The Central Bank of Nigeria recently directed banks to shore up their capital, which will stimulate a lot of activities in the Nigerian capital market in the next two years. Technology will be a key driver in the recapitalisation process, OLUWAKEMI ABIMBOLA writes

In December 2021, the Nigerian capital market recorded its first digital public offerings when MTN Nigeria sold 575 million ordinary shares to Nigerians at N169 per share in a strictly digital offer.

The public offer done via a digital platform called Primary Offer has become a reference point in the capital market since then.

MTN Nigeria Communications Plc was listed on the Premium Board of the Nigerian Stock Exchange by introduction on May 16, 2019, becoming the first Mobile Network Operator to be listed on the Nigerian Exchange.

MTN Group President and Chief Executive Officer, Ralph Mupita, speaking on the digital offer, said, “We are proud that our offer was the first Nigerian public offer to use the digital application platform, PrimaryOffer, which enabled wider investor participation across Nigeria.”

Concerning the process, the Managing Director of Capital Markets, Chapel Hill Denham, Lanre Buluro, who acted as the lead adviser on the transaction, said the digital platform was set up based on engagement with regulators, including the Securities and Exchange Commission and the Nigerian Exchange Limited.

“This is the first time in our market when investors far and wide, also in Diaspora can participate in an equity offer in Nigeria. With the help of our regulators, the SEC and NGX, we have created this wonderful application called Primary Offer. It is end-to-end. People should be able to buy their shares in five minutes. All you need is your BVN and your date of birth. Once you put that, your information will show up on that application.

“If you do not have a CSCS account, you can create one on that application and in 24 to 48 hours, CSCS has confirmed that they will be able to create an account for you. While doing that, you can go ahead to buy shares, put in your bank details where you will receive your dividend and when the SEC approves and shares are allotted, you will be notified and the shares will be domiciled in your CSCS account,” Buluro stated.

In the wake of the fresh banking sector recapitalisation directive by the CBN, the MTN digital offer has been referenced by multiple stakeholders, with hints that the adoption of technology would boost the fresh exercise.

In March, the CBN issued a circular to all commercial, merchant and non-interest banks as well as promoters of proposed banks, on a new capital base for them.

In the circular, the apex bank directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn while those with regional authorisation are expected to achieve a N50bn capital base.

Also, non-interest banks with national and regional authorisations will need to increase their capital to N20bn and N10bn, respectively.

The apex bank circular said, “For existing banks, the minimum capital specified above shall comprise paid-up capital and share premium only. For the avoidance of doubt, the new capital requirement shall not be based on the Shareholders’ Fund.

“Additional Tier 1 Capital shall not be eligible for the purpose of meeting the new requirement. All banks are required to meet the minimum capital requirement within a period of 24 months commencing on April 1, 2024 and terminating on March 31, 2026. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio requirement applicable to their license authorisation. In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position.”

For proposed banks, the CBN said that their minimum capital requirement shall be paid-up capital and applicable to all new applications for banking licences submitted after April 1, 2024.

To meet the requirement, the CBN gave the sector three options, including issuance of new common shares (by way of public offer, rights issues, or private placements); mergers and acquisitions; as well as upgrade/downgrade of their respective license category or authorisation.

Fitch Rating has projected that Nigerian banks were going to ignore license change in favour of equity issuances and mergers.

While no mergers have become visible yet, banks have started to get shareholders’ approval to raise funds on both the local and international markets via different instruments and submitted their plans to the CBN.

Speaking on the adoption of technology, the President/Chairman of the Council, Institute of Capital Market Registrars, Seyi Owoturo, said that there were ready rules in the market for electronic offerings and that some registrars had already developed the technological capacity for digital offers.

 He added that with the increasing number of investors in the market, paperless offerings were the way to go.

“One of the things as a market we have done years back is to create rules around digital offerings.  You know when these rules were made, the biggest registrars probably had about 5,000 shareholders. Now, we have some banks with millions of shareholders, and when they are doing rights issues, you cannot do it by paper.

“I know several registrars who have developed technological capabilities to be able to take electronic filings. The NGX has also gone ahead to build an electronic platform and they are building that platform to be able to interact with other stakeholders. Registrars are preparing because we understand the enormity of the challenge. This capitalisation exercise cannot be manual, but you will still find one or two persons who may not be able to get on board, like those in the villages and such,” he posited.

Owoturo, however, cautioned that better investor enlightenment needs to be carried out in this fresh capitalisation exercise.

“We have to be mindful about how we sell those offers. People need to know what they are getting into.  Part of the challenges we have now are from the 2005 and 2008 banking sector recapitalisation exercises. A whole lot of issues, people were selling shares in the market, some didn’t even know what they were buying, and they sold shares in churches and mosques.

“We have to be careful how we sell these offers to the public. They need to know what they are getting into. When the market tanked in 2008, a lot of them felt it was a scam and that is why they are not back till today, so we have to be mindful that when we are selling those offers, we are selling to people who understand what they are getting into. The capital market is for patient capital, you invest and wait,” he admonished.

At its last annual general meeting, the Nigerian Exchange Group said that it was working on plans to provide an online platform for public offers.

A statement from the group said, “The platform will provide a smarter and more efficient way for issuers to raise capital and enhance the subscription process and operational workflow of POs in the capital market, including initial public offerings, rights issues and other public offers.”

According to the NGX Group Managing Director/Chief Executive Officer, Temi Popoola, the future of the NGX’s business and capital markets hinges on technology, hence the direction it is going.

“That is why we are driving this digital transformation journey across our subsidiaries through the group. NGX Group’s digital transformation will democratise access to public issuances for every Nigerian with a mobile phone, supporting capital-raising efforts for companies. Additionally, we aim to commercialise our technology solutions and expand our footprint across Africa,” he added.

Expressing a similar view, the Chairman of Access Holdings, Aigboje Aig-Imoukhuede, the parent company of Nigeria’s largest bank, Access Bank, which was already seeking a combined capital raise of up to $1.5bn via equity, quasi-equity, and debt issuances and N365bn through a rights issue to fortify its capital base.

Speaking with journalists at the second annual general meeting of the HoldCo in April, Aig-Imoukhuede disclosed that digital technology would play an interesting role in the bank’s capital-raising efforts.

He said, “If you remember the 2004 capital raising, we went around Nigeria. It led to the democratisation of our capital market, others followed suit. The number of shareholders in banks and the capital market increased as a result of that effort.

“This time around, we have digital technology that we are going to deploy fully. There have been public offers that have leveraged digital technology, but using Access Bank’s capacity, and the NGX’s digital capacity, we are going to do some interesting things. In this rights issue, we have shareholders and each of them would be able to make that investment decision just by touching their phones.  That way, the issue of dilution and concerns that they may have about participation would be dealt with.”

Not left of the push for the adoption of technology, the Chartered Institute of Stockbrokers, whose immediate past President/Chairman of the CIS Council, Mr Oluwole Adeosun, touted the ability of the capital market to support the capital raising exercise during a visit by its leadership to the CBN Governor, Mr Olayemi Cardoso, who is also a stockbroker, in his Lagos office.

He maintained that the Nigerian capital market could support the recapitalisation exercise, saying, “It was amply demonstrated during the indigenisation exercise as far back as 1972 and successive banking sector recapitalisation programmes over the years up until the last major banking recapitalisation exercise between 2004 and 2006. With technology and new subscription channels like mobile apps, the current exercise should record even greater success and bring in more and younger Nigerians into the investment community.”

Meanwhile, the former Director-General of the Securities and Exchange Commission, Lamido Yuguda, noted at the last Capital Market Committee meeting in April that the SEC was partnering with the CBN and other relevant agencies to ensure a smooth process.

The former SEC DG commended the CBN for the policy on bank recapitalisation and noted that the commission had drawn useful lessons from the previous bank recapitalisation exercise and would very shortly issue appropriate guidelines to facilitate an efficient capital-raising process in the present exercise.

He added that a process driven by technology was what the SEC would like to see.

He said, “Paperless (offering) is the preference of the commission. We had an offer on the market not too long ago that was done paperless from end to end. This would drive the inclusion of everyone, especially those of the younger demographic class, people who are used to filling out electronic forms rather than paper forms.

“We are coming out with guidelines,” he concluded.

Beyond the capital market players is the technology on which the process would run.

DataReportal said that a total of 205.4 million cellular mobile connections were active in Nigeria in early 2024, which was equivalent to 90.7 per cent of the country’s total population.