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Commercial Papers

Commercial Papers?

Commercial Papers (“CPs”) are short-term debt instruments issued by corporates to get funds from the public (private individuals, institutional investors, non-governmental organisations, religious bodies etc.) to meet short-term obligations. These large corporations are the main issuers of Commercial Papers because they have high credit ratings.

A CP pays a fixed interest rate to the investor. Also, it is generally sold at a discount to its face value due to the somewhat risky nature of the unsecured security. Typically, maturities on Commercial Papers rarely last longer than 270 days. 

The minimum investment amount for Commercial Papers on i-invest is N50,000.

Advantages of Commercial Papers

  • Low minimum investment amount – invest from as low as N50,000 and enjoy access to relatively high return on investment 
  • Fixed return on investment –  you get to earn your interest upfront (discounted value) at the point of purchase while the invested amount (face value) is paid fully at maturity
  • Duration – short to medium term investment (duration of 15-270 days)
  • Low risk of default – the companies that issue commercial paper are large, creditworthy corporations and the paper often gets ratings from ratings agencies. As a result, there is a low risk of you losing your investment.
  • Investment portfolio diversification – commercial papers are an effective way to diversify investment portfolio and balance higher-risk investments like stocks.
  • Tax free

How do Commercial Papers work?

Commercial Papers are sold at a discount, meaning the investor pays less than the face value of the security, and the rate of return is the difference between the purchase price and face value. Companies typically write commercial paper in minimum denominations of thousands with terms ranging from 15 to 270 days, though the average maturity on commercial paper is around 30 days.

While commercial papers in Nigeria are typically issued by corporates with remarkable credit ratings, this does not eliminate credit risk. However, commercial paper offers investors the opportunity to purchase better yielding instruments than available on risk-free instruments, especially investors who can take calculated risk.

How to Buy Commercial Papers?

  1. Download the i-invest app on the App Store or Google Play Store or sign up on this website.
  2. Register with your BVN, phone number and a valid email address.
  3. Fund your wallet via internet banking, card or in a bank branch. Wallet withdrawals can be made directly into an account linked to your BVN.
  4. Select your preferred investment option and watch your money work for you!
  5. Be sure to upload a passport photograph, recent utility bill and a valid means of identification for KYC verification.

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