By Taiwo Adebowale, Senior Business Correspondent
LAGOS ISLAND, Lagos — In a swift response to the Central Bank of Nigeria’s (CBN) recent announcement of increased minimum capital requirements for banks, Access Holdings Plc has taken proactive measures by unveiling plans for a $1.5 billion capital raising programme. This move comes amidst mixed reactions from financial analysts, economists, and bankers regarding the implications and necessity of the recapitalization exercise.
The CBN’s directive, unveiled less than 24 hours ago, mandates banks to bolster their capital bases to N500 billion and N200 billion for commercial banks with international and national authorization respectively. While some industry experts have welcomed the move as a means to enhance the resilience and competitiveness of Nigerian banks, others have raised concerns, particularly regarding the exclusion of retained earnings from the regulatory capital composition.
Access Holdings Plc, in a statement released shortly after the CBN’s announcement, detailed its plans for the capital raising programme. The programme, with a target of $1.5 billion, aims to strengthen the group’s financial position through the issuance of various financial instruments, including ordinary shares, preference shares, Alternative Tier 1 capital, convertible and/or non-convertible debt, bonds, or other capital and/or funding instruments.
According to Access Holdings, the programme may be executed through public offerings, private placements, rights issues, book building processes, or a combination thereof. The specifics of the programme, including tranches, series, proportions, dates, pricing, tenor, and other terms and conditions, will be determined by the Board of Directors, contingent upon securing the necessary regulatory approvals.
The group revealed that a significant portion of the proposed capital raising, up to N365 billion, will be raised specifically through a Rights Issue of ordinary shares. The proceeds from this Rights Issue will be allocated towards supporting ongoing working capital needs, including organic growth funding for its banking and non-banking subsidiaries.
While Access Holdings Plc has taken the lead in announcing its capital raising programme, the broader implications of the CBN’s directive are still being assessed by industry stakeholders. Prof. Uche Uwaleke, the Special Adviser to the Senate Committee on Banking, Insurance, and Other Financial Institutions, contextualized the move by recalling the CBN’s previous capital base adjustment in 2005. He emphasized the need for fresh capital injection to enhance the stability and resilience of the banking sector in line with international standards.
Dr. Uche Olowu, a former President of the Chartered Institute of Bankers of Nigeria (CIBN), lauded the initiative as a timely intervention to address capital erosion resulting from currency devaluation. He anticipated a high compliance rate among banks within the 24-month window provided by the CBN, with some potentially opting for mergers or regional focus to navigate the evolving landscape.
However, there are concerns raised by financial analysts regarding the exclusion of retained earnings from the capital base calculation. Mr. Ayokunle Olubunmi, the Head of Financial Institutions Ratings at Agusto & Co, noted that this exclusion poses challenges for banks in raising additional capital and may necessitate discussions within the CBN to reconsider this aspect of the regulatory framework.
In response to these concerns, Chief Executive Officer of Eczellon Capital, Diekola Onaolapo, emphasized the importance of safeguarding banks against currency devaluation but acknowledged the potential need for strategic shifts in banking operations, including mergers, acquisitions, and regional expansions.
As Access Holdings Plc sets the stage with its $1.5 billion capital raising programme, the Nigerian banking sector braces for a period of transformation and adaptation to meet the new regulatory requirements laid down by the CBN. With stakeholders closely monitoring developments, the coming months are likely to witness significant changes in the landscape of Nigerian banking, as institutions strive to enhance their competitiveness and resilience in the face of evolving market dynamics.
