Dangote Sugar Plc Plans N50 Billion Commercial Papers Issuance

Dangote Sugar Plc has disclosed its plans to issue Commercial Papers (CPs) in several tranches to raise N50 billion.

The company intends to raise N50 billion in its two most recent offerings, Series 4 and 5, at 25% for nine months and 23% for six months.

The offer will close on May 22, 2024, and settle on May 23. It opened on May 16, 2024.

Dangote Sugar Refinery is Sub-Saharan Africa’s largest sugar refinery, with a combined installed refining capacity of 1.49 MMT per annum. 

The company plans to produce an additional 1.5 million metric tonnes of refined sugar from locally grown sugarcane in the medium term. With its backward integration plan, it is well on its way to becoming a major global integrated sugar producer.

In Series 1, 2, and 3, Dangote Sugar Refinery has raised approximately N99.01 billion since its N150 billion commercial paper issuance program was accepted to FMDQ on February 9.

In Series 1, N39.39 billion worth of CPs were reported to have been issued at a discount rate of 17.08% and a tenor of 266 days. 

For Series 2, N6.15 billion CPs were issued at a 19.81% discount rate and a tenor of 184 days. In Series 3, N53.47 billion worth of the CPs were issued at 21.30% and a tenor of 254 days.

The private sector was forced to raise rates on its debt instruments following the initial 600 basis point hike in benchmark interest rates by the Cardoso-led Monetary Policy Committee to 24.75%.

Since then, investor demand for government securities has been very strong, with treasury bill true yields reaching as high as 27% and currently averaging 26%.

Stop rates on the FGN Savings Bonds are more than 19%.

Additionally, it led Nigerian banks to raise their lending rates, which increased the servicing costs for customers who already had loan facilities with the banks.

Interest rates on investment instruments have been increased by the Monetary Policy Committee's to 150 basis point increase in rates today, bringing them to 26.25%.

Oladipo Samuel, a senior portfolio manager at Lead Asset Management Limited, expressed worries regarding how businesses would be affected by the increase in federal government rates. 

According to him, companies need to offer their instruments at a rate more competitive than the current average of 19% for federal government instruments to draw in investors.

It was also reported that VFD Group also declared last week that it planned to raise N6 billion with a 30% yield.