Nigerian firms saw 200% CP uptick
Companies across the globe raised $565.2 billion in 2023, which was $40 billion less than the 2022 performance, a new report by Stocklytics says.
The report indicates that after the venture capital boom during the COVID-19 pandemic in 2021, the global capital raising market started showing signs of weakness in 2022. The downturn continued last year with high inflation, rising interest rates, and the gloomy economic outlook spreading fear and making investors less likely to invest.
Compared to 2022, global capital raising dropped by $40 billion or seven percent (7%), according to the report. However, the two-year drop is even bigger, statistics indicate that since 2021, global capital raising plunged by $118.4 billion or 17 percent. Most of that drop came from traditional venture capital (VC) services.
Statista data show the traditional capital-raising segment has seen a downturn for the past two years, with the total value of fresh capital falling from $618.2 billion in 2021 to less than $500 billion last year. On the other hand, digital capital raising, including crowdfunding, crowdinvesting, crowdlending, and marketplace lending, has grown in this period, with the total value of capital going from $65.4 billion to $66.3 billion.
Capital raising dropped by 17% in 2 years
According to a Statista survey, 2023 was not particularly a good year for capital raising, with companies across the globe finding it much harder than before to get fresh capital. Investments are a core pillar of economic growth, and easy access to fresh capital allows companies to develop new technologies and hire more workers.
Last year, companies raised $565.2 billion to launch, finance, and grow a business or a project. This included money from traditional VC services for startups and emerging companies and digital capital raisings like crowdfunding, crowd investing, crowdlending, and marketplace lending. Although more than half a trillion dollars sounds like a lot, this represents a significant decrease from the capital companies raised in years before.
Average deal size dropped by 25% since 2021
The Statista survey showed the average dollar investment per deal had also significantly dropped over the past two years. In 2021, the average deal size was more than $14.7 million. Since then, this figure has fallen by almost 25 percent to $11.1 million last year.
In global comparison, the US capital raising market, as the largest globally, has seen the biggest downturn, with the total amount of fresh capital falling by 20 percent in two years to $299.5 billion in 2023. The Chinese market saw a 12 percent drop in this period, with the total value of raised capital falling from $148.6 billion to $133.2 billion.
Nigerian firms raised N807bn in 200% CPs uptick
However, some Nigerian companies raised N807 billion via commercial papers (CPs) issuance in 2023. This is despite the country’s biting economic quagmire, which has seen annual inflation rising to 28.92 percent by December of same year, with food prices a key contributor. The Nigerian companies, in an attempt to meet their working capital requirements and fund future expansion plans, tapped the debt market, as the issuance of commercial papers in the country surged by 200 percent as of November last year, according to data from FMDQ group.
There were 124 commercial paper issuances valued at N807 billion, compared to only 73 issuances with a total value of N251 billion in the full year 2022.
Commercial papers (CPs) are money-market securities issued by large corporations to obtain funds to meet short-term debt obligations like payroll. These funds are backed only by an issuing bank or company’s promise to pay the face amount on the maturity date, which is usually in 270 days or less.
The short-dated nature of CPs provide comfort for issuers to refinance and raise new capital while navigating uncertainty in the period, according to financial analysts at Afrinvest Securities Limited.