Importance of Dangcem’s N50bn FMDQ Commercial Papers listing

Dangote Cement's recent listing of N50 billion Commercial Papers on the FMDQ Securities Exchange has set a significant milestone in Nigeria's capital markets. The listing has been hailed as one of the largest commercial paper notes issuances by a non-financial institution in the country's history. In an exclusive interview with CNBC Africa, Bola Onadele Koko, the Managing Director and CEO of FMDQ Securities Exchange, discussed the importance of this listing and its potential impact on Nigeria's commercial paper market. Describing the listing as a corporate benchmark, Koko noted that the presence of a corporate entity like Dangote Cement in the debt capital market helps establish reference points for pricing securities. By providing a corporate flavor to the market, Dangote Cement's issuance serves as a crucial reference point for other market participants in pricing transactions. Koko emphasized the significance of having liquid corporate debt markets, which not only offer issuers like Dangote Cement the opportunity to issue substantial amounts of debt papers but also provide investors with the additional returns they seek. He highlighted the growing interest from foreign portfolio investors in diversifying their portfolios beyond sovereign papers, underscoring the need for a vibrant corporate debt market in Nigeria. As Nigeria moves towards implementing regulations like Basel III, Koko stressed the importance for corporate treasurers to begin building track records to ensure their future access to the debt capital market. Reflecting on the potential impact of Dangote Cement's landmark issuance, Koko expressed optimism about the evolution of Nigeria's corporate commercial paper market. He pointed out that while the market may not be very liquid currently, the credibility established by market players like the FMDQ Securities Exchange inspires confidence among investors. Koko emphasized that the holding of commercial papers by investors indicates the strength and attractiveness of the issuers, such as Dangote Cement, which offer higher returns compared to treasury bills. He underscored the role of big institutions in driving liquidity in the market, noting that the growing size of the buy side presents opportunities for large issuances that can attract investors seeking alpha. Koko also mentioned the potential for states and smaller institutions to explore short-term paper issuances, contributing to the market's variety and depth. While acknowledging the importance of liquidity, Koko emphasized the significance of creating a transparent and reputable market environment that instills confidence in regulators and participants alike. The emergence of Dangote Cement as a key player in the commercial paper market signals a significant step towards establishing a robust corporate debt market in Nigeria, with the potential to attract more issuers and deepen liquidity in the future.