Recapitalisation: Banks raised ₦2.2trn from capital market in 2024

Nigeria's banking sector is abuzz with activities as banks race to meet the Central Bank of Nigeria's new recapitalization requirements. According to the Nigeria Securities and Exchange Commission, banks have managed to raise a staggering ₦2.2 trillion from the capital market in 2024. This significant amount has been gathered to bolster the financial strength of the banks and ensure compliance with the regulatory guidelines. Fitch, a renowned credit rating agency, believes that banks in the country are on track to meet the deadline set for the first quarter of 2026. To shed more light on this development, Muyiwa Oni, the Regional Head of Equity Research for West Africa at Standard Bank Group, shared insights in a recent interview with CNBC Africa. The discussion revolved around the capital raising process, the quality of the capital raised, and the ongoing efforts in the banking sector to meet the recapitalization requirements. Oni highlighted the importance of ensuring that the raised capital is of high quality and free from any form of leverages. He emphasized the need for equity-based funding to support the banks' capital base, rather than relying on credit financing. The conversation also touched upon the vigilance exercised by regulatory bodies, such as the Central Bank of Nigeria, in monitoring the capital verification process to prevent any misuse or mismanagement of funds. Looking ahead to the upcoming year, Oni mentioned that while some banks have successfully completed their capital raising exercises, others are still in the process of meeting the minimum share capital and share premium requirements. Various methods, including rights issues and private placements, have been employed by banks to raise the necessary capital. Despite initial concerns about market depth and investor participation, the prevailing trend indicates a positive outlook for the banking sector. With moderating interest rates and attractive valuations, investors are finding compelling opportunities in Nigerian banks, which are currently trading at discounts to their book value. The discussion also touched upon the recent directive from the Central Bank of Nigeria concerning insider loan-related facilities. Oni noted that for the larger banks within their coverage, the impact of regularizing such loans is minimal, as the non-performing loans are negligible compared to the banks' overall asset quality. However, he emphasized the importance of addressing governance issues and asset quality concerns in smaller, non-listed banks to avoid potential scandals and maintain financial stability. Overall, the interview provided valuable insights into the progress made by Nigerian banks in raising capital, ensuring high-quality capital, and navigating regulatory requirements as they work towards meeting the recapitalization deadline.