…Only major bank to issue Commercial Papers in past 3-Years
…Access Bank trades at lowest valuation compared to peers
Access Bank, a wholly owned subsidiary of Access Holdings Plc is in the market to raise up to N194 Billion as part of its Series 3/4 Commercial Papers (CP) Issuance, a situation that is raising liquidity fears and worries about possible financial weakness on the part of the Tier-One Bank by investors.
Access Bank is paying up steeply for the CP cash as the 180 Day Commercial paper has an implied yield of 19.45% while the 270 Day Commercial Paper has an implied Yield of 24.75%, according to the Pricing Supplement for the Offer seen by MoneyCentral.
“The net proceeds from each issue of Notes will be used to support the Issuer’s short-term working capital and its lending activities, or as may otherwise be described in the Applicable Pricing Supplement,” Access Bank said.
The problem with this investor’s told MoneyCentral is that Commercial Banks don’t usually go the Commercial Paper route to raise short term liquidity as they usually get access to cheap funding via huge deposit base that commercial banks rely on.
For instance, as of Q3 2024, Access Bank posted total assets of ₦40.6 trillion, of which ₦11.9 trillion were in loans and advances to customers and ₦22.3 trillion in customer deposits, according to the bank’s most recent financial statement.
Only Access Bank Has Issued CP among major Lenders in 5-Years
Commercial papers (CP) are short-term debt instruments (up to 270 days) issued by corporations to raise quick cash, and in Nigeria, they’re mostly tracked by the FMDQ Exchange, with oversight from the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC).
Analysis of Commercial Paper Issuance in Nigeria from 2020 – 2025 shows the largest issuers were Dangote Cement with N281.79 billion total by 2024 under a N300 billion program (expanded from N150 billion in 2021), MTN Nigeria Communications Plc, N375 billion in 2023, N127 billion (Series 1 & 2) in 2022, N52.8 billion (Series 8 & 9) earlier.
Other major issuers were Flour Mills of Nigeria, Nigeria Breweries, UACN, C & I Leasing and Mixta Real Estate, among issuers that were largely no-financial firms.
The data shows that Access Bank was the only commercial bank to issue Commercial Paper over the past 5-years, showing how rare it was for deposit money banks to do so.
Access to CBN Discount window and Interbank market
Big tier-one commercial banks have massive deposit pools and access to Central Bank of Nigeria’s (CBN’s) discount window or interbank markets for short term liquidity needs.
“The big banks are less desperate for CPs unless they’re dodging high borrowing costs or need a specific liquidity jolt. Their funding is already cheap and steady,” one banking Treasury source told MoneyCentral.
The interbank rate in Nigeria, as reported by the Central Bank of Nigeria (CBN), is the rate at which banks lend to each other, and it’s a key indicator of the short-term money market conditions.
On March 20, 2025, the interbank rate was 30.16 percent.
Meanwhile the CBN has lifted its suspension on banks borrowing from its Standing Lending Facility (SLF) and set the lending rate at 31.75%, allowing authorized dealers access to the SLF and Intraday Lending Facility (ILF).
Sources tell MoneyCentral that while these rates are marginally higher than the 270 DAY Commercial Paper on offer by Access Bank, most banks would still prefer to use the CBN Intraday Facilities or Interbank market than issue CPs which lock in longer tenors which would be more expensive source of liquidity for them over time.
Regulatory and Market Dynamics
While some Merchant Banks have issued commercial papers (CPs) in Nigeria over the past five years (2020–2024) such as NOVA Merchant Bank, Coronation Merchant Bank, FSDH Merchant Bank, and Rand Merchant Bank, analysts MoneyCentral talked to said those were largely due to their small balance sheets size as well as the fact that they are non-deposit-taking institutions, that focus on corporate finance, advisory, and short-term lending.
“Commercial Banks issuing CPs is an anomaly and Merchant Banks do it because they don’t have the deposit base of commercial banks,” another banking source told MoneyCentral.
“Issuing CPs by Commercial banks could signal weakness to depositors or regulators, who expect them to self-fund via deposits or CBN facilities or the N1 trillion daily repo market.”
Basel III compliance also pushes deposit money banks toward long-term bonds for Tier-2 capital, such as Eurobonds, as opposed to short-term CPs.
Access Bank South Africa Credit Ratings Withdrawn as Losses Mount
GCR Ratings (GCR) last week withdrew the national scale, long and short term issuer credit ratings of Access Bank (South Africa) Limited without review.
The withdrawal was due to analytical reasons as GCR said it has not received adequate information from Access Bank (South Africa) Limited to meet the rating agency’s standard information sufficiency requirement.
“Therefore, the issuer credit ratings cannot be sustained, meaning GCR no longer supports any previously assigned ratings,” GCR said.
Its Limited issuer credit ratings were last reviewed by GCR in June 2024.
Despite capital injections of Zar1.4bln (N115 billion) by Access holdings, since its acquisition of Access Bank South Africa in 2021, persistent losses have continued for the subsidiary.
GCR had forecast a financial loss at year end 2024 for Access Bank South Africa, after the firm recorded losses in 2023.
Capitalisation was expected to deteriorate in the short to medium term and Access Bank South Africa would have to return to shareholders or the market to increase capital soon, according to GCR.
Access Bank South Africa Limited is the 24th (out of 30) largest regulated banks in South Africa, with a market share across assets, loans and deposits of less than 0.1%.
To increase its market share, Access Bank Plc offered to acquire Bidvest Bank Holdings Ltd., for about 2.8 billion rand ($159 million) to help Nigeria’s biggest lender by assets expand in South Africa.
The credit rating withdrawal by GCR does not imply that the entity is not servicing its debt obligations or that its financial position has deteriorated, but rather that it has failed to provide important information pertaining to its credit profile.
N12.76 trillion Claimed Against Access in Lawsuits
Access Bank is involved in 1,846 (One thousand, Eight Hundred and Forty-Six) cases, of which 1,843 of the cases were instituted against the Issuer (Access Bank), while the other 3 cases were instituted by Access Bank, in terms of claims and litigation in which it is currently engaged, as of 31 December 2024, according to the Law firms Wigwe & Partners and Aluko & Oyebode who signed documents as part of the Offer Memorandum.
The total amount, including general damages, claimed against the Issuer in the 1,843 cases instituted against the Issuer is N12,763,485,411,444. (Twelve Trillion, Seven Hundred and Sixty-Three Billion, Four Hundred and Eight-Five Million, Four Hundred and Eleven Thousand, Four Hundred and Forty-Four Naira.
The law firms said they were o the opinion that the aforementioned cases, would not adversely affect the Issuer’s obligations under the Transaction however they also noted that: “We cannot and do not express any opinion concerning the credibility of the cases in the Litigation Portfolio, and in particular the chance of success of any of the cases against o by the Issuer.”
Access Bank exposed to execution risk for overextended acquisitions
Access Bank is exposed to cross border execution risk for its numerous acquisitions in Africa and beyond as it seeks to strengthen its franchise with geographic diversification. In the financial year ended 31 December 2023, Access Bank Plc added two subsidiaries in Angola and France to the Group and the customer base was expanded to 60 million.
“Access Bank has a record of integrating domestic acquisitions, but the large number of cross border acquisitions creates execution risks and may pressure financial metrics,” said Fitch Ratings.
Augusto & Co for its part noted that its “Aa” credit rating of Access Bank for the Offer is suppressed by the fragile economy, elevated cost profile (relative to other tier-1 banks) and challenging operating environment in most African countries that Access operates in.
Investors not buying Access Banks growth Story
Investors are not buying the Access Bank growth story just yet, and the move to raise commercial papers despite its much cheaper deposit funding base could further dent investor confidence.
Access Bank is the Cheapest Tier-One Bank on a Price-to-Book basis, trading at 0.25 book value, according to Bloomberg data.
It also has the worst one year return and worst Year-to-Date return among the 5 Tier-One banks returning -7.3% as at Friday March 21st (see chart).
A low price-to-book (P/B) ratio in banks, especially that which is well below 1, often suggests investor concerns about the bank’s health, profitability, or shareholder value, potentially leading to a higher cost of capital if the bank needs to issue more equity.
