Recent naira devaluation has been pointed out as a key reason behind moves by some Nigerian banks to raise funds to upgrade their capital base.
Since the last recapitalisation exercise in 2008, the nation’s currency has devalued by over 100 percent (584.64%) to N799.73 per dollar, its current rate, from N116.81/$ in January 2008, data from the CBN website indicated.
“Banks recapitalisation is a business decision, of course you can see that with the devaluation of naira it takes too much to do activities that the banks need to do,” said Ken Opara, president and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN).
Speaking with BusinessDay on the sidelines of 2023 CIBN fellowship investiture themed Harnessing Nigeria’s Economic Potentials for Growth and Development: Strategic Imperatives,” held recently in Lagos, he said, banks need larger capital to operate efficiently.
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“What we used to have as 10 million dollars for instance has dropped, so you need a larger capital base in terms of capitalisation and capital adequacy to be able to consummate most of those transactions.
“Companies are also growing, for you to service these companies, you need a larger capital base so that is why the industry is looking to shore up their capital. So it is a business decision, and I think it is the best thing that will obviously happen,” he said.
FBN Holdings Plc, Nigeria’s oldest financial services group, recently submitted a request for approval to raise N139 billion in new equity funds.
FBN Holdings is a diversified financial services Group offering a wide range of products and services to millions of customers.
The Group plans to float a rights issue of 8.974 billion ordinary shares of 50 kobo each and at an offer price of N15.50 per share.
The rights issue will be pre-allotted to shareholders on the register of the company as at close of business yesterday, on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held, according to a report by The Nations.
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Three other banks – Wema, Fidelity and Jaiz – are also seeking approval to raise more than N135 billion in separate offer proposals.
Nigeria’s premier and largest non-interest bank, Jaiz Bank is undertaking a rights issue of about 5.41 billion ordinary shares of 50 kobo each at an offer price of N1 per share, representing initial offer size of N5.4 billion. The rights issue will be pre-allotted on the basis of 87 new ordinary shares for every 250 ordinary shares held as at the close of business on October 6, 2023.
The rights will be pre-allotted on the basis of two new ordinary shares for every three shares held as at September 28.
Fidelity Bank Plc had launched a hybrid capital raising plan aimed at sourcing some N90 billion in new equity funds from existing and new shareholders. The bank plans to issue 13.2 billion ordinary shares of 50 kobo each to new and existing investors to boost its capital base
Under the plan, the bank is seeking to float a public offer of 10 billion shares and a rights issue of 3.2 billion shares. The rights issue will be allotted on the basis of one new share for every 10 shares held.
In her personal statement at the last Monetary Policy Committee (MPC) meeting in July 2023, Aisha Ahmad, former deputy governor of the CBN, said stress test results showed that industry solvency and liquidity positions could withstand mild to moderate shocks in the short to medium term. Nonetheless, she said the sector must continue to build adequate capital buffers – ongoing implementation of the Basel III capital standards (which prescribes additional capital buffers) are relevant in this regard.
