Afrinvest Securities Limited today announced that Dangote Sugar (DSR) is issuing N50 billion Series 6 and 7 commercial paper under its ₦150bn Commercial Paper Issuance Programme. The offer opened today and is closing on Thursday, 12 December 2024. Dangote Sugar is Africa’s largest sugar refinery, with a combined installed refining capacity of 1.49 MMT per annum. It supplies sugar to wholesalers and manufacturers in the the skin care, food and beverage, and pharmaceutical industries.
High-Yield Investment Opportunity
The offering is divided into two series with attractive returns:
- Series 6: A 180-day tenor with a discount rate of 24.99% and an implied annual yield of 28.50%, maturing on June 11, 2025.
- Series 7: A 270-day tenor with a discount rate of 24.55% and an implied annual yield of 30.00%, maturing on September 9, 2025.
Investors can participate with a minimum subscription of ₦5 million and additional increments of ₦1,000. The offer opens on Friday, December 6, 2024, and closes on Thursday, December 12, 2024, with settlement scheduled for Friday, December 13, 2024.
Purpose of the Offer
Dangote Sugar aims to use the proceeds to meet its short-term working capital needs and other funding requirements. This move highlights the company’s proactive approach to sustaining operations and maintaining its leadership position in the Nigerian sugar market.
Why This Matters
With annual implied yields of up to 30%, this commercial paper programme offers a quite attractive short-term investment returns in the Nigerian market. It also underscores the confidence institutional and high-net-worth investors place in Dangote Sugar Refinery’s financial stability and operational efficiency. The high level of yields present an opportunity to hedge against inflation and earn significant returns in under a year.
The launch of Dangote Sugar commercial paper offer demonstrates the dynamism of Nigeria’s corporate bond and commercial paper market, providing avenues for companies to raise capital while offering investors competitive returns. Dangote Sugar Refinery’s strong financial performance ensures this offer will attract significant interest from market participants.
While Dangote Sugar Refinery is a highly rated issuer, holding A+ ratings from Agusto and DataPro, investors should remain mindful of the broader economic environment. Factors such as potential interest rate fluctuations and macroeconomic uncertainties could impact the relative attractiveness of the investment.
That said, with Nigerian treasury bills currently offering 22.93% interest, the implied yields on the Dangote commercial paper, reaching up to 30.00%, make it a very compelling option for investors seeking higher returns in the short term.
The minimum investment amount of ₦5 million makes the Dangote Refinery commercial paper inaccessible to smaller investors; only high net worth and institutional investors can participate in the programme.
What is a Commercial Paper?
A commercial paper is a short-term investment instrument that companies use to borrow money from investors. It is often used to meet immediate funding needs, such as paying for raw materials or managing operational costs
