effectively.
If they are unable to manage the increased workload or lack the appropriate skillset to mediate disputes, the aspiration of the corporate Trustee acting as an Ombudsman may not be achieved,” she said.
President of the Association of Corporate Trustees and Managing Director of Vetiva Trustees Limited, Mrs. Theresa Orji, stated that one of the challenges facing the association is the understanding of what a corporate trustee does.
She noted that Trustees are the protectors of the investors in every transaction because they are the ones that have an understanding of the transaction structure.
“They are ensuring that everything is in place to guarantee that investors’ money comes back to him, the way he has planned for it to be invested.
“Not only do we need to have that explanation for the public. We also need the other capital market operators to understand the need to work together with the Trustees to ensure that the fabric of the capital market is maintained, and the structure is also sustained.
“But we also need a legal structure to support the Trustees in doing the things that need to be done to ensure that the market moves forward, and investors are also maintained,” she said.
