FMDQ OTC Exchange Introduces Short Term Bonds

Short term

FMDQ OTC Exchange, Nigeria’s platform for the Naira-settled OTC FX Futures has announced the introduction of Short Term Bonds (STBs) to the Nigerian fixed income market.

In a statement issued by the Exchange, the decision was taken after a wide consultation with stakeholders in the financial market space which recognised 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 (3) years and above.

In short “STBs are essentially short term debt instruments issued by corporate entities, for tenors of between one (1) year and not exceeding three (3) years. In addition to bridging the funding gap between short- and medium- to long-term debt instruments, STBs are designed to serve the liquidity needs of the medium to large creditworthy corporates and commercial entities by providing an alternative/competitive source of financing to bank loans. Also, STBs are beneficial to the 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”.

The FMDQ also announced that “the Commission 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 serve as a guide to issuers, STB sponsors and the investing public, amongst others. The Rules outline 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.

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