Corporate Borrowing Derailed As Investors Chase High-Yield Government Debt

Corporate Borrowing Derailed As Investors Chase High-Yield Government Debt

In 2024, Nigerian companies struggled to secure funding as investors turned to high-yielding government debt. According to FMDQ data, corporate issuances dropped from 140 in 2023 to 133 in 2024, with the total value decreasing…Corporate Borrowing Derailed As Investors Chase High-Yield Government Debt

by 12% to ₦790.4 billion.

The Central Bank of Nigeria (CBN) aggressively raised interest rates eight times in 2024, from 18.75% in January to a record 27.5% in November, aiming to curb persistent inflation. This hike significantly increased borrowing costs for private firms, forcing them to offer competitive yields to attract investors.

Government securities became more appealing, with one-year treasury bills hitting a yield of 30.7% by November, while corporate papers averaged a discount rate of 27%, up from 16.4% in 2023. Companies like Hillcrest Agro-Allied Industries raised funds at an effective yield of 35%.

Heavyweights such as Dangote Sugar Refinery and Dangote Cement were among the largest issuers, raising ₦141.8 billion and ₦119.4 billion, respectively, through commercial papers.

The interest rate surge also led banks to increase lending rates, with Zenith Bank raising rates by 500 basis points to 30%, and Keystone Bank and First Bank offering rates as high as 36%.

Analysts believe that while the CBN’s policy helped manage inflation, it placed additional pressure on businesses, raising concerns about private sector growth in 2025.

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