By Uche Matthew

A Commercial Paper (CP) is an unconditional promise by a person to pay to the order of another person a certain sum at a future date. Such an instrument may or may not carry the bank’s guarantee. Where the bank guarantees the CP to make it more marketable in the money market, the instrument acquires the force of a BA and the bank incurs a contingent liability. Where the CP is not secured 4 or guaranteed by the bank (clean CP), it needs not be reported as a contingent liability.

OTHER DEFINITIONS
• An unsecured, short-term debt instrument issued by large banks and corporations, typically for the financing of account receivable, inventories and meeting short term-liabilities. They are usually issued at a discount from face value and reflect the prevailing market interest rates. Maturities on commercial papers rarely exceed 270 days
• A short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded
In simple terms, companies borrow money from the public by issuing commercial papers. It is essentially an unconditional promise to pay back your money on an agreed future date with interest.

FEATURES
• WHO CAN ISSUE: Only financially secure and highly rated organizations can raise money through commercial papers. New and moderately rated organizations are not in a position to raise funds by this method.
• DISCOUNTED INSTRUMENTS: A commercial paper is similar to Treasury bills due to the fact that it is a discounted instrument (interest is paid upfront) and is usually tax free. They usually reflect the prevailing market interest rates, meaning that they borrow at a lower rate than is offered at the bank. The key difference between Treasury bills and commercial papers is that the former is issued by the Federal Government while the latter is issued by corporations. That means commercial papers are a bit more risky than Treasury bills. Consequently, commercial papers often attract higher returns compared to government issued securities.
• ACCREDITED INVESTOR: Investment in commercial papers is open to accredited investors. An accredited investor is any person or institution capable of understanding and affording the financial risks associated with acquisition of unregistered securities. This means you understand what you are doing (financial education) and can handle the risk if things do go otherwise. The accredited investor includes qualified institutional investors or an eligible individual investor. An eligible individual investor, or accredited individual investor is:
(i) Any person who alone, or with a spouse has a net worth of over N2m
(ii) Any person who alone had income in excess of N400, 000 in each of the two most recent years (or with a spouse, in excess of N500, 000 during this period) and had a reasonable expectation of reaching the same income level in the current year (annual income).
• MATURITY: They are usually short-term securities. Maturities on commercial papers rarely exceed 270 days
• CENRAL REGISTRATION: All CPs issued in Nigeria shall be registered with the Central Securities Clearing System (CSCS), which shall serve as the custodian of all issues. The CSCS shall also serve as a central depository for all dematerialized instruments.
• REGULATION: Investment in commercial papers is regulated by the Securities and Exchange Commission. In addition, quotation of commercial papers on FMDQ Platform (financial market daily quotes) is a rigorous process that involves credit rating etc. This is to protect the investing public and create confidence in the market. Since commercial papers are listed on FMDQ, you can buy and sell them on the platform.
• UNSECURED SECURITIES: Commercial papers are not usually backed by any form of collateral, making it a form of unsecured debt. It is regarded as unsecured because it does not have a bank guarantee in the event of default. As a result, only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue. Commercial papers that come with bank guarantees are called bankers’ acceptance.
• CONSUMER SECURITY: Companies seeking funds through issuance of commercial papers cannot afford to default. It would severely impact their credit rating and limit their ability to access funds in future through issuing commercial papers or other financial institutions.
• The proceeds from this type of financing can only be used on current assets, or inventories, and are not allowed to be used on fixed assets, such as a new plant, without SEC involvement.

LEGAL FRAMEWORK- CBN GUIDELINES
CONDITIONS FOR CREATING A COMMERCIAL PAPER
I. A Commercial Paper qualifies as a financing vehicle under these guidelines if:
(a) The issuer has 3-years audited financial statements, the most current not exceeding 18 months from the last financial year end; and
(b) The issuer has an approved credit line with a Nigerian bank acting as an issuing and payment agent (IPA), where the bank guarantees the issue.
II. Investors in CPs shall be made aware of the identity of the issuer.
III. CPs shall only be guaranteed and not accepted since the intermediating bank is only a secondary obligor.
IV. When a bank invests in a CP by disbursing its own funds, the transaction shall be reported on balance sheet and treated as a loan. However, if the bank merely guarantees the instrument, it shall be shown off-balance sheet as a contingent liability.
V. Resale of CPs by banks/discount houses shall be accompanied by adequate documentation which should be provided to Examiners on request.

DOCUMENTATION REQUIREMENTS FOR COMMERCIAL PAPERS
The standard documentation requirements for a CP transaction in Nigeria shall include:
(a) CP raising mandate
(b) Board Resolution to borrow
(c) Issuing, placing and paying agency agreement
(d) Commercial Paper Note
(e) Bank Guarantee, where applicable
(f) Investment Instruction/Investment Mandate
(g) Investment Advice
(h) Custodial Agreement
(i) Information memorandum on the issuer in the case of clean CPs
(j) Latest rating report from the credit rating agency
(k) Backstop loan request for guaranteed CPs

RATING REQUIREMENTS FOR CP ISSUES
(I) Either the issuer of a CP or the specific issue itself shall be rated by a rating agency registered in Nigeria or any international rating agency acceptable to the CBN. An indicative rating must have been obtained by the issuer at the time of submission of the declarations and information to the Central Securities Clearing System (CSCS).
(II) The issuer or the issue shall have a minimum of investment grade credit rating (BBB- or similar rating).

TENOR AND ROLLOVER OF CPS
(I) The CP shall be issued for maturities of between 15 days and 270 days, including rollover, from the date of issue.
(II) Every issue of a CP is therefore, a separate CP.
(III) The capitalization of upfront interest and discount on maturing Commercial papers into a rollover is not allowed.
PROCEDURE FOR ISSUANCE OF CPS
(I) Any company proposing to issue CPs shall submit a proposal to the IPA with its rating report issued by a credit rating agency. The IPA, on receipt of the proposal, shall scrutinize same and, on being satisfied, take the proposal on record or record the proposal in its blotter.
(II) Companies shall ensure that the proposed issue of CP is completed within the period of two weeks from the date of opening of the issue for subscription.
(III) After the exchange of deal confirmation between the IPA and the issuer, the IPA shall issue physical certificates to the investor or arrange for crediting the CP to the investor’s account with the depository.
(IV) All IPAs issuing the CPs shall, within three working days from the date of completion of issue, advise the depository on the amount of CPs actually issued.

ROLES AND RESPONSIBILITIES OF PARTIES TO CP ISSUANCE ISSUER
With the simplification in the procedures for CP issuance, issuers shall now have more flexibility. Issuers shall, however, have to ensure that the guidelines and procedures laid down for CP issuance are strictly adhered to.

ISSUING AND PAYING AGENT
(I) IPA would ensure that issuer has the minimum credit rating as stipulated by the CBN and amount mobilised through issuance of CP is within the quantum indicated by the guidelines for the specified rating. 14
(II) IPA shall verify that all documents submitted by the issuer viz., copy of board resolution, signatures of authorised executants (when CP is in physical form) are in order. It shall also ensure that it has a valid agreement with the issuer.
(III) Original documents, or certified true copies thereof, verified by the IPA should be held in its custody.

PROVISION OF STAND-BY FACILITY FOR CPS
I. Banks and DHs shall have the flexibility to provide for a CP issue, credit enhancement by way of stand-by assistance/credit backstop facility, etc., based on their commercial judgment and as per terms prescribed by them.
II. However, these should be within the prudential norms as applicable and subject to specific approval of the Board.

DISCLOSURE REQUIREMENTS
I. The bank shall fully disclose the issuer risk in the placement memorandum.
II. CP are only redeemable at maturity, as such cannot be pre-liquidated.
III. The investor in a CP may rediscount the paper with the bank before maturity at new market terms if the bank is willing to purchase the risk.
IV. Banks shall expressly state in customer advice/correspondence the difference between bank deposits and clean CP investments as well as highlight the underlying agreement that the bank is not obliged to pay at maturity until the issuer redeems the paper.
V. Investment instructions in CP shall be received from the customer before transaction is booked.
VI. Acceptable channels of communication include:
(a) Logged/recorded telephone conversation
(b) Email from official corporate email addresses
(c) Letter signed according to existing mandate
(d) SWIFT
(e) Bloomberg, Reuters

VI. Every issue of CP, including renewal, shall be treated as a fresh issue.

PENALTY FOR NON-COMPLIANCE
Non-compliance with these guidelines or any part thereof shall attract appropriate penalties as prescribed in Section 60 (1) of the Banks and Other Financial Institutions Act 1991 (as amended) and may also include debarring from the BA or CP market, or as may be prescribed by the CBN from time to time.

If you are persuaded about the prices of petrol, rice, etc, and exchange rate under President Goodluck Jonathan in 2015 compared to what is obtainable under President Muhamadu Buhari in 2020, then you fail to realise that if the former was still in power today, the situation may not be significantly different.  The difference would be that Nigerians will find the situation so hard to bear that a real revolution would have commenced in Nigeria. Interestingly, such revolution may have even been financed by some of those in power now (also part of those in what has become Nigeria’s power recycling game).

President Muhammadu Buhari came in 2015 when Nigerians were desperately in need of change and fought hard for it. He is still here and many of the problems are still here with us—insecurity, poverty, poor electricity supply, bad roads, poor healthcare, unemployment, etc., and corruption being at the helm of all these. The problems of Nigeria are so huge. Perhaps PMB sincerely believed he could bring the much-desired change. But no. Fairly, we reckon with some of his efforts but because these do not touch on the perennial problems of the country as highlighted above, they do not ring loud bells—and no bells at all for others.

Before PMB became President, he was one of those who led the crusade of belief that all Nigeria’s problems could be solved from the centre at Aso Rock. Oftentimes, this belief tends to shield governors who may be corrupt and incompetent and are happy to conveniently hide under the overshadowing figure of Aso Rock, thus continue to fail to help the Federal Government to bring dividends of democracy to the States and grassroots.

No sooner than later President Buhari arrived, we saw that, just like in the times of the Israelites, the messiah is yet to be born and that we remain where we were. This discovery has weakened and disenchanted many, shutting their mouths and shrinking their weight to occupy Nigeria now. Unlike President Jonathan’s era when all manner of criticisms were largely tolerated, this current dispensation, by a number of the actions by its actors, has shown low tolerance for criticisms, whether objective or otherwise. Any (unguarded) utterance against the actions and policies of the current administration might earn you the unsolicited visit by what some Nigerians have described as “the Black Ninjas”—the triple or double “S” squad. (SSS or DSS). Lagos which served as the headquarters and controlling unit of the Occupy Nigeria Movement now has the same party as the state ruling at the Centre. Many of the voices springing from its Islands are now perhaps already occupied, reaping the fruits of their earlier crusade. Others have drowned in the lagoon of fear, while a few others have their voices swallowed by faintness. And there are many others who keep breathing deep with foreboding.

What I foresee

It will take time before the weight to occupy Nigeria would be regained. I foresee that when that weight is here, Nigeria will be so occupied that it would be difficult to disperse. True compatriots shall arise and the call for salvation will be compelling. They will move to save our Fatherland. And they may not even have to be in power themselves, but allow Nigerians who will serve the Nigerian people with love, strength, and faith, do so democratically. To understand this, recall that we profess daily that the labour of our past heroes shall not be in vain. This creed will be a propelling force.

The God of all creation will be with them to direct their noble cause and to lead them aright. The truth will be revealed to our youths in a practical manner they will comprehend it. Peace and justice will be restored, and prosperity will colour our flag.

Stephenlegal

By Frank Tietie

I respect the name of the Holy Prophet of Allah. I have been taught so and I have also witnessed the consequences of mentioning it without due regard.

Nduka Obaigbana, Thisday Newspapers and the Nigerian government have learnt a lesson in that regard and they have one to tell for the reckless and casual reference to the name of the Holy Prophet by that Nigerian newspaper.

The spontaneous reactions of those who hold the name of the Holy Prophet so dear can have very sure and crucial consequences. Therefore it is considered by non-moslems to be a very sensitive matter.

The message that the name of the Holy Prophet must be accorded full reverence has been made quite clear by His followers to non-moslems in quite unmistakable terms and that has come to be respected by all, including the government, the people and Nigerian law.

On the other hand, the Lord Jesus Christ is declared by the Holy Bible as the Saviour of mankind. He lived and died on earth, a propitiatory death, as the typical sacrificial lamb of God that was slain and His blood was used in spiritual symbolism to wash away the past, present and future sins of all those who might believe and accept such claims as made by His disciples, thereby assuring such believers a heavenly place of eternal bliss for their disembodied souls when they die and cease to be earthlings.

The Holy Bible and Christians declare that His name, the name of Jesus commands the highest authority in the spiritual realm and at its mention, the devil flees, miracles happen, prayers are answered and there are deliverances. What a name! The wonderful name of Jesus!

Yet when the name of the Lord Jesus Christ is used in ribald jokes by ingenious Warri comedians, nobody gets bothered. Even His so-called followers pay stupendous amounts of money to laugh at such jokes. They don’t get angry but secretly, they think within themselves that if the Lord Jesus Christ actually feels offended by the abuse of His name by comedians, He should fight for Himself, after all, He is Lord of the heaven and the earth.

Some of the leaders of the followers of the Lord Jesus Christ have formed and belong to certain groups like Christian Association of Nigeria (CAN) and Pentecostal Fellowship of Nigeria (PFN).

Whenever the name of the Lord Jesus Christ is abused and misused by the likes of Warri based comedians, these leaders of CAN and PFN don’t get angry or charge at the government to invoke Sections 210 -213 of the Penal Code, with regard to offences relating to religion. They often remain calm and consider themselves to be religiously and politically correct so long as the finances of the Church of Jesus Christ are not touched or affected.

So which is more important? The name of the Lord Jesus Christ or the money belonging to His Church?

I have come to see a recent trend where some of these church leaders have become so insensate about the public abuse of the Lord’s name that they have now begun to invite these comedians to their churches in order to swell their throngs.

Meanwhile, there is a usual strange fury and righteous indignation by these church leaders against anybody or thing that touches or threatens to touch church money. But there is a cold peace whenever the name of the avowed owner of the church money is blasphemed.

A denominational pastor once told me that church founders are prepared to forgive any sin or offence except that concerning church money. So I have seen church founders pursue their employee-pastors, seize all their property and arrest them with police for failing to account for church money yet such vehement resolve is never expressed in calling for public respect for the name of the Lord Jesus Christ.

I circulated a video to over 5000 persons on my WhatsApp broadcast list where a cadet instructor was sacreligiously using the name of the Lord Jesus to beat an applicant in the head with a stick in a diabolic manner. To my surprise, after about an hour only two or three Christians decried the mention of the Lord’s name in that kind of drill. All the other commentators of the Christian faith, only saw the human rights dimension of the abusive drilling of the cadet.

As a student of religion and a seeker of spiritual release myself, I know the efficacy of the power of the name of the Lord Jesus Christ when done in faith. Therefore, I appeal to His vicars here on earth to stand up more for His name and not for His money.

Without resort to extremism, there is nothing wrong in ensuring that the same regard and reverence that is accorded to the name of the Holy Prophet in the public national life of Nigeria should also be accorded to the name of the Lord Jesus Christ.

What is blasphemous to one faith should be blasphemous to all faiths because blasphemy is plural.

• Tietie, a human rights lawyer, writes from Abuja, and sent this via WhatsApp

By Farouk Adejoh-Audu

In January 2012 international crude price had stabilized at $140…Jonathan’s government declared it was removing subsidy and NNPC announced a new pump price of N97 which led to widespread protests code named Occupy NIGERIA.

The protest shut down the country but Lagos, specifically Ojota was the epicentre.The usual activists were on ground. And for the first time it was obvious the vocal community was parting ways with the Jonathan goverment they helped birthed right from when their agitations forced the hands of the National Assembly into invoking the “Doctrine of Necessity” to the 2011 Elections that officially enthroned him as president.

Buhari up to that point a serially defeated presidential contestant quickly cashed in on the nationwide protest and declared that government’s claim of removing subsidy as dishonest because, as he fiercely argued, there wasn’t any subsidy at the then prevailing price of N65 pump price to be removed.

“Anybody who says he’s subsidizing anything is a fraud “
Buhari said. (https://youtu.be/y7nNWw_lXDk)

But the government of the day sustained the new price regime after reducing the initial price from N97 to N87 naira.

To show honesty of purpose the SURE-P Fund was established to warehouse the difference of between what would have been paid as subsidy and the pump price to be used for infrastructure mainly in the transport sector. Monthly this SURE-P fund was paid to the three tiers of government and the fund was sustained all through until the governed was kicked out in the 2015 Election.

By 2016, the international price of crude had been on a steady decline averaging at about $50 or even less. At times coming as low as $20 per barrel (pb). That was when the present goverment of the man who claimed there wasn’t any subsidy to be removed at a pump price of N65 against international crude price of $140 pb now came to announce they were removing subsidy and instantly announced a pump price of N145!

No protests. The vocal activist community retreated. The NLC called for industrial action and demonstrations, but both flopped monumentally. The politically correct mantra and answer to the bewildering volte face was : ” I Stand With Buhari “

This week, the government has announced a new price regime of petroleum products and the action is again being defended as “removal of subsidy” and “deregulation”. It is explained that because the international price of crude had risen again there was a need to mark up prices to conform with the international price. Beside, goverment they said, had totally deregulated thus the pricing is at the mercy and pleasure of the dealers and marketers.

I guess the “I stand with Buhari” crowd have lapped up all these and they are aggressively pushing the narrative of the advantages of deregulation and removal of subsidy. Good, but there are begging questions of simple arithmetic.

If at international crude price of $140 pb a pump price of N87 has nothing to do with the removal of a “non-existent” subsidy but dishonesty and fraud on the part of the former government how come N162 pump price from a crude price of $40-$45 reflects genuine subsidy removal and deregulation?

And if at N87 pump price from $140 the previous government made savings, infact profit to share SURE-P funds across the tiers of government how do we explain the regime of N162 pump price from $40 pb as deregulating?

A simple arithmetic will indicate that if product sold at N87 per litre at crude price of $140 at between $40 -$45 the price should be at about N27. 20 to N27.36. But if we decide to factor in the then exchange rate and today’s exchange rate which is about 120% increase against the naira, it should fetch a maximum pump price of N65. 66.

The above calculations is using the Jonathan template of N87 against $140pb with excess funds redistributed as SURE-P.

Now let’s imagine the Buhari “no subsidy at N65 from $140”. Using the current $40-$45 pb x120% currency differential will fetch a maximum of N23.14.

I do not pretend to be an economist or mathematician or even “arithmetician” so I will gladly welcome any logical presentation that will repudiate this layman analysis using the same stat or if it can be proven that there are better and more accurate data than the ones available to the public which I have used here.

I’m waiting.

▪︎ Mr. Adejoh-Audu, a former journalist, lives in Abuja and sent this material via WhatsApp