By Rita Uzuh
October 22, 2024

In a strategic move to strengthen capital reserves, five early-bird Nigerian banks have collectively raised N1.27 trillion on the Nigerian Stock Exchange as the race for recapitalisation intensifies. This significant milestone demonstrates continued investor confidence in the banking sector despite headwinds such as the government’s 2023 windfall tax on foreign exchange (FX) gains.

Following the Central Bank of Nigeria’s (CBN) March 29, 2024, announcement of a sector-wide recapitalisation initiative, several banks have taken proactive steps to meet the capital requirements. So far, five banks—GTCo, Access Holdings, Zenith Bank, Fidelity Bank, and FCMB Group—have completed their capital-raising efforts, while Sterling Financial Holdings is currently in the market with plans to raise an additional N153 billion.

Bank Recapitalisation Highlights:

GTCo Holdings: N400.5 billion

Access Holdings: N350.1 billion

Zenith Bank: N289.1 billion

Fidelity Bank: N127.1 billion

FCMB Group: N110.9 billion

With the total raised so far reaching N1.27 trillion, some banks have reported oversubscription, signaling robust investor appetite.

Economic Implications

Recapitalisation is a vital process that enhances the ability of banks to finance large-scale transactions and complex business ventures, ultimately contributing to the resilience and growth of the Nigerian economy. According to Jibola Odedina, managing director of Coronation Securities Limited, adequately capitalised banks are essential to ensuring the stability of the financial sector and its capacity to withstand potential economic downturns.

“Bridging the N4.2 trillion capital gap across the banking industry is crucial,” Odedina noted, referring to a recent KPMG report that highlighted the shortfall many banks face in meeting the new minimum capital requirements.

Fidelity Bank and Others Lead the Charge

Fidelity Bank was the first to take action, raising N127.1 billion through a combined rights issue and public offer that closed on August 12, 2024. The bank reported that it had exceeded its target, hinting at an oversubscription.

Similarly, FCMB Group successfully raised N110.9 billion, attracting over 40,000 investors. GTCo Holdings, which launched the largest ever public offer in the country’s history, raised a staggering N400.5 billion, surpassing expectations.

Technology Driving Efficiency

The banks’ capital-raising efforts were supported by NGX Invest, a digital platform from the Nigerian Exchange (NGX), designed to streamline public offering subscriptions and rights issues. The platform has been pivotal in boosting the efficiency and transparency of the recapitalisation process.

“The platform is a game-changer,” said Jude Chiemeka, CEO of NGX. “It addresses inefficiencies in managing public offers, expediting reconciliation processes and bolstering investor confidence.”

Market Response

The Nigerian equity market has responded positively to the banks’ recapitalisation moves. The NGX Banking Index is up by 4.24 percent as of October 21, 2024, while the overall market has risen by 31.99 percent this year, according to trading data.

Financial analysts from Capital Bancorp Group have noted that while the issuance of new shares may dilute the ownership percentages of existing shareholders, recapitalisation ultimately strengthens banks’ balance sheets, attracting more deposits and sustaining profitability in the long term.

As the recapitalisation race heats up, Nigerian banks are positioning themselves not only to meet domestic regulatory requirements but also to compete more effectively on the global stage.