Ecobank Nigeria plans additional fund raising to boost tier-1 capital

There are strong indications that Ecobank Nigeria is considering raising additional capital in order to boost its tier-1 capital. Ecobank Nigeria’s total capital adequacy ratio at the end of the first half of 2014 stood at 13.3 percent.

The additional capital will be a boost as the recent Central Bank of Nigeria (CBN) draft guidelines categorised the bank as a systemically important bank.

The subsidiary of Ecobank Transnational Incorporated (ETI) recently raised $250 million in tier-2 capital, thereby lifting its capital adequacy ratio (CAR) to 16.5 percent.

According to Adesoji Solanke of Renaissance Capital, “considering the Central Bank of Nigeria’s (CBN) preference for tier-1 capital for a bank of this scale, we think the subsidiary needs a tier-1 capital injection.”

Albert Essien, group chief executive, ETI, said recently that “Ecobank expects South Africa’s Nedbank to convert a $285 million loan to shares in the Lome-based bank before the end of the year,” saying he was confident that Nedbank would exercise the conversion option and also top up the conversion amount with $206 million to give it a 20 percent stake in Ecobank.

After the Nedbank deal, Ecobank expects its capital adequacy ratio to hit 18.7 percent of assets by year-end, up from the 17.5 percent it was in the first six months of the year.

“The Nedbank stake is capped at 20 percent. If they do convert I think that will strengthen the business relationship that we have (had) since 2008,” Essien said, noting that “the conversion will trigger reciprocal board seats. We see it as very positive and we expect that it will happen.”

Management of ETI expects to invest a portion of the Nedbank top-up into its Nigeria operations to boost capitalisation levels.

HOPE MOSES-ASHIKE