If you’ve been following Nigerian financial news lately, you’ve probably noticed something interesting: major companies like Dangote Cement, Access Bank and even smaller firms are raising billions through something called “commercial papers.” In June 2025 alone, Dangote Cement offered ₦100 billion to investors, while Access Bank went even bigger with ₦193.25 billion. But what exactly are these commercial papers and why is everyone suddenly talking about them?
What Are Commercial Papers?
Commercial papers (CPs) are IOUs that are issued by large, and often creditworthy companies. When a business needs quick cash for short-term expenses, like paying suppliers, managing inventory or covering operational costs, instead of going to a bank for an expensive loan, they can issue commercial papers directly to investors.
In other words, when you buy a commercial paper, you lend money to a company for a short period (typically 90 to 270 days), and in return, they pay you back with interest when the paper matures. It’s similar to Treasury Bills, except instead of lending to the government, you’re lending to corporations.
Commercial papers are usually sold at a discount. For example, if a company issues a CP with a face value of ₦1 million, you might buy it for ₦950,000 today and receive the full ₦1 million when it matures in 180 days. That ₦50,000 difference becomes your profit.
How It Actually Works
Let’s break down Dangote Cement’s recent ₦100 billion commercial paper offer to see how this works in practice.
In June 2025, Dangote Cement opened subscriptions for three different series of commercial papers, each with different tenors and rates. The company set a minimum investment of N5 million, making it accessible primarily to high-net-worth individuals and institutional investors. Dangote Cement, which controls about 57% of Nigeria’s cement market, needed this funding for working capital and general corporate purposes. The company’s strong credit rating (AA+ by GCR and AA by DataPro) meant investors could feel relatively confident about getting their money back.
Under Series 19, investors could buy a 93-day CP at a discount rate of 19.93%. Series 20 offered a 184-day tenor at 20.61%, while Series 21 extended to 268 days at 20.77%. The longer you agreed to lock in your money, the higher your return. If you invested ₦1 million in Series 20 (184 days), based on the implied yield of approximately 23%, you’d earn around ₦117,556 in gross returns, that’s before the 10% withholding tax. Not bad for just over six months!
A Commercial Paper Gold Rush Is Happening Now!
Nigeria is experiencing what can only be described as a commercial paper boom.
According to data reported by FMDQ Securities Exchange, the total registered CP programmes reached over ₦8.19 trillion by 2025, with quoted CPs hitting ₦7.23 trillion. Between June and July 2025 alone, over ₦468 billion worth of commercial papers flooded the market from various Nigerian corporates.
The diversity of issuers tells its own story. From banking giants like FCMB (₦70 billion) and Access Bank (₦193.25 billion) to manufacturers like Cutix Plc (₦20 billion), healthcare companies like Fidson Healthcare (₦20 billion), and even fintech players like Payaza Africa Limited (₦20 billion) show that businesses across every sector are tapping this market.
Yields have been exceptionally attractive. In mid-2025, Cutix Plc led the market with the highest 270-day implied yield at 28.5%, followed by SKLD at 27.5%. For 180-day papers, SKLD offered 24.65%, with Daraju at 24.50%. These rates significantly outperform traditional alternatives like FGN Savings Bonds (15-17%), money market mutual funds (12-22%), and even 364-day Treasury Bills (17-18.5%).
Interestingly, while the volume of commercial papers issued declined slightly from 140 issuances in 2023 to 133 in 2024, corporate issuance dropped by 12.2% to ₦790 billion in 2024. However, retail interest has grown substantially, meaning that awareness is spreading beyond institutional circles.
Why the Sudden Rush?
This commercial paper boom isn’t happening in a vacuum. Several factors have converged to make CPs the financing instrument of the moment.
For Companies: With the Central Bank’s Monetary Policy Rate stuck at 27.5%, traditional bank loans have become prohibitively expensive, often exceeding 30% when fees and risk premiums are added. Commercial papers offer a cheaper alternative. MeCure Industries, for instance, issued its CP at 22.54% yield, a figure that is well below typical bank rates.
CPs also provide faster access to cash than lengthy bank loan processes, offer flexibility through multiple tranches, and don’t require collateral since they’re unsecured instruments.
For Investors: In an environment where inflation has been running high and traditional savings accounts offer negative real returns, CPs provide attractive double-digit yields. The short-term nature (90-270 days) also means investors aren’t locked in for long periods. In a rising interest rate environment, this creates an opportunity: when your CP matures, you can reinvest at potentially even higher rates.
Market analysts note that despite recent moderation in inflation and bond yields, risk-tolerant investors continue favouring commercial papers due to their attractive premiums over government securities.
How Can You Invest in Commercial Papers?
While commercial papers sound appealing, getting started requires some preparation. Here’s what Nigerian investors need to know:
1. Meet the Minimum Requirements: Most CPs have a minimum investment of ₦5 million, with increments of ₦1,000 thereafter. This high threshold means CPs primarily target high-net-worth individuals and institutional investors. However, some stockbrokers and fintech platforms now allow smaller investors to participate through pooled investments.
2. Open the Right Accounts: You’ll need two things:
- A trading account with a licensed stockbroking firm or issuing house
- A CSCS (Central Securities Clearing System) account number
Work with stockbrokers registered with the Securities and Exchange Commission (SEC) and under FMDQ oversight.
3. Do Your Due Diligence: Commercial papers are unsecured, meaning there’s no collateral backing them. Before investing, review:
- The issuer’s credit rating (provided by agencies like GCR, DataPro, or Augusto)
- The company’s financial statements and business fundamentals
- How the company plans to use the funds
- Whether there’s any credit enhancement, like guarantees
4. Understand the Tax Implications: Interest or discount income from CPs is subject to 10% withholding tax. Factor this into your return calculations.
5. Choose Between Primary and Secondary Markets: You can buy CPs directly during issuance (primary market) or purchase them from other investors through stockbrokers on the secondary market. The secondary market offers more flexibility for entry and exit.
The Risks You Should Keep In Mind
While commercial papers offer attractive returns, they’re not without risks. Default or bankruptcy risk exists. In other words, if the issuer goes bankrupt, you could lose your investment since CPs are unsecured. This is why sticking with highly-rated, established companies matters. Also, interest rate risk means that if rates rise after you’ve locked in your CP, you might miss out on better opportunities elsewhere. Liquidity risk can also occur; some CPs may not be easily tradable before maturity, especially in the less liquid secondary market.
To mitigate these risks, you should diversify across multiple issuers, focus on companies with strong credit ratings and only invest money you won’t need before the CP matures.
In all, the commercial paper market represents a maturing Nigerian capital market where companies and investors can meet their respective needs more efficiently. For investors willing to do their homework and meet the minimum thresholds, it’s an opportunity worth exploring.
