The Chartered Institute of Stockbrokers has called on Nigerian banks to look beyond rights issues as the sole method of fundraising as banks grapple to raise over N4 trillion in fresh capital to meet new regulatory requirements.
This was disclosed by the CIS President, Oluwole Adeosun at the Nigeria’s Association of Capital Market Academics symposium for Q2 2024 on Thursday, themed ” Banking Sector Recapitalisation; Implications for the Nigerian Capital Market,” according to Businessday.
Adeosun stated that the public offer and special placement would provide broader market participation, attracting new investors, particularly, younger demographic groups.
He said, “There should be more than just rights issues, we believe some should go for public offer, special placement because the sum they are trying to raise is huge and also this will help to bring new shareholders into the market.”
He pointed out that public offers provide the younger generation like millennials and Gen Z to participate in the stock market as many of them were young during the last recapitalization.
He noted that he does not anticipate a lot of Mergers and Acquisitions.
“We do not envisage many Mergers and Acquisitions because capital requirements have been categorized into different classes and amounts unlike in the past,” Adeosun said.
To meet the capital requirements laid down by the Central Bank last month, the country’s banking sector is facing a 24-month deadline of raising about N3 trillion.
Zenith Bank Plc, last Friday announced plans to raise additional funds to achieve the Central Bank of Nigeria’s minimum capital requirements.
Access Bank, FBN Holdings, and Guaranty Trust Holding Company had earlier declared their intention to raise additional funds.
The preferred option for major banks to raise capital has been a rights issue, but analysts are concerned that the move might be disproportionately affecting shareholders.
Adeosun said that banks should opt for other means of raising cash rather than Rights Issues to meet the new requirements.
Meanwhile, the President Chartered Institute of Bankers of Nigeria, Ken Okpara said that the recapitalisation of banks has come at an appropriate time, as it would lead to a consolidation of banking mergers and acquisitions.
The President Institute of Chartered Accountants of Nigeria, Innocent Okwuosa said the exclusion of retained earnings from the recapitalisation process could raise concerns about international reporting standards.
