As part of efforts to meet the Central Bank of Nigeria’s (CBN) new capital base requirements, three major Nigerian banks are turning to rights issues to raise capital.
FBN Holdings has already initiated an N150 billion rights issue, offering 5,982,548,799 shares at N25.00 each, based on a 1-for-6 ratio for shareholders as of October 18, 2024. The offer is expected to close on December 12.
Similarly, the United Bank for Africa (UBA) is targeting N239.39 billion by offering 6,839,884,274 shares at N35.00 per share, with existing shareholders able to purchase one new share for every five shares held as of November 5, 2024.
UBA’s Group Chairman, Tony Elumelu, highlighted that this move is part of a broader capital raising program aimed at strengthening the bank’s capacity to seize growth opportunities and sustain its leadership in the banking sector.
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Stanbic IBTC Holdings is also preparing to enter the market with an N148.71 billion rights issue. The offer will comprise 2,944,772,083 shares priced at N50.50 each, with a 5-for-22 ratio. While not yet in the market, Stanbic IBTC has already sought approval from the Nigerian Exchange Limited.
The trend of rights issues is largely driven by the majority shareholders, who seek to maintain control over the banks. Analysts, including Rotimi Fakayejo, suggest that this strategy helps major shareholders secure additional shares, preventing external investors from altering the ownership structure.
Nevertheless, the Nigerian banking sector is experiencing significant growth, driven by recapitalization efforts. The rights issues by these banks present an opportunity for existing shareholders to increase their stake and for new investors to enter the market.
However, the rights issue strategy may limit the entry of new investors, as majority shareholders seek to maintain control. Despite this, the recapitalization efforts are expected to strengthen the banks’ capacity for growth, making them attractive investment opportunities.
