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30th May 2020

Nigeria's capital market leader in innovation financing solutions

The aftermath of the global financial crisis that shook the world market has engendered the need for creativity, innovation and localisation of market financing solutions for different markets around the world to recover and thrive.

Across the globe, advanced economies have taken to different models of financing for economic growth and development. Developing economies, in particular, are severely challenged economically, and must strategically harness and deploy the best financially savvy minds and skills available to them, in order to record continuous and lasting economic growth.

In Africa, some economies have reinvented and positioned themselves for better economic growth and development. Stories abound about what the likes of South Africa and Rwanda are doing to drive their economies and boost both foreign & local direct investment. The economy of Nigeria has been acutely challenged in recent times. After the rebasing of the GDP, there came a recession that nearly brought the market to its knees. Although Nigeria is said to be technically out of recession now, the economy is yet to fully recover from the effects of the recession.

Building Nigeria's future

For Nigeria’s economic recovery, and for growth and development to become a true reality that trickles down to its citizens, several forces will be required to make various contributions. Investment banks and finance houses will have a crucial role to play. This is where DLM Capital Group comes in as a developmental investment bank that thrives on financing sectors of the Nigerian economy using innovative techniques such as securitisation. The firm provides general full-service investment banking products via bespoke corporate finance advisory, trustee, asset management, nominees, and securities trading to sovereign/sub-sovereign entities as well as private & non-private corporations.

DLM Capital Group takes a special interest in crafting financing strategies & solutions for micro-finance banks, asset financing, agricultural, infrastructural, power, energy, oil & gas and mining sectors of the Nigerian economy. DLM Group is regarded as a market leader in providing best-in-class deal structuring and execution of advisory and capital raising services in the Nigerian capital market.

Over the years, the firm has launched and completed several novel financing transactions in Africa and Europe. Its subsidiaries have demonstrated expertise across the following five core focal points:

  • 1. Financial Advisory and Restructuring
  • 2. Debt & Equity Capital Raising
  • 3. Underwriting
  • 4. Mergers & Acquisitions
  • 5. Set-up & other Advisory Services

Financial firsts in Nigeria

In recent years, DLM Capital Group, through its DLM Advisory Partners (DLMAP) subsidiary, originated the first and second future flow securitisations in Nigeria. The concept of securitisation remains a new financing technique in the Nigerian debt capital markets (DCM), although it is already widely used in many other countries. This funding mechanism as well as others, constitute the non-traditional forms of innovative financing which Nigeria must fully explore to accelerate & sustain its economic growth and development.

Securitisation as a financing technology needs to be prioritised in the Nigerian markets as a viable capital-raising alternative for business entities.

The advantage of this funding model is that it enables businesses to access capital, based on the strength of future predictable cashflows.

Future flow securitisation

The execution of a future flow securitisation provides a business with the capital needed to accelerate growth and significantly scale up. The repayment happens over the longer term, based on future cash flows. A typical future flow financing process is characterised by a company issuing debt instruments to investors and repaying the principal and interest on the loans obtained, through the assignment of predictable future cash receivables generated from its normal course of operations. It is crucial to note that the repayment of debt is largely determined by the inflow of cash receivables, but the success of the future flow securitisation transaction is dependent on the continuing operations of the business.

This funding mechanism has recorded significant use in many countries and the current global indices suggest that it is only going to keep growing. In Nigeria, the first successful future flow securitisation transaction in the debt capital market was undertaken by CERPAC Receivables Funding SPV Plc in 2017, with the securitisation of the Combined Expatriate Residence Permit and Alien Card (CERPAC) receivables due to Continental Transfert Technique Limited (CTTL); a deal arranged by DLM Advisory Partners (DLMAP). CERPAC is the Combined Expatriates Residence Permit and Alien Card (CERPAC) scheme in Nigeria, managed by Continental Transfert Technique Limited (CTTL), who serve as technical partners to the Federal Government of Nigeria on the project. CTTL specialises in secure systems integration, particularly in automated systems for e-governance and the authentication of people, objects and documents, leveraging expertise in biometric technology.

In 2017, DLMAP, on behalf of the company, launched a ₦25 billion (equivalent to US $69 million) future flow securitisation financing programme, backed by future receivables from the CERPAC scheme.

The second future flow securitisation transaction in Nigeria, also facilitated by DLMAP for Primero Transport Services Limited (TSL), involved the listing of a ₦16.5 billion (roughly US $45 million) BRT tickets receivables securitisation. Primero TSL, a major player in Lagos State of Nigeria’s transportation sector, under the Bus Rapid Transit (BRT) scheme, needed to engage in medium-term financing to increase its capacity to bridge the transportation infrastructure gap and meet the needs of the populace in Lagos, Africa’s busiest city.

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Nigeria's future