Onome Amuge
The value of new commercial paper (CP) listings in Nigeria more than doubled in the first seven months of 2025 compared to the same period last year, as corporates leaned on short-term debt to ease funding pressures in a stubbornly high-interest-rate environment.
Fresh data from the FMDQ Securities Exchange shows CP issuance reached N1.58 trillion between January and July, up 107 per cent from N763.4 billion in the same period of 2024. Activity was concentrated in March and July, which together accounted for nearly half of new listings, with spikes of 271 per cent and 1,686 per cent respectively.
Commercial paper, a short-term unsecured debt instrument typically used to fund payrolls, inventories and other immediate liabilities, has become an increasingly attractive financing option for Nigerian corporates facing expensive long-term credit and uncertain capital market conditions.
Among issuers tapping the market this year are large financial institutions and manufacturers, including MTN Nigeria, Access Bank, Stanbic IBTC, Providus Bank, Fidson Healthcare and Lucky Fibres. Smaller lenders such as Alert Microfinance Bank and Addosser MFB have also participated.
The increase in issuance reflects the interplay of monetary policy and corporate financing strategies. The Central Bank of Nigeria (CBN) raised its benchmark interest rate by 875 basis points in 2024 to 27.5 per cent, in one of the most aggressive tightening cycles in the bank’s history. Although rates have been held steady in 2025 to allow earlier measures to filter through, borrowing costs remain elevated.
“Businesses are feeling the strain of the elevated interest rate environment,” analysts at investment firm Norrenberger noted in a recent half-year outlook. “Commercial papers, a key funding source for Nigerian corporates, have been quoted at steep discount rates of up to 25 per cent for 270-day tenors. Many companies have increasingly turned to short-term instruments as a strategy to mitigate long-term funding costs and interest rate risks,” they added.
The preference for CPs is evident when compared with longer-term debt instruments. Outstanding commercial papers on the FMDQ platform grew by 157 per cent to N1.3 trillion between January and May 2025, while corporate bonds increased by only 0.3 per cent over the same period.
Despite the higher costs of CP issuance, firms appear willing to pay for liquidity in the short run, betting on eventual monetary easing. Inflation slowed to 21.88 per cent in July, raising expectations that the CBN could begin cutting rates before year-end. Analysts project a potential reduction of 200 basis points if inflationary pressures continue to ease.
“A moderate cut would reflect growing confidence in inflation containment efforts while signalling support for broader economic recovery. But risks remain, including global commodity price volatility, external monetary tightening, and domestic fiscal and security challenges,” Norrenberger said.
Credit rating agency Agusto & Co. observed that banks, in particular, are likely to accelerate the adoption of CPs as part of innovative funding strategies to moderate the impact of high funding costs. It noted the sector remained liquid, with the industry liquidity ratio improving from 43.5 per cent at end-2023 to 59.4 per cent by mid-2025, and projected to exceed 60 per cent by year-end.
While July’s CP maturities totalled N113 billion, the outstanding value of admitted papers rose 15.3 per cent month-on-month to N1.54 trillion, reflecting sustained demand.
For corporates, however, the reliance on short-term debt carries risks of refinancing stress if rates stay elevated or investor appetite shifts. Analysts caution that an overdependence on rolling short-term paper could create funding vulnerabilities, particularly for smaller firms without diversified financing channels.
