As Nigerian banks gear up to satisfy the Central Bank of Nigeria’s new capital base requirements, rights issues have emerged as the dominant strategy for capital raising among lenders. Leading this initiative is FBN Holdings, which has begun offering a rights issue set at N150 billion, including nearly 6 billion ordinary shares priced at N25 each. This rights issue allows shareholders to acquire one additional ordinary share for every six held as of October 18, 2024, with the offer closing on December 12. Meanwhile, United Bank for Africa (UBA) aims to raise N239.39 billion through a similar offering. Its rights issue will grant existing shareholders the opportunity to purchase new shares at N35 per share, in a 1-for-5 ratio, based on shares held by November 5, 2024. UBA’s Group Chairman, Tony Elumelu, highlighted that this capital initiative forms part of a broader Equity Shelf Programme approved by shareholders, intended to enhance growth capacity and maintain industry leadership.
The anticipated funds from these capital raises are intended for various strategic purposes. UBA’s rights issue, in particular, is aimed at strengthening lending capacity, investing in technological infrastructure, and expanding operations across Africa, all while ensuring compliance with evolving regulatory standards. On the horizon, Stanbic IBTC Holdings is seeking the Nigerian Exchange Limited’s approval for its own rights issue valued at N148.71 billion. They plan to issue about 2.94 billion shares, priced at N50.50 each, allowing shareholders to purchase five new shares for every 22 currently held as of October 29, 2024. Following a request from Wema Bank shareholders at their Annual General Meeting, the bank is also exploring additional capital raising options to abide by the capital requirements set forth by the Central Bank.
The activities in the capital market are not merely a response to regulatory requirements but are also influenced by the interests of major shareholders. According to capital market analyst Rotimi Fakayejo, majority shareholders push for rights issues as a means of cementing their control over the banks. This practice not only allows them to maintain their equity stakes but also minimizes the infusion of new investors who might disrupt their governance. Fakayejo suggests that existing shareholders likely view rights issues as a strategic avenue that enables them to strengthen their financial holdings while maintaining a competitive position within the organization. The dynamics reveal a concerted effort from majority shareholders to ensure their continuous influence within the banks.
Contrarily, opinions from various financial representatives indicate a complex relationship between shareholders and boards concerning capital-raising initiatives. Eric Akinduro, Chairman of the Ibadan Shareholders Association, noted that decisions surrounding rights issues are primarily made by the board, with shareholder input typically limited to approving resolutions during official meetings. These decisions often include the option for rights issues, public offerings, or private placements. Despite this, Akinduro emphasizes the benefits of shareholders participating in rights issues, predicting potential price increases as capital requirements are met, which would ultimately lead to better investment returns.
In contrast, Moses Igbrude, National Coordinator of the Independent Shareholders Association of Nigeria, counters the narrative that bank owners are dismissive of new shareholders. He argues that the Central Bank of Nigeria’s directives were primarily aimed at the current owners, requiring them to mobilize funds internally before considering external investors. Igbrude’s viewpoint suggests that banks initially attempt to gather the necessary capital within their existing ownership before exploring additional routes or bringing in new stakeholders, underlining a strategic phased approach to capital raising. This demonstrates a layered understanding of the intricacies involved in recapitalization efforts, which often require balancing immediate financial needs with long-term ownership strategies.
David Adonri, Vice Chairman of HighCap Securities and a stockbroker, reinforces the notion that banks possess a comprehensive understanding of their capitalization strategies. He acknowledges that different banks might leverage various methods—be it rights issues, public offerings, or hybrid models—depending on how each institution interprets market conditions and shareholder sentiment. The current trend shows that rights issues are largely driven by an internal push from majority shareholders wanting to optimize their investment positions, while also enhancing operational capabilities and meeting regulatory mandates. Ultimately, the decisions made in this capital-raising landscape reflect broader goals of growth, compliance, and sustainability in a rapidly evolving banking industry, ensuring that stakeholders are well-prepared for future opportunities and challenges.
