Your Roadmap to Financial Security
Start your wealth journey with us today
Partner with Coronation’s team of financial experts to make smart choices to preserve and grow your wealth.
Are you looking to make your ₦5 million work harder for you?
If you have this amount ready to invest in a reliable asset, this blog highlights an opportunity you might miss. Click here, and we’ll contact you with more details.
Investors looking for safe, short-term options for their ₦5 million (or more capital) are usually only familiar with traditional investment opportunities and haven’t considered commercial paper a viable alternative.
“In this guide, you’ll be introduced to commercial paper—what it is, how to subscribe, its unique benefits, potential risks to be aware of, and how Coronation Securities ensures security throughout your investment journey.
What is Commercial Paper?
As an investor looking to maximize returns while managing risk, you’ve likely explored various options for your portfolio. But there’s one powerful instrument you may have overlooked: Commercial Paper.
Commercial Paper (CP) is a short-term debt instrument issued by large corporations and financial institutions to cover immediate operational needs. When you invest in CP, you’re essentially lending money directly to these established companies for a short duration—typically between 179 and 270 days, or even less, in exchange for interest rates that often exceed those of traditional bank deposits. Find examples of CP issued by companies through Coronation Securities below.
CP provides competitive yields and liquidity unlike long-term investments that lock up your capital for years. By subscribing to a CP, you’re becoming a short-term lender to corporations with strong credit ratings, and in return, you receive your principal plus interest upon maturity.
Why Consider Commercial Paper?
What makes CP intriguing is its sweet spot in the risk-reward spectrum. While bank deposits offer security but minimal returns, and stocks provide higher potential returns with volatility that you may be unable to handle, Commercial Paper occupies that valuable middle ground, offering yields higher than treasury bills with marginally increased risk.
For investors with capital (₦5 million and above), CPs represent an opportunity to put idle funds to work without the commitment of long-term investments or the volatility of equity markets.
Perhaps most compelling is the customization available. Companies issue CP with various maturity dates, allowing you to align your investments with your cash flow needs—whether that’s 90 days or 270 days from now.
Investment Choices: Commercial Paper Offers
Moreover, investing in CP provides several strategic options:
- Diversification of Short-Term Holdings: Rather than keeping all your liquid assets in savings accounts, CP allows you to diversify your short-term portfolio while maintaining accessibility.
- Tactical Rate Advantage: CPs typically offer 2-4% higher yields than comparable bank deposits, significantly enhancing returns on your working capital.
- Maturity Laddering: By spreading investments across CPs with different maturity dates, you can create a rolling stream of returns while maintaining consistent liquidity.
- Issuer Selection: You can choose to invest in CPs from specific industries or companies you understand and trust, giving you greater control over your investment exposure.
- Inflation Hedging: In periods of rising inflation, the higher yields from CP can help protect the purchasing power of your short-term capital.
Common Obstacles to Commercial Paper Investment
Despite these advantages, many investors hesitate to venture into Commercial Paper due to several barriers:
- High Minimum Investment Thresholds: Most CP offerings require minimum investments of ₦5-20 million, putting them out of reach for many individual investors. However, if you can’t afford a CP, click here for other investment options.
2. Market Access Challenges: Coronation Securities will grant you access to the market. Even though the CP market primarily caters to institutional investors, making it difficult for individuals to identify and access attractive offerings.
3. Due Diligence Requirements: We will adequately evaluate issuer creditworthiness, which requires sophisticated financial analysis and access to information not readily available to individual investors. Coronation Securities is here to support you and help you subscribe to genuine CPs.
4. Administrative Complexity: Again, we will handle all administrative complexities. The subscription process involves paperwork, compliance requirements, and settlement procedures that can be daunting without professional guidance.
5. Liquidity Concerns: Click here if you have liquidity concerns. While CPs have defined maturity dates, selling them before maturity can be challenging without established secondary market connections.
How Coronation Removes These Barriers
This is where Coronation transforms your CP investment experience:
- Pooled Investment Access: We enable investments starting at ₦5 million by pooling resources, allowing you to access premium CP opportunities previously available only to institutions. Because the asking price of a commercial paper is usually high, out of the reach of many, like 10 billion naira per commercial paper, as seen in the example above:
2. Market Intelligence: Our dedicated research team continuously analyzes the CP market, identifying the most attractive opportunities based on yield, issuer quality, and maturity.
3. Rigorous Due Diligence: We conduct comprehensive credit analysis of all issuers, ensuring your investments are directed only to companies with strong fundamentals and repayment capacity.
6. Streamlined Process: Our digital platform simplifies the entire subscription process—from initial investment to maturity—eliminating paperwork and administrative hassles.
7. Liquidity Solutions: Should you need funds before your CP matures, our extensive market connections can help facilitate early liquidation options.
8. Portfolio Advisory: Our experts provide personalized guidance on how CP can complement your existing investments, optimizing your overall portfolio performance.
The Potential Outcomes
By incorporating Commercial Paper into your investment strategy through Coronation, you can expect:
Enhanced Yields: Typically 2-4% higher returns compared to traditional bank deposits of similar tenure.
Capital Preservation: Investment in highly-rated issuers minimizes principal risk.
Liquidity Management: Better alignment of investment maturities with your cash flow needs
Portfolio Efficiency: Improved overall returns without significantly increasing risk profile
Financial Flexibility: Access to funds at predetermined dates without depending on market conditions
With your ₦5 million, you can invest in Commercial Paper, enjoy short-term profits, and elevate your portfolio performance while maintaining the security and liquidity you require.
Contact our investment advisors today to begin your journey into this sophisticated yet accessible market.
Access more lucrative investments HERE
🆔Olufunke Sadiku
📧SadikuO@coronationsl.com
📞08080472681
🆔Alice Sunday
📧SadikuO@coronationsl.com
📞08130956444
Related Posts
How to Grow Your Investments This Year
Investment trends constantly change, and successful investors know that positioning their portfolio for growth requires more than just picking promising Read more
Third Party Motor Insurance: How to Stay on the Safe Side of the Law
The announcement by the National Insurance Commission (NAICOM) that Nigeria will commence full enforcement of third-party motor insurance on February Read more
How Investment Taxes Work in Nigeria: What Every Serious Investor Should Know
You have worked hard to build your wealth. As an investor, chances are your investment portfolio is not sitting idle—it’s Read more
Fixed Income Investing in Nigeria: How and What You Need to Know
In the latest episode of Coronation Conversations, Gbemisola Adelokiki is joined by investment expert Somkene Jipreze to discuss fixed-income investing. Read more
