Banks’ Recapitalisation, New Listings Boost NGX Market Cap by N8.1tn
Kayode Tokede
Despite economic downturn in Nigeria and rising interest rates, the Nigerian equities has remained resilient with the Nigerian Exchange Limited (NGX) listing whooping N8.1 trillion worth of shares from January 2024 to November 2024.
In all, the overall market capitalisation that opened 2024 at N40.918 trillion, gained N18.2 trillion or 44.5 per cent to close November 29, 2024 at N59.107 trillion.
Also, the All-Share Index or ASI closed November 29, 2024 at 97, 506.87 basis points, about 22,733.10 basis points or 30.4 per cent from 74,773.77 basis points the stock market opened for trading this year.
Twenty companies responsible for the N8.1 trillion comprise of 10 financial institutions, two breweries manufacturing companies, who were driven by the need to expand business and meet the Central Bank of Nigeria (CBN) minimum capital requirement.
While most of the banks already listed on the local bourse embarked on public offer, and rights Issue, others came by way of private placement and “listing by introduction.”
Among major listings by introduction in 2024 was Aradel Holdings Plc that listed N3.05 trillion, followed by Transcorp Power Plc that listed by introduction N1.8trillion worth of shares.
Also, Haldane McCall Plc recently listed by introduction 3.12 billion ordinary shares of 50 kobo each at N3.84 per share with a market capitalization of over N11.99 billion.
In term of raising fresh capital, Nigerian Breweries Plc, and International Breweries Plc are the only two breweries manufacturing companies that have raised the highest amount, followed by Guaranty Trust Holding Company Plc (GTCO).
Nigerian Breweries is in the market to raise N599.1 billion, International Breweries has raised N588.28billion fresh capital from investing public.
Nigerian Breweries in August 2024 got approval for Rights Issue of 22,607,491,232 ordinary shares of 50 Kobo each at N26.50 per share on the basis of 11 new ordinary shares for every existing 5 ordinary shares held as at the close of business on Friday, July 12, 2024.
The Issue is part of Nigerian Breweries’ business recovery plan to strengthen its capital base by deleveraging its balance sheet, eliminating certain foreign exchange-related exposures and reducing bank borrowings, thereby giving the Company greater financial flexibility to promote business growth and continuity.
Nigerian Breweries has been operating in a position of negative working capital since 2020. The company posted a negative working capital of N102.3 billion at the end of FY 2020. It declined to N152.4 billion in 2021, stood at N252.3 billion in 2022 and N356.9 billion in 2023.
The Managing Director, Nigerian Breweries, Mr. Hans Essadi, had explained that the Issue represents an opportunity for shareholders to support the company’s strategic vision and participate in the next phase of its growth.
For International Breweries, the N588 billion rights issue programme was 87.75 per cent oversubscribed, with 141.43 billion shares taken up by the company’s shareholders. It amounted to a capital raise of N516. 2 billion for the company, which was used to offset the company’s current liabilities.
Further investigation by THISDAY revealed that out of the N8.12 trillion capital in the period under review, GTCO, Zenith Bank Plc, Access Holdings Plc, FCMB Group Plc, Fidelity Bank Plc, United Bak for Africa Plc, FBN Holdings Plc, Sterling Financial Holdings Company Plc, and Stanbic IBTC Holdings Plc contributed about 23.4per cent or N1.92 trillion amid CBN’s latest policy in the banking sector.
Jaiz Bank Plc in the February 2024 got approval from the Exchange to raise N10.05 billion through private placement.
The non-interest financial institution listed a private placement of 10,048,237,995 ordinary shares of N0.50 each at N1.00 per share.
Jaiz Bank’s Chairman, Mohammed Bintube, had hinted that the proceeds of the capital raising exercise would be deployed to improve service delivery on its various platforms to enable the Bank achieve its five-year strategic objectives.
He further said, “the Bank chose this route to sustain its growth trajectory and also to ensure it remains well capitalised in line with its capital management strategy.”
Recall that on March 28, 2024, the CBN revised the minimum capital requirements for Banks.
In the new dispensation, commercial banks are facing minimum capital thresholds of N500 billion for international authorisation and N200 billion for national authorisation.
In contrast, those with regional authorisation are expected to achieve a N50 billion capital floor.
Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20 billion and N10 billion, respectively.
The directive which was contained in a CBN circular emphasised that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, terminating on March 31, 2026.
To enable the banks to meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues, and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrades or downgrade of license authorisation.
Nigerian banks have accessed the capital market to raise fresh capital via public offer and right issue. However, the outcome of these capital raising exercises is creating mixed reactions among capital market stakeholders.
In the period under review, GTCO raised N400.5 billion as it got approval and listing of its offer for subscription of 9,000,000,000 ordinary shares of 50 kobo each at N44.50 per share.
Similarly, the NGX approved Access Holdings N351.01 billion fresh capital, when Rights Issue of 17,772,612,811 ordinary shares of 50 kobo each at N19.75 per share on the basis of one (1) new ordinary share for every existing two (2) ordinary shares held as at the close of business on Friday, June 07, 2024.
Notable banks that have completed fresh capital injection in the banking sector include: Zenith Bank’s N289.38 billion public offer and rights issue; Fidelity Bank’s N127.10 billion public offer and rights issue; FCMB Group’s N110.94 billion and Sterling Financial Holdings Company Plc’s N130.79 billion private placements and right issue.
Others currently raising capital via rights issue are: UBA, Stanbic IBTC Holdings, and FBN Holdings N239.4 billion, N148.71 billion and N149.56billion, respectively.
Speaking at the 2024 Capital Market Correspondents Association of Nigeria (CAMCAN) workshop in Lagos at the weekend, the Chairman NGX Group Plc, Mr. Umaru Kwairanga stated that the banking sector recapitalisation has long been recognised as a cornerstone for building resilient financial institutions and a thriving economy.
He said, “It is essential not just for regulatory compliance but for driving innovation, fostering economic stability, and equipping banks to fulfil their critical role in resource allocation and development. At the Nigerian Exchange Group, we remain unwavering in our commitment to creating a capital market ecosystem that supports these objectives.
“The capital market serves as a critical enabler in this process, acting as a bridge between issuers seeking to raise capital and investors looking for opportunities to create value. At NGX Group, our mission is to ensure that this bridge is efficient, accessible, and transparent. It is against this backdrop that we introduced NGX Invest, a digital platform transforming the way public offerings and rights issues are distributed in Nigeria.
“Since its inception, NGX Invest has facilitated over N1.26 trillion in capital-raising efforts by banks, including notable players such as FBN Holdings, Zenith Bank, GTCO, FCMB Group and Access Bank amongst others. These achievements underscore the potential of the capital market to support various sectors’ growth while fostering investor confidence through transparency and efficiency.”
Reacting on listed companies’ fresh capital injection, Investment Banker and Stockbroker, Mr. Tajudeen Olayinka stated that it is necessary for listed companies to raise fresh capital amid present macroeconomy challenges.
He stated that reforms in the foreign exchange market, among others, have weakened listed companies’ balance sheets that required urgent fresh capital to stay afloat and expand business frontline.
He noted that the Nigerian capital market has the potential to assist companies in the quest to fresh capital exercise, stressing on its robust liquidity.
