The Managing Director of Coleman Cables and Wires, George Onafowokan, has urged businesses and manufacturers to consider leveraging the capital market as a more sustainable financing alternative to commercial loan and development funding.
He stated this during a sideline panel session at the 13th Practical Nigerian Content (PNC) Forum in Yenagoa, Bayelsa state, where he noted that the debt capital market is the easiest avenue to raise money as a businessperson or manufacturer.
He emphasised that transparency is needed before involvement in the debt capital market, noting that corporate governance needs to be at the highest level.
He said: “You do not have to be a public limited liability company. I’m a family-run, private, A-rated investment-grade company and our first rating three years ago was triple B since then, I have been raising money without collateral on the market at over 70 per cent of my subscription for three years. The last debt capital raise was N20 billion, it was done in three days and it was over-subscribed at 70 per cent.”
He noted that in today’s debt capital market, rates are at least 500 to 800 basis points lower than commercial bank rates, pointing out that one essentially needs to operate like a multinational or a privately-run business to successfully raise funds. He stated that when it comes to bonds, rates are typically 10 to 12 per cent lower than those offered by commercial banks. He highlighted that, in today’s market, it is possible to secure a 20-year bond at less than 20 per cent, stressing this as the current reality.
He emphasised that raising funds is not as straightforward as some might claim, even with the Bank of Industry (BoI). Success he said, comes from running the business like a publicly listed company while embracing being Nigerian.
He noted that increased participation in the debt capital market leads to better ratings and reduced risk, saying his company can now secure ratings globally without requiring collateral, attributing this advantage to the de-risking effect of their strong ratings.
“I have been practising structure for 25 years from day one, so, for me, to achieve a triple B investment rate on day one, it was easy because it was something I already practised. But if you do not practice it, do not go out and do a rating, because if you do so and you fall below the investment rate, it takes you another year or two to enumerate it. You do not want to waste time doing it, hence, you need proper guidance over the next one or two years before you go out and do the rating in the first place,” he said.
Onafowokan explained that as one climbs higher on the rating scale, with the highest being triple-A, reaching that level means one is in a position of negative equity.
