Dangote Sugar

Dangote Sugar issues N100 billion commercial papers at 20.65%, 21.17% rates

Dangote Sugar Refinery is planning to borrow N50 billion in both Series 4 and 5 of its N150 billion Commercial Paper(CP)  Issuance.

This puts the total amount expected to be raised from the two series at N100 billion.

Series 4 of the company’s N150 billion commercial paper issuance program offers CPs with an 181-day tenor and a discount rate of 20.65%. While the Series 5 CPs have a 265-day tenor and are issued at a discount rate of 21.17%.

The offer which opened on May 16, 2024, will close on May 22, 2024, with settlement occurring on May 23.

Since Dangote Sugar Refinery’s N150 billion commercial paper issuance program was admitted to FMDQ on February 9, the company has raised about N99.01 billion in Series 1, 2, and 3.

In Series 1, N39.39 billion worth of the CPs were issued at a discount rate of 17.08% and a tenor of 266 days. For Series 2, N6.15 billion of the CPs were issued at a 19.81% discount rate and a tenor of 184 days. In Series 3, N53.47 billion worth of the CPs were issued at 21.30% and a tenor of 254 days.

High-interest rate business environment

Considering the further hike of the benchmark interest rate in Nigeria to 24.75%, lending to the real sector has become very expensive. This is highlighted by the attractive discount rates offered by Dangote Sugar in its commercial paper issuances.

Dangote Sugar’s commercial paper issuances offer discount rates of 21.3%, 21.17%, and 20.65% for Series 3, 5, and 2, respectively. The comparability of these rates to the returns on recently issued FGN Treasury bills makes these CPs a highly attractive short-term fixed income investment option.

While these returns are attractive to investors, they underscore a pressing issue for the real sector: the high cost of financing. As of May 20, 2024, Stanbic IBTC charges the manufacturing sector lending rates as high as 50%, while banks like FCMB offer loans to the sector ranging from 23% to 40%.

In a fiscal year when players in the manufacturing sector have been hit with harsh operating conditions such as hiked energy costs, net losses due to their FX exposures and heightened inflation, having the cost of borrowing as high as 40% or 50% is a significant challenge.

Facing a challenging borrowing environment from banks, many businesses are turning to the fixed-income market for alternative financing. However, to remain competitive in this market, discount rates must reach as high as 20%, presenting another challenge for businesses.


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