In a groundbreaking move that will shake up Nigeria’s corporate bond market, Presco Plc, the country’s largest palm oil producer, is set to raise a record ₦100 billion. This marks the first phase of its ₦150 billion bond programme and signals a powerful step in the company’s growth and expansion strategy. With a 7-year tenure and a highly attractive yield range of 23.25 percent to 23.75 percent, the issuance promises to be a game-changer, setting a new benchmark in the country’s corporate financing landscape.
Presco Plc, known for its dominance in the palm oil industry, is no stranger to capital market success. This upcoming bond issuance follows the company’s previous successful venture into the market in 2022, when it raised ₦34.5 billion through Series 1 of its ₦50 billion bond programme. However, this new ₦100 billion bond dwarfs its earlier attempt, making it not only the largest corporate bond offering in the palm oil sector but also among the biggest ever seen in Nigeria’s corporate bond history.
Strengthened by Robust Financials
With a credit rating of Aa from Agusto & Co. and A- from GCR, Presco’s strong financial profile has made it an attractive option for institutional and individual investors alike. The company’s decision to raise ₦100 billion comes amid a turbulent economic climate marked by high-interest rates and a volatile monetary environment in Nigeria.
Despite these challenges, Presco’s financial fundamentals for 2024 paint a picture of stability and growth. The company is expected to deliver triple-digit growth in net profit this year, buoyed by impressive returns on equity that place it among the top performers in Nigeria’s corporate sector.
“This is a bold statement of confidence in Nigeria’s capital markets,” said Ifeoma Okafor, a market analyst at Stockview Consult. “Presco has shown resilience even in tough economic conditions, and its financial strength makes it a standout player in the corporate space. Investors are likely to be drawn to its stability and potential for further growth.”
Corporate Bond Issuances in Nigeria: A Declining Trend
Presco’s bond issuance comes at a time when the Nigerian corporate bond market is experiencing a decline. In 2024, only ₦69.37 billion in corporate bonds were issued, a significant drop from the ₦126 billion raised in 2023. While some of Nigeria’s largest corporate players, including Dangote Group and MTN Nigeria, have made sizable bond offerings in the past, companies are increasingly turning to shorter-tenured commercial papers to avoid the risks associated with long-term bonds in a high-yield environment.
Dangote Group’s N112.42 billion bond issuance in December 2022 and MTN Nigeria’s N115 billion offering in September 2022 were part of a wave of large-scale corporate bond issuances in Nigeria. Yet, as 2024’s market figures suggest, the corporate sector is now more cautious. The trend of opting for commercial papers, which offer higher yields but come with shorter tenures, reflects the increasing apprehension around long-term bonds.
However, Presco’s decision to issue a ₦100 billion bond, despite these market conditions, sends a signal that confidence in the Nigerian capital markets is beginning to rebound. Many market experts believe that Presco’s successful bond issue could encourage other corporations to revisit the bond market in 2024 and beyond.
Presco’s Growth Prospects and Market Impact
The palm oil giant’s bold bond issuance also reflects its optimism about future growth. In the past few years, Presco has enjoyed remarkable profitability, driven by an increase in global demand for palm oil and its ability to maintain a competitive edge in both local and international markets. The company has also been focused on expanding its operations, including investments in new processing facilities and an expanded agricultural base to support its growing production needs.
With Nigeria’s agricultural sector poised for further growth, particularly in the palm oil industry, Presco’s strategic bond issuance could pave the way for more investments in infrastructure, equipment, and human resources. These investments will enable the company to meet rising demand, especially from key markets in Asia, where palm oil remains a vital commodity.
The projected impact of Presco’s bond issuance on Nigeria’s broader capital markets cannot be overstated. If successful, the offering will not only bolster Presco’s expansion plans but also help restore investor confidence in the country’s corporate bond market.
A New Standard for Corporate Bonds in Nigeria
The ₦100 billion bond offering is expected to set a new precedent for corporate bond issuances in Nigeria, particularly in industries like agriculture and commodities. By offering one of the highest yields in the market, Presco is positioning itself as an appealing investment option for a wide range of investors, from pension funds to individual retail investors.
“Presco’s decision to offer a yield range of 23.25% to 23.75% is indicative of how the company is trying to strike a balance between providing value for investors and ensuring its own long-term financial stability,” said Kelechi Okechukwu, a senior economist at Delta Investment Bank. “This bond could have far-reaching effects on how corporate bond offerings are structured in the future, both in terms of interest rates and tenures.”
With its bond offering, Presco is signaling that, despite the current challenges facing the Nigerian economy, the capital markets remain a vital channel for raising capital and driving growth in key sectors like agriculture. Its success could catalyze a shift back toward long-term bond issuances, particularly among companies with strong financial fundamentals like Presco.
