Tuesday, February 02, 2021 / 12:15PM /
Ottoabasi Abasiekong for WebTV / Header Image Credit: Zedcap Partners Limited
Corporate Commercial Paper (CP) Issues will grow in Q1, 2021 because of the comfortable migration away from the fixed income market to the equities market by local investors as fixed income yields begin to climb back up. The fall in bond prices is expected to push up fixed income yields thereby deepening the debt market during the quarter said Mr. Oluwatosin Ayanfalu, Senior Manager, Securities Dealing, Zedcap Partners Limited. Ayanfalu made the point as he discussed developments in the Nigerian fixed income market in 2021.
The debt trader commended the FMDQ Securities Exchange for developing creative ways to improve the process for issuance of commercial papers by companies.
He said, "This is the best time for the private sector to access the Commercial Paper market, to get funding for their operations."
The analyst noted that yields are expected to go back up in 2021 relative to 2020, as investors leave fixed income instruments and drive down prices.
"only creditworthy companies would be able to a nibble or bite at the market as investors become intensely discriminatory amongst asset classes and debt issuers, he pointed out that this would spur tighter regulation and protection of debtholders"' he said.
He projected that the debt market would see increased participation because of subsequent rise in yields and coupon rates. He alluded to the fact that risk-free rates and interest rates were low, encouraging increased activity by corporate bodies.
On the outlook for 2021, he said the fundamentals for Nigeria's economy were not encouraging with weak growth, pressured FX, high inflation rate, and the disruptive impact of COVID-19. This has led to the Central Bank of Nigeria's (CBN's) accommodative monetary policy, designed to support the country's recession recovery.
Regarding the foreign exchange market in 2021, the bond trader observed that the CBN would continue with its managed FX regime to stabilize the economy.
Ayanfalu called on the federal government to pursue policies that would attract private capital investments into the country, transform the economy, and create jobs.
Currently, Total, Mixta and Valency Agro companies have already kicked off the year with CP issues on the FMDQ.