‘How banks’ recapitalisation will induce stock market’

The race for Nigerian banks to raise the new capital benchmark is expected to trigger activities in the capital market.

The Chartered Institute of Bankers of Nigeria and the Nigerian Exchange recently formed a strategic collaboration to that effect. Speaking about the recent bank recapitalisation directives issued by the CBN, she emphasised that these measures will require banks to increase their capital, which will boost their attractiveness to stock market investors and shareholders.

While he commended the CBN’s initiative to implement these requirements, he explained that the measure was critical given the depreciation of the naira, which significantly affected the capital base of banks in recent years. “Against the backdrop of the requirement to use only paid-up share capital and share premium for recapitalisation purposes, it is expected that most of the banks will approach the Stock market to raise additional funds either through an offer for subscription or rights issue.

A financial analyst, Ahmed Idris emphasised the market’s preparedness to play the pivotal role in assisting quoted banks to raise the expected capital.He said: “Looking at the size of the NGX and also looking at the giant strides it has recorded in the last couple of years, you will see that the market is ready. The management has instituted several corporate governance instruments that have helped the market attain the current height it is now.

“The programme may be executed through a variety of methods including public offerings, private placements, rights issues, book building processes, or a combination thereof. The bank’s senior executives according to a source have identified an urgent need to raise capital in line with the directive from the apex bank.

The lender declared that the banking group, which has already begun the procedure of conversion to a holding company, will complete the process in 2024. Last month, the banking sector was the standout performer as its benchmark index gained 21.2 percent to close at 1,029.63 points. The bullish performance of the sector is reflective of foreign investors’ buying interest in the banks.Nigerian Exchange Group Plc on Monday, March 4, announced its full-year audited financial statements for 2023, which ended December 31, with a Profit After Tax of N5.2 billion and a declaration of a final dividend of N1.5 billion.

Source: News Formal (newsformal.com)

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