FMDQ Exchange Suspends Security Admission Services in the Nigerian Commercial Paper Market

FMDQ Exchange has temporarily suspended its security admission services in the Nigerian Commercial Paper market following new rules introduced by the Nigerian Securities and Exchange Commission (SEC).

The Nigerian SEC released a new set of rules last month that govern the issuance of commercial papers and determine the eligibility criteria for prospective issuers.

In a market notice dated January 2, FMDQ informed stakeholders that the suspension, effective from December 30, affects all new and ongoing applications for prospective Commercial Paper program registration, revisions, and quotations. The suspension also includes applications for which all relevant documentation has been completed, applications where the filing of all relevant documentation is still pending, and ongoing CP offers under active CP programs.

FMDQ has stated that it is in discussions with the SEC on the implementation and operationalization of the new commercial paper rules. This collaboration is expected to ensure a smooth transition and proper compliance with the updated regulations.

The SEC’s new rules stipulate that all proposed issuances of Commercial Papers (CPs) must first receive approval from the Commission. Additionally, the credit rating for any CP issuance must be at least investment grade. The maturity date for outstanding CPs must align with the validity period of the issuer’s credit rating on file with the SEC. If the rating expires before the CPs mature, the issuer must secure an extended or renewed investment-grade rating at least five business days before the expiration of the initial rating.

The rules also state that CPs may be issued or sold to qualified institutional investors, high-net-worth individuals, and retail investors. For private placements, the subscription period must not exceed five working days from the opening date. Any unsold portion after this period cannot be offered further. In the case of public offers, the subscription period shall not exceed ten working days.

Furthermore, issuers of Non-Interest Commercial Papers (NICPs) must comply with these rules and adhere to all applicable laws, Shari’ah rulings, principles, and standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) or other standard-setting bodies recognized by the SEC.

Under Emomotimi Agama, the SEC has been introducing regulatory frameworks across various sectors, including the capital markets and cryptocurrency.

In the first ten months of the year, the total turnover on the FMDQ Exchange reached ₦356.86 trillion, reflecting a 93.01% increase compared to October 2023. This data was disclosed in the FMDQ Spotlight, the in-house newsletter of the FMDQ Group released recently.

Commercial Paper (CP) refers to an unsecured promissory note with a maturity of not less than 30 days and no more than 364 days, including rollovers.