As the competition for sector-wide recapitalization heats up, five early-bird banks that applied for capital on the Nigerian stock exchange have raised almost N1.27 trillion.
This suggests that investors are still optimistic about the equities of Nigerian banks. Even the windfall tax levied by the government on banks’ foreign currency (FX) earnings in 2023 wouldn’t stop equity investors from buying more shares or increasing their holding in the institutions.
Some banks have started using the stock market to raise money since the announcement of the banking recapitalization exercise on March 29, 2024. Out of them, five have ended and one is still going on.
Among the banks are Zenith Bank (N289.1 billion), Fidelity Bank (N127.1 billion), GTCo (N400.5 billion), Access Holdings (N350.1 billion), and FCMB Group (N110.9 billion).
Additionally, after completing a $50 million private placement capital transaction, Sterling Financial Holdings Company is listed for N153 billion. Some of these institutions reported oversubscriptions among those that raised the targeted N1.277 trillion.
“The resilience and overall economic strength of the banking sector can be strengthened by adequately capitalized banks, which can facilitate larger transactions and complex business ventures,” stated Jibola Odedina, managing director and chief executive officer of Coronation Securities Limited.
Because capitalization necessitates that banks maintain adequate cash as a safety net against financial downturns, Coronation Securities sees the bank capitalization program as a timely accelerator for economic growth.
“Nigerian banks in all license categories face a significant capital deficiency, ranging from 35% to 90% of the new minimum requirement. This industry-wide shortfall amounts to around N4.2 trillion (KPMG, 2024).”
“The banking industry must close this gap in order to continue serving as a catalyst for economic expansion, which will benefit all parties involved. Nigerian banks will be able to compete with their African competitors more successfully with a capital infusion. Nigerian banks would be able to compete internationally thanks to recapitalization. No Nigerian bank now has capital that is in the highest tier,” Odedina added in a recent commentary.
In an effort to strengthen the Nigerian financial services sector and stimulate the country’s economy, the Central Bank of Nigeria (CBN) started a recapitalisation program in March that requires commercial banks to raise new capital in accordance with the minimum requirements for their individual banking licenses. The recapitalisation must be finished between April 1, 2024, and March 31, 2026, which is a 24-month period.
With a combined rights issue and public offer of N127.1 billion, Fidelity Bank was the first to join the market and got the approval of shareholders well before the CBN announced the recapitalization exercise. About two weeks after the offer’s expiration on August 12, the bank revealed that it had exceeded its N127.1 billion goal, raising the possibility of an oversubscription.
In an email to investors, Fidelity Bank CEO Nneka Onyeali-Ikpe stated, “With the conclusion of the Combined Offer, I am delighted to announce that we have met and surpassed the capital-raise target we set for ourselves in the first phase of our capital-raise exercise.”
The FCMB Group was looking to raise N110.9 billion by means of a public offering. The CEO of the firm declared that the bank has increased the offered amount with more than 40,000 investors taking part in the offer approximately a week after the public offering concluded.
In addition to making the largest public offering in the nation’s history (N400.5 billion), GTCO Holdings is said to have raised almost N1.26 trillion, indicating a notable oversubscription.
About a month ago, on September 23, Zenith Bank concluded its N290 billion combined offer. According to sources close to the bank, the firm has now increased the amount it has offered. Access Holdings had a rights issuance of N351 billion.
The Nigerian Exchange (NGX) introduced a digital platform called NGX Invest, which made it easier for the banks to sell their products and supported their capital-raising operations. The NGX Invest is intended to greatly improve the effectiveness of rights issues and public offering subscription procedures, optimizing operational workflows to better assist issuers in their capital-raising endeavors.
The platform’s revolutionary potential was emphasized by NGX CEO Jude Chiemeka, who stated, “NGX Invest addresses the demand for a more efficient and transparent process in managing public offers and rights issues.” It will speed up reconciliation and allotment processes, eliminate unclaimed dividends, and increase investor confidence.”
Due to capital increases by the majority of the big listed banks, the equity market is up this year. This year, the market has increased by 31.99 percent. Based on trading data as of October 21, the NGX Banking Index has increased by 4.24 percent.
