FMDQ STBs to provide competitive source of financing bank loans

OTC market records N10.85 trillion turnover l

FMDQ OTC Securities Exchange has announced that the newly introduced Short-Term Bonds (STBs) would provide an alternative/competitive source of financing to bank loans and serve the liquidity needs of the medium to large creditworthy corporates and commercial entities.

Short Term Bonds are essentially short-term debt instruments issued by corporate entities, for tenure of between one year and not exceeding three years. In addition to bridging the funding gap between short- and medium- to long-term debt instruments.

According to FMDQ, STBs are beneficial to the Debt Capital Market (DCM) as they will serve to boost the investment product bouquet for the buy-side (which comprises amongst others, the Pension Fund Administrators), offshore investors and other market participants.

“As an innovation-driven Exchange focused on powering growth, through product and market development, FMDQ OTC Securities Exchange had, following extensive consultations with stakeholders in the Nigerian financial market space, identified the funding gap for corporates, between the money market debt instruments such as commercial papers with maximum tenors of 270 days and the traditional medium- to long-term debt instruments (e.g. bonds) which are typically issued for three years and above.

“To this end, and in order to support an even greater inclusion and participation of corporates in the Nigerian DCM, FMDQ through its various engagements, and with the subsequent approval of the Securities and Exchange Commission (SEC) is delighted to introduce Short-Term Bonds (STBs) to the Nigerian fixed income market.”

Furthermore, the Exchange explained that SEC also approved the FMDQ Short-Term Bonds Registration Process and Listing Rules (STB Rules), which were developed in furtherance of FMDQ’s commitment to provide effective market regulation and governance for the markets under its purview.

The STB rules, according to FMDQ would serve as a guide to issuers, STB sponsors and the investing public, amongst others.

It added that the rules also outlined the governance structure for STB issuances as well as the procedure for the registration of prospective STB issuances.

“As a consequence of SEC’s approval of the STB Rules, FMDQ will serve as the Exchange through which the primary due diligence for all STB issuances, consequently ensuring an expedited time to market, shall be conducted and also provide its efficient platform for the registration and listing of all STBs.

“With the near-recently launched Naira-settled OTC FX Futures product in its 4th successful trading month and about $4.00bn worth of contracts traded on FMDQ, the Exchange has continued to articulate ways to improve the value-add to market participants, and in particular, corporates, who through their respective activities will in turn boost the growth of the nation.

“The importance of a fully functional and efficient DCM in powering the growth and development of Nigeria cannot be overemphasised. Even in the light of the present economic climate, FMDQ remains keen and unrelenting in its efforts to actively work with relevant stakeholders to deliver on its agenda of making the Nigerian financial market globally competitive, operationally excellent, liquid and diverse,” it added.

Meanwhile, the OTC market for the month of September 2016 has recorded a turnover of ₦10.85 trillion, representing11.30 percent higher than a turnover of ₦9.75 trillion recorded in the month of August 2016.

A breakdown of activities in OTC last month showed that Treasury Bills (T.bills) transactions accounting for 36.85 per cent of the total value while turnover in the Foreign Exchange (FX) market accounting for 23.29 per cent of total turnover, settled at $8.70 billion.