Nigerian Breweries establishes new US$275.2m ‘Commercial Paper’ programme

NIGERIA – Nigerian Breweries Plc, a subsidiary of Heineken N.V. Group has set up a US$275.2 million Commercial Paper (CP) programme to complement other sources of working capital, while diversifying its funding sources to include non-bank investors, the Guardian has reported.

The programme would be issued in tranches or series with specified amounts, dates, discounted values, coupon, interest rates, within specific maturity periods as will be determined by the company.

According to the company, the programme aims to improve the company’s ability to periodically access funding at rates mirroring the money market.

This is the second of such a programme launched in October 2015 in an effort to demonstrate its innovative approach towards executing the company financing strategy.

At the time, it was termed as the largest Commercial Paper programme to be established in Nigeria by a (non-financial institution) corporate issuer since the 2009 guidelines on Commercial Paper from the Central Bank of Nigeria (CBN).

Expansion at the helm of competition

The company also announced it had accepted a US$27.5 million seven-year loan from the Bank of Industry Limited (BoI) in addition to a US$13.3m working capital over a period of three years.

The long term will be used to finance the procurement of plant and machinery for the expansion of the company’s breweries.

This comes in the middle of fierce competition in the brewing industry dominated by subsidiaries of foreign brewing giants who have been making significant investments in the country.

For instance, International Breweries, a subsidiary of AB InBev, the world’s largest brewery consolidated its three breweries in Nigeria under one business entity at the end of last year.

AB InBev said it expected its new US$250 million brewery, said to be the second largest in Africa, being built in Sagamu, Nigeria, to start production in the middle of this year.

In the middle of the just completed FIFA World Cup, the brewers including Nigerian Breweries Plc, Guinness Nigeria Plc and International Breweries Plc came out to increasing their market spend to increase market share.

Nigerian Breweries reported a five-year compound annual growth rate of 6.4% in revenue in its 2017 financial statement helped by acquisitions, introduction of new products and positive impacts of price inflations.

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