There are indications up ten Nigerian corporates are currently in the process of raising bond compared to about five recorded in 2017. The yields on fixed income securities have fallen dramatically this year and the Central Bank of Nigeria (CBN) is committed to single-digit inflation.
Nigeria’s headline inflation for month of April 2018 eased to 12.5 percent year-on-year (y/y) in line with many analysts projection, representing the 15th consecutive decline since January 2017.
The increasing preparation for record bond issuance by companies results from their quests to benefit from lower interest rates regime and an economy on the fix.
While the International Monetary Fund (IMF) says it expects Nigeria’s economic growth to continue to pick up in 2018 to 2.1 percent, the World Bank forecasts that economic growth in Nigeria would edge up to at least 2.5 percent in 2018, as the country benefits from improved commodity prices, investments and trade.
Nigerian corporate bond market is on fire as companies could raise up to N200billion of bonds in 2018, almost double the all-time high set two years ago. According to Securities and Exchange Commission (SEC), five companies have already submitted plans for debt sales totaling about N60.5billion.
“Average discount rates for corporate issues have tumbled to 14.8percent compared to 19percent in 2017, stimulating several corporate pipeline deals”, United Capital research analysts said in their May 16, 2018 note.
The analysts at the investment firm noted that an increased exposure to corporate bonds is important to alpha seeking investors wishing to optimise return.
Corporate bond markets are an important part of the global capital markets and a critical source of financing for companies and, consequently, for economic growth and jobs.