By Ologeh Joseph Chibu
As Nigerian banks work to meet the Central Bank of Nigeria’s (CBN) new capital base requirements, rights issues have emerged as a favored strategy for raising additional funds.
Several banks have entered the capital market with significant offerings to strengthen their financial positions and expand operations.
Key Rights Issues
• FBN Holdings is offering a ₦150 billion rights issue, allowing shareholders to purchase one new share for every six held at ₦25.00 per share. The offer closes on December 12, 2024.
• United Bank for Africa (UBA) has launched a ₦239.39 billion rights issue, providing shareholders the opportunity to buy one new share for every five held at ₦35.00 per share. Group Chairman Tony Elumelu emphasized that the funds will boost UBA’s lending capacity, digital infrastructure, and African operations.
• Stanbic IBTC Holdings has sought approval for a ₦148.71 billion rights issue, with plans to offer five new shares for every 22 held at ₦50.50 per share. The qualification date is October 29, 2024.
• Wema Bank recently resolved to raise additional capital, either through equity or mergers and acquisitions, to meet the CBN’s requirements. The bank had earlier listed an ₦8.572 billion rights issue in July.
Shareholders’ Perspectives
Rights issues are seen as a strategic move by majority shareholders to retain control and maintain their equity stakes. Rotimi Fakayejo, an economy and capital market analyst, noted, “I think basically, the majority shareholders want to hold on to the percentage holding that they have and I think they don’t want new shareholders, also they want more shares to themselves. You know if everyone does not take up their shares, other shareholders can buy them up as additional rights.”
Shareholder leaders, including Eric Akinduro of the Ibadan Shareholders Association, have encouraged investors to take up their rights, citing potential returns as banks achieve the required capital base.
Moses Igbrude, National Coordinator of the Independent Shareholders Association of Nigeria, dismissed suggestions that banks are sidelining new investors, explaining that the CBN’s directives primarily target existing owners.
Capital Market Impact
David Adonri, Vice Chairman of HighCap Securities, highlighted that banks have calculated their strategies, with rights issues providing a viable path to meeting the ₦500 billion recapitalization target.
The ongoing rights issues reflect a concerted effort by Nigerian banks to comply with regulatory mandates, strengthen their financial resilience, and position themselves for growth in a competitive market.