Nigeria’s strong equities market rally is yet to translate into significant growth in capital opportunity for businesses, with companies increasingly turning to short-term debt to finance their operations, even as the value of commercial papers (CPs) has risen by 317.4 per cent to nearly N500 billion in the past three years.

Data from FMDQ Securities Exchange showed that the value of CPs in the Nigerian capital market has risen from N117.32 billion in July 2023 to N489.45 billion in July 2026, over fourfold.

The three-year increase represents an additional N372.13 billion, taking the value of CPs to more than four times the level recorded in July 2023.

The development comes against the backdrop of a strong performance by the equities market, with the NGX All-Share Index (ASI) delivering a return of about 57 per cent in the first seven months of the year.

Operators said the sharp rise in share prices has largely increased the value of existing investments, but failed to produce a corresponding wave of fresh equity capital for companies seeking funds for expansion.

For instance, in the equities sector, fresh fundraising outside the insurance and banking sectors has remained concentrated in a handful of companies, despite the strong performance of the exchange.

The sectors have accounted for a significant part of the primary-market activities in the two years because operators had to raise capital to meet recapitalisation requirements.
Besides the regulatory-driven programmes, major transactions in the year include Dangote Sugar Refinery’s N485.88 billion rights issue and Neimeth International Pharmaceuticals’ N2.44 billion rights issue.

he trend is an indication that the impressive performance of the secondary equities market has not been matched by a broad expansion in the primary market, where companies obtain fresh equity capital.

However, the growing attraction of the CP market is already evident on FMDQ Exchange. Data from the exchange indicated that companies including Sunbeth Global Concepts, SKLD Integrated Services, Sycamore Integrated Solutions and C & I Leasing have accessed the platform through CP quotations this year.

Sunbeth Global Concepts quoted N150.41 billion in multi-series CP, while C & I Leasing quoted N18.90 billion under its N50 billion CP programme.

SKLD Integrated Services quoted N7.3 billion, while Sycamore Integrated Solutions quoted N6.89 billion. FMDQ said the C & I Leasing proceeds would be used for working capital and operational activities.

Other companies accessing the FMDQ platform during the year include Miskay Boutique International, ARCO Worldwide Services, First Upland Ventures, Accion Microfinance Bank, HillCrest Agro-Allied Industries and MyCredit Investments.

The growing use of CP highlights the different funding choices available to companies. While equity provides sustainable capital without a fixed repayment obligation, debt allows businesses to raise funds without giving up ownership.

For companies seeking to finance working capital, inventory and immediate operational requirements, the shorter-term nature CP offers makes it an attractive alternative to a public equity issue.

However, the operators warned that the increasing reliance on short-term debt also means companies must manage their cash flows carefully because the obligations have to be repaid, unlike equity capital.

President of Newdimension Shareholders Association of Nigeria, Patrick Ajudua, said the rally in the equities market should not be mistaken for an increase in fresh capital available to businesses, noting that a rise in share prices does not translate into new funds for companies unless they issue additional shares.