SEC sets July 1 for submission, processing of applications for CPs issuance

The Securities and Exchange Commission (SEC) has notified all capital market stakeholders and prospective issuers that the submission and processing of applications for the issuance of Commercial Papers (CPs) would commence on July 1, 2025.

This development according to the SEC is in line with the “Rules on Issuance of Commercial Papers” issued on December 23, 2024.

“Accordingly, all applications for the issuance of commercial papers, are required to be filed with the Commission for prior review and approval through the Commission’s e-portal,” SEC said in June 25 notice.

Commercial Paper (CP) are unsecured promissory notes with a maturity of not less than 30 days and cumulatively not more than 364 days, including rollovers, the SEC noted.

The short-term debt instruments are issued by credit-worthy companies to meet immediate financial obligations such as operating expenses or supplier payments.

Instead of securing loans from banks, companies raise funds directly from investors by issuing CPs.

Commercial papers (CPs), long favoured by large corporations and institutional investors, are now gaining traction in Nigeria and other emerging markets as savvy individuals and businesses seek more effective ways to manage idle cash.

With the potential for significantly higher short-term returns compared to traditional options like savings accounts or fixed deposits, CPs are becoming a compelling component of modern investment strategies.

Read also: A review of the investment and securities act 2025

Eligibility…

SEC in its new rules set out the eligibility criteria for prospective Issuers of CP, saying that, “Where the commercial paper is to be issued by an SPV, the promoters of the SPV shall be required to meet the eligibility criteria set out below: the Issuer shall be a company duly incorporated under the CAMA or other enabling law; the Issuer must have been in operation for a minimum of five (5) years; the Issuer shall have three (3) years audited financial statements, the most recent being not older than nine (9) months from the Issuer’s last financial year end”.

The rule also requires that a Management Account be signed by the Chief Executive Officer (CEO) and the Chief Finance Officer (CFO) “filed under oath may be accepted where the Issuer’s latest audited Account has become stale. Provided that where CPs are to be issued to retail investors, the issuer’s latest audited account shall be current and valid; and where the CPs are to be issued to retail investors, the Issuer’s shareholders’ funds (unimpaired by losses) shall not be less than N500million as certified by its auditors and reflected in its latest audited financial statement, and shall be maintained at or above that level for the period any of its CPs remain outstanding.

Also, SEC rules said that where the CP is guaranteed, the Issuer shall hold an approved credit or a comparable agreement with the guarantor; issuers shall attain a credit rating of investment grade from a rating agency registered with the Commission; no Issuer shall offer CPs if it is currently in default of payment of interest or repayment of principal in respect of any existing debt issuances; where the Issuer does not meet the eligibility requirements stipulated above, the CP issuance shall be backed by a guarantor or such other credit enhancement provider that meets the eligibility requirements; such other eligibility criteria as may be prescribed by the Commission from time to time.

Conditions for CP Issuance…

Also, SEC rules require that all CPs proposed to be issued shall first be approved by the Commission.

“The credit rating of the CP shall not be below investment grade; the maturity date of all outstanding CP issues shall fall within the validity period of the Issuer’s rating filed with the Commission. Where the rating will expire prior to the maturity of the CPs, the Issuer shall provide an extended or renewed investment-grade rating, no later than five (5) business days prior to the

expiration of the initial rating; and CPs shall be issued or sold to qualified institutional investors, high net worth individuals and retail investors; offerings of CPs by way of a private placement shall not exceed five (5) working days from the date the issue opens for subscription. “Any unsold portion of the issue after five (5) working days of its opening for subscription shall not be issued,” SEC said.

“For a public offer, the offer period shall not exceed ten (10) working days; issuers of NICPs shall in addition to these rules, comply with all relevant laws, Shari’ah rulings, principles and standards as issued by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), or other standard setters, recognised by the Commission,” the SEC rules noted among many others.