Driving participation in Nigeria’s debt capital market

Nigeria’s debt capital market has experienced significant growth in recent years, with the market size expanding from just under 100 billion in 2013 to over 2 trillion in 2023. Laju Atake, Head of Debt Capital Market at Rand Merchant Bank, discussed the evolving landscape of Nigeria's debt capital market in an interview with CNBC Africa. Atake highlighted key trends and parameters that have driven this growth. One notable trend is the increasing number of issuers in the market, with 56 institutions issuing debt securities in 2023 compared to only 10 in 2019. This influx of issuers, including blue-chip and multinational companies, reflects the benefits that the debt capital market offers in terms of raising capital. Additionally, the growing investor community, with pension assets under management rising from 4 trillion to 19 trillion, provides a ready supply of capital for issuers. The accessibility and cost-efficiency of the debt capital market have attracted various entities looking to diversify their funding sources. Despite the challenging economic landscape, corporates continue to tap into the market for capital needs, adapting their issuance strategies to current market conditions. This flexibility includes adjusting tenors and exploring innovative financial instruments like commercial papers. However, challenges such as higher interest rates and potential crowding effects due to government borrowing impact corporate issuers. Amidst these dynamics, the Nigerian Securities and Exchange Commission (SEC) has proposed new rules to regulate debt securities issuances by private companies. The exposure guidelines aim to mitigate risk-taking behaviors by limiting the amount of debt capital private companies can raise within a year. While the proposal has sparked mixed reactions from market participants, Atake emphasized that it is currently a draft guideline open to feedback and discussion. Looking ahead, Atake expressed optimism about the future of Nigeria's debt capital market. He foresees continued market growth, driven by the government's economic development agenda and the potential for more sophisticated financial products such as green and sustainable bonds. Moreover, he anticipates increased cross-border listings and the integration of digital technology and artificial intelligence in market operations. This evolution underscores the dynamic nature of the debt capital market in Nigeria and its pivotal role in supporting the country's economic aspirations.