Despite a restrictive monetary environment and historically high borrowing costs, Nigerian corporates raised a total of ₦1.61 trillion in commercial papers (CPs) from the capital market in 2025. This represents a 40% increase compared to the ₦1.15 trillion recorded in the previous year.
The surge in CP issuances occurred against the backdrop of a high interest rate regime, following the Central Bank of Nigeria’s (CBN) aggressive monetary tightening cycle in 2024, aimed at curbing inflation and stabilizing the naira. With bank lending rates elevated and liquidity conditions relatively tight, many corporates found traditional bank financing either costly or constrained, prompting greater reliance on capital market–based funding solutions.
According to FMDQ, the average discount rate for CPs rose to 22.38% with an average tenor of 233 days, compared to 21.69% and 225 days in the previous year. It is worth noting that 2025 recorded the highest rate in recent history. This was partly due to the CBN’s wait-and-see approach, which kept interest rates relatively high for most of the year, with only a 50-basis-point rate cut in Q3, thereby maintaining elevated borrowing costs.
Commercial paper, which typically offers faster execution, flexibility, and less stringent documentation requirements compared to bank loans, emerged as an attractive alternative for corporates seeking working capital, trade financing, and short-term liquidity support. The increase in issuance suggests that firms were willing to absorb higher financing costs in exchange for timely access to funds. The rise in the average tenor also indicates that firms were slightly more comfortable extending their short-term funding horizon despite the elevated cost of borrowing. This may further suggest improved investor confidence in corporate credit profiles and stronger demand for higher-yielding short-term instruments.
What This Means
For corporates:
The growing reliance on commercial paper signals a strategic shift toward market-based financing and deeper engagement with institutional investors such as pension fund administrators and asset managers. It also reflects the need to diversify funding sources in an environment where bank credit may be expensive or limited.
For investors:
The expansion of the commercial paper market presents opportunities for attractive returns, particularly given elevated discount rates. However, it also necessitates rigorous credit assessment, as higher yields often come with increased risk exposure.
Expert Take
In an interview with Victor Onyema, Head of Investments at Norrenberger Asset Management Limited, he noted that corporates relying on external financing for working capital are finding their funding options increasingly constrained, compelling many to turn to the capital market—particularly short-term instruments such as commercial papers.
He explained that with commercial bank lending rates trending well above the Monetary Policy Rate of around 27%, and bond issuance locking issuers into elevated borrowing costs over longer horizons, commercial paper has emerged as the most pragmatic funding alternative for many firms.
According to Onyema, this development is a double-edged sword. While it highlights the strain Nigerian businesses face in accessing financing, it also contributes to deepening Nigeria’s domestic capital market, broadening corporate financing channels, and creating attractive opportunities for investors to access high-yielding instruments with relatively shorter tenors.
Bottom Line
Looking ahead, commercial paper is expected to remain an important funding avenue for Nigerian corporates, particularly in an environment of persistently high interest rates and cautious bank lending. Continued economic recovery, stronger corporate performance, and improved financial disclosures could further broaden and deepen the market.
Should monetary policy ease meaningfully later in the year, lower borrowing costs may encourage longer tenors and make commercial paper an even more attractive strategic financing option.
Ultimately, the ₦1.61 trillion raised in 2025 highlights the increasing sophistication and resilience of Nigeria’s short-term debt market, reinforcing its critical role in meeting corporate financing needs despite a challenging macroeconomic landscape.
