The Central Bank of Nigeria’s (CBN) delay in verifying and allotting shares to shareholders who bought into listed banks’ rights issues and public offers on the Nigerian Exchange Limited (NGX) is generating concerns in the capital market.
At the 2024 workshop of the Capital Markets Correspondents Association of Nigeria (CAMCAN) in Lagos with theme: “Banks’ Recapitalization: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market,” the Group Managing Director, Cowry Asset Management Limited, Johnson Chukwu stated that “the delays in the CBN verification process has raised concerns among investors, especially as it has not been able to conclude any verification almost four months after the closure of some offers.
Investors have bought N1.27 trillion worth of shares of Guaranty Trust Holding Company Plc (GTCO), Access Holdings Plc, Zenith Bank Plc, FCMB Group Plc and Fidelity Bank Plc, but are yet to be allocated.
“While the CBN’s role in verifying the source of the capital invested is important, the time it takes to be completed dampens investors’ confidence.
“This is particularly painful for investors whose funds may be returned where the offers may be oversubscribed given the missed reinvestment opportunities.”
He, however, called on the CBN to leverage the high level of Information Technology (IT) support at its disposal and the bank-wide Bank Verification Numbers (BVN) to quickly carry out the verification and approve or reject the funds so that investors can either get their allotment or deploy their funds in other profitable economic activities.
GTCO completed its N400.5 billion public offer on August 12, 2024, but the shares are yet to be allotted four months later. GTCO raised N400.5 billion via its offer for subscription of 9,000,000,000 ordinary shares of 50 kobo each at N44.50 per share.
Similarly, Access Holdings’ rights issue of N351.01 billion ended on August 23, 2024, after extending the offer by one week.
Access Holdings had concluded a Rights Issue of 17,772,612,811 ordinary shares of 50 kobo each at N19.75 per share on the basis of one (1) new ordinary share for every existing two (2) ordinary shares.
Zenith Bank had extended its public/ right issues for one week that ended September 23, 2024, while FCMB Group’s N110.9 billion public offer ended September 4, 2024.
Fidelity Bank extended its N127.01 billion public offering and rights issue by two weeks. The bank applied and received the approval of Securities and Exchange Commission (SEC) to extend the closing date of the application and acceptance lists till August 12, 2024.
Fidelity Bank opened its public offer and Rights Issue on Thursday June 20. The bank was in the stock market to raise a total of up to N127.1billion by way of a Rights Issue to existing shareholders and a Public Offer (the Combined Offer).
Chukwu maintained that the current CBN requirements for investing in banks shares are seen by many as overly stringent, creating barriers for both issuers and investors.
“For instance, for corporate investors, the CBN required them to provide the following: three-year audited financial statements, Board resolution authoring the investment and tax clearance certificates for the past three (3) years.
“While regulation is necessary for maintaining the stability and integrity of the financial system and ensuring that unqualified capital is not invested in the banks, there is need to leverage on existing customer information in the banking system and avoid imposing onerous conditions on investors,” he said.
He noted that one of the significant challenges facing pension funds (through the National Pension Commission or PENCOM) is the restriction on pension companies limiting their total equity investments in a single sector to 30per cent.
“While this is aimed at ensuring diversification and reducing risk exposure, it has inadvertently constrained the ability of pension funds to make more substantial investments in the banking sector. Given that banks are central to the Nigerian economy and play a critical role in financing growth, it would be beneficial for regulators to review this cap.
“A revision would allow pension funds to increase their exposure to the banking sector, facilitating larger capital inflows and help banks raise the necessary funds for recapitalisation,” he expressed.
He added that banking recapitalisation of the CBN, thus, remains a key strategy for strengthening the Nigerian banking sector and fostering economic growth, stressing that the success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market.
“By addressing the challenges of information asymmetry, regulatory uncertainty, and liquidity, while improving transparency, corporate governance, and financial innovation, the Nigerian capital market can unlock new opportunities for bank recapitalisation.
“Concerted efforts from both banks and investors, supported by regulators, will ensure that the Nigerian banking sector remains resilient, competitive, and capable of driving the country’s economic growth for the future,” he said.
The Director General, Securities & Exchange Commission (SEC), Emomotimi Agama recapitalisation is not merely a regulatory requirement as it is a strategic imperative to bolster the banking sector’s resilience and enhance its role as a catalyst for economic growth.
Agama, who was represented by Divisional Head, Legal, and Enforcement, Lagos Zone Office, John Achile, said, “In 2024 alone, Nigerian banks raised over N1.83 trillion through rights issues, public offers, and private placements. This achievement reflects both the confidence of investors and the resilience of our market.
“Platforms like NGX Invest have revolutionized capital raising by offering seamless access to investors across demographics. In addition, the adoption of innovative instruments, such as hybrid securities and convertible bonds, has broadened funding options for banks while catering to diverse investor preferences.”
Comments are closed.