‘Banks should prioritise digital innovation during recapitalisation’
Oluwole Adeosun, outgoing president and chairman of Council of Chartered Institute of Stockbrokers (CIS) speaks on a range of issues in the economy, markets, including proposed recapitalisation of banks, and the Institute’s landmark achievements while he
HOW would you describe the Nigerian Capital Market at the moment ?
The market is vibrant. It has not only fully recovered from the 2008 global shock, but has become one of the solid pillars of economic recovery in the country. Investor confidence is significantly restored, even though we still expect more faith from our local investors. Market regulation has been substantially tightened, and you hardly get to hear of market infractions anymore. Compared to 2010, which was 14 years ago, the Nigerian capital market has witnessed monumental expansion. We have five thriving securities exchanges in the country now, in contrast to only one back then, and three of these are commodities exchanges, which we didn’t have before.
The equities market has been on an upward trajectory since the entry of the new administration in Nigeria , due to proactiveness in implementing necessary reforms such as the removal of fuel subsidy and the liberalization of the foreign exchange market. The Nigerian stock market recorded significant growth as the All-share Index (ASI) successively broke barriers at 70,000points in October 2023 and crossed the historic 100,000 mark in January 2024. The bourse emerged as world’s bestperforming stock market in the first three weeks of 2024 and number one exchange in Africa in the first two months of 2024.
The fixed income securities market has so blossomed that Nigeria is today about the leading debt capital market (DCM) in Africa. Investment product has increased and investors today can seamlessly choose between the traditional equities, mutual funds, exchange traded funds (ETF) fixed income securities and derivatives amongst others. In terms of professional development, the Chartered Institute of Stockbrokers (CIS), has implemented specialized qualifications and shifted examinations to remote settings. Nigerian stockbrokers now have a seamless path to practise in the advanced countries due to the institute’s international collaborations. In summary, the current leaders, shaping Nigeria’s financial system—the Minister of Finance and Coordinating Minister of the Economy, along with the Governor of the Central Bank are seasoned members of our Institute. Their extensive experience and the commendable work they’ve undertaken underscore the caliber of professionals the institute produces.
The Central Bank of Nigeria (CBN), has directed banks to recapitalize in the next 24 months in line with their individual level of authorization. What was your immediate reaction to this announcement against the backdrop of the last banks’ recapitalisation in Nigeria.
The action of the Central Bank of Nigeria was both necessary and overdue, especially when considered in the context of global trends. The developmental needs of Nigeria has substantially increased since the last banking recapitalization exercise that was initiated about 20 years ago. The country’s population as well as the serviceable market for financial transactions, have substantially grown with the advent of the African Continental Free Trade
Area (AFCFTA), Nigeria must enhance and modernize its financial system to stay competitive. Various external and domestic factors have significantly impacted the Nigerian economy, necessitating an increase in minimum capital requirements for banks. This measure aims to fortify their capital base, enabling them to absorb unforeseen losses and sustain their role in fostering the growth and development of the Nigerian economy as we aim for the one trillion dollar economy achievable by 2026.
Many banks are already preparing to float rights issue to recapitalize by deploying various options for capital injection . What are these options and their implications ?
It is logical, and the right thing to do. Businesses would naturally want to give their existing shareholders the privilege of enhancing their shareholdings, before reaching out to outsiders. If the Rights Issue succeeds, it means that the company was able to raise capital without changing the shareholding structure or diluting the proportionate stake of existing shareholders who choose to participate in the offering. Nevertheless, past occurrences suggest that following the Rights Issues, numerous companies may opt for a public offering to raise additional capital and attract more shareholders. This trend is especially probable given that many Nigerian banks have expanded into international markets, necessitating substantial capital to operate on a larger scale.
Can you advise on other capital raising methods that can equally assist the banks to meet up, particularly Public Offer ?
From a strategic standpoint, engaging in a Public Offer can significantly elevate the bank’s visibility and reputation within the market landscape. This move has the potential to attract fresh investors, thereby amplifying its market capitalization. With an augmented capital base, the bank gains enhanced financial prowess and adaptability to seize growth prospects and extend its footprint. Leveraging Public Offers grants banks access to a vast reservoir of potential investors, facilitating swift accumulation of substantial capital.