Fidelity Bank’s N41.21bn bond: A boost to economic growth- Unegbu

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COMFORT EKELEME, BUSINESS EDITOR

 

Managing Director/Chief Executive Officer, Maxifund Investments and Securities Plc, Mazi Okechukwu Unegbu has described the Fidelity Bank’s N41.21billion unsecured subordinated bond as a good development for the banking sector and the Nigerian economy at large.

 

According to him, the bond is a way of mopping up some of the excess cash in the economy, adding that excess cash leads to high rate of inflation.

 

Fidelity Bank Plc recently said it has successfully issued 10 years N41.21 billion in fixed rate unsecured subordinated bond at a 8.5 per cent coupon rate due in 2031.

 

Its Chairman, Mustapha Chike-Obi, while speaking on the significance and success of the bond issuance, said that the bond issuance further demonstrates the bank’s confidence in Nigeria’s debt market.

 

He said, “It also validates the continued investor confidence in our corporate strategy and aspirations, strong corporate governance structure and solid and stable executive management team with robust history of superior financial performance and returns.

 

Speaking with Daily Champion, Mazi Unegbu said there is market for the bond, which means that it was fully subscribed.

 

“What it means is that there is some excess money which is also leading to the inflation we are talking about. It also means that the economy appears to be very awashed with cash. No problem with that, the only problem I have is as long as people will trade on it, the best thing to do with the bond is to keep trading on it so that liquidity in the market will be assured,” he said.

 

He further predicted that inflation rate in the next couple of months may rise above 17 per cent, which he said would not be good for the nation’s economy.

 

The Fidelity Bank’s bond issuance which was fully subscribed given that total investor interest and commitments in the bonds were N56.6 billion, adds to the impressive portfolio of landmark transactions structured by the bank, and underscores its capacity to successfully execute debt capital market transactions.

 

“The transaction is a landmark achievement in the Nigerian domestic debt market for being the largest corporate bonds ever issued by a Nigerian Bank including the deposit money banks and merchant banks etc.”

 

In December, the bank had announced plans to issue fixed income securities with 10-year tenor to support the growth and development of Small Medium Enterprises (SMEs), Retail Business as well as its technology infrastructure. The bank conducted the debt issuance under its registered N100 billion bond issuance programme.

 

The bonds are unsecured and subordinated, which will qualify as Tier II Capital in line with the Central Bank of Nigeria (CBN) Guidance Notes on Regulatory Capital for commercial banks in Nigeria.

 

Chief Executive Officer of Fidelity Bank Plc, Mrs. Nneka Onyeali-Ikpe noted that proceeds from the transaction would be utilised to support growth in the issuer’s risk assets in Small and Medium scale Enterprises (SMEs) and retail business as well as investments in technology & retail infrastructure.

 

While noting that, this is in line with the bank’s Tier I aspirations.  Onyeali-Ikpe said, “our business fundamentals have remained strong despite the challenging economic environment occasioned by the coronavirus pandemic and the attendant recession.

 

“The successful bond issuance highlights the confidence in the Fidelity brand, as well as our capability to expand our funding sources, and deliver innovative financial services to our esteemed customers”, she added.

 

The issue was assigned a rating of A- by Agusto, and A by Datapro and will be listed on both the Nigerian Stock Exchange (NSE) and FMDQ Securities Exchange Limited.