Skye Bank to float N100bn commercial paper to boost liquidity
Skye Bank Plc. has concluded arrangements to float N100 billion commercial paper (short term monetary instruments) in order to boost its liquidity. The commercial paper would be traded on the secondary market under the platform of FMDQ Over the Counter OTC.
The Managing Director/CEO, Skye Bank Plc, Mr. Timothy Oguntayo, who disclosed this at the signing ceremony of the Commercial Paper programme of the planned N100 billion said “The bank will issue the commercial paper in tranches starting with a N20 billion 90-day fixed income that will be offered to domestic institutional investors in a sale closing March 27, 2015. The instrument will be traded on the FMDQ platform so that it would allow investor who wants to exit to do so.”
According to him “It is one way the bank will boost liquidity other than deposits. Liquidity is the blood of a bank; hence remains a challenge to the banks due to tight regulatory requirements such as the increase in public and private sector cash-reserve ratios. We are always in need of liquidity either for transactions or capital.”
He further explained that the commercial paper to be floated is an alternative instrument needed to boost liquidity and not capital. “We already have adequate capital” he noted.
Speaking as well, the Chief Executive Officer, Stanbic IBTC , Mr.Yinka Sanni said “ We commend Skye Bank for giving us the opportunity to package this transaction. Stanbic IBTC is the adviser as well as agent of the bank in this commercial paper instrument. It is a landmark transaction as it is the second bank to do the commercial paper after 2009 when CBN abolished it.
Skye, which has $6.8 billion of assets, joins Nigerian lenders including Access Bank Plc in raising capital amid measures imposed by the Central Bank of Nigeria, CBN to bolster the naira. The CBN last year increased lenders’ cash-reserve requirement for public sector deposits to 75 percent from 50 percent and private sector deposits to 20 percent from 15 percent.
The yield on Skye Bank’s initial fixed income sale will probably be 75 basis points to 100 basis points above similar-maturity government debt, said Oguntayo. Yields on Nigeria’s three-month Treasury bills fell 96 basis points to 14.21 percent on Monday, according to data compiled by Bloomberg.
The regulator in 2013 named eight lenders as systemically important and said they needed capital adequacy ratios of at least 16 percent.
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