There is palpable anxiety in the banking industry over delays by the Securities and Exchange Commission (SEC) to approve the issuance of new securities by the banks. In the last three months, over 15 banks have filed applications with the SEC to issue new shares by way of right issues and public offers in order to meet the new capital base announced by the CBN in March, but the capital market regulator has only managed to approve Fidelity Bank’s N127.1 billion capital raise. Fidelity is hoping to raise N97.5 billion in fresh funds from the public offer and N29.6 billion from the rights issue. The SEC’s delay in approving new issues is creating apprehensions in the banking industry, with many speculating that the two-year deadline set by the CBN may not be met after all. There are two major reasons for the delay.
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First, the SEC has been flooded with loads of applications from banks and other companies wishing to raise money; and second, the former management of the commission was a bit tardy in handling the approval processes and other responsibilities, thus leaving behind a huge backlog of applications that need to be cleared. It was only in April that President Tinubu swept off the top management of the commission and replaced it with a new team that is grappling with the challenge of long-overdue proposals. Said a retired SEC director, Mr Okokon Akpan, “The President did well in changing the former leadership. We now have a team of young and capable professionals who have been in the system and know the workings of the commission. I am sure the backlog will be cleared soon. The previous people had a very poor attitude towards the job.’’
Over N4 trillion would have to be raised by the nation’s 35 commercial, merchant, and non-interest banks no later than March 2026 to meet new benchmarks set by the CBN. The broad objective is to create a strong and resilient banking system that would help propel the Nigerian economy to a trillion-dollar GDP by 2031. It is not clear to what extent these delays from the SEC may affect the March 2026 target or if the CBN will shift the bar in the event of massive defaults. Already, tier-one lenders like First Bank Holdings, UBA, GTCo, Zenith Bank, and Access Holdings have filed applications with the SEC for approval of their issues.
Many others are in the pipeline. In addition to requests from the banks, the SEC has also been swamped with transactions from other companies that require regulatory approval. Nigerian Breweries, the nation’s largest brewer, is planning to raise N600 billion from the capital market. The sale of Diageo’s 52.02 percent stake in Guinness Nigeria Plc to the Tolaram Group is also awaiting the attention of the regulatory authority. Tolaram will acquire Diageo’s shares at N81.6 per share, with a total transaction amounting to N103.7 billion. There’s also the acquisition of a majority stake in the Uyo-based Champion Breweries Plc by the little-known EnjoyCorp Limited. A few other foreign firms divesting from the country are also seeking the SEC’s approval for the sale of their shareholdings. “With all these transactions coming to the capital market, the SEC would have to double up efforts to clear the backlogs of applications on time. We are also hoping that the CBN is aware of these unexpected delays’’, a chief executive of a bank told me.
To obtain SEC’s approvals for any issue, an issuer must file several documents at the Office of the Director General at SEC’s corporate headquarters in Abuja.
Specific requirements vary from time to time, but the common ones include memorandum and articles of association; evidence of tax payments; advertising materials; the purpose of the offer and expected utilisation of funds to be raised; the proposed allotment of shares; and the prospectus of the offer, which contains particulars of all the parties to the offer. Documents forwarded are reviewed, and where there are observed deficiencies, the applicants are duly informed. Where such lapses are communicated, the timeline for approval resets. But in the absence of any deficiencies, approval will be communicated. The commission may, however, require other documents or information, where necessary. An issuer pays exorbitant fees to the SEC to secure these approvals. Each stage of the application filed with the SEC costs N100,000. A big issuer, for instance, may spend as much as N100 million to raise N300 billion. Such costs are expended on a wide array of items, like legal fees and other professional payments; filing fees; media and publicity; printing; extra-ordinary AGMs, etc.
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In March, CBN Governor Yemi Cardoso announced an upward review of the minimum share capital for banks according to authorization for their operations. International banks will have N500 billion minimum share capital; national banks, N200 billion and N50 billion for regional and merchant banks. It is likely that Cardoso did not envisage that his well-thought-out recapitalization plans would be disrupted by the action of another regulator in the financial industry. The two institutions must therefore work together to achieve the national goal.
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