Nigeria: CBN’s Delays in Capital Verification Undermine Banking Recapitalisation Efforts

The Central Bank of Nigeria (CBN) is facing growing criticism from capital market stakeholders for delays in completing its capital verification process, a critical step in the ongoing banking sector recapitalisation exercise. Market participants argue that the delays are frustrating investors and hindering the digitisation of share issuance processes, which were designed to streamline operations.

This sentiment was echoed during the annual workshop of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos. Themed “Recapitalisation: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market,” the workshop brought together experts and regulators to discuss challenges in the sector.

Verification Delays Impacting Market Confidence

The CBN, as the final signatory in the tripartite committee—alongside the Securities and Exchange Commission (SEC)and the Nigeria Deposit Insurance Corporation (NDIC)—has not concluded any capital verification exercises since the first offers closed over five months ago. This step is essential for approving allotments and releasing funds for banks to complete their recapitalisation processes.

Dr. Umaru Kwairanga, Chairman of the Nigerian Exchange Group (NGX), described the delays as counterproductive, warning that prolonged holding of investors’ funds could erode trust in the market. He highlighted the success of the NGX’s e-offering platform, NGX Invest, which has doubled the number of investors in six months. However, he noted that such progress could be undermined if regulatory bottlenecks persist.

Call for Technology-Driven Solutions

Mr. Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited, urged the CBN to deploy technology, including Bank Verification Numbers (BVN), to expedite verification processes. He argued that while ensuring the legitimacy of capital is important, prolonged delays dampen investor confidence and create missed reinvestment opportunities.

Chukwu also criticised the stringent requirements imposed by the CBN, including three years of audited financial statements and tax clearance certificates for corporate investors. These conditions, he said, are discouraging participation and slowing down the recapitalisation exercise.

Regulatory Collaboration and Market Innovation

Dr. Emomotimi Agama, Director-General of the SEC, stressed the importance of leveraging innovation to close the gap between issuers and investors. Represented by Mr. John Achile, he revealed that SEC is exploring the integration of blockchain technology to enhance transparency and trust in transactions.

Agama highlighted that oversubscriptions for recapitalisation offers in 2024 demonstrate strong investor confidence, which should be preserved through timely approvals, enhanced corporate governance, and simplified regulatory processes. He also emphasized the importance of financial literacy and low-barrier investment options to encourage retail participation.

Addressing Market Challenges

During the panel session, SEC officials pointed out key challenges in the market, including volatility, limited retail participation, and skepticism among investors. They committed to addressing these issues by:

• Streamlining bureaucratic processes through digitalisation.
• Enhancing disclosure standards and governance practices.
• Strengthening regulatory oversight to protect investors.

Market stakeholders, including Chukwu, called for better coordination among regulators and banks to create a predictable regulatory environment. He emphasised that frequent policy changes increase uncertainty and operational risks, deterring investment.

Chukwu further noted that well-capitalised banks signal financial stability, which boosts investor confidence and attracts further investment—a critical factor for economic growth.

SEC’s Achile reaffirmed the commission’s commitment to safeguarding investor interests while promoting innovation. He also addressed concerns about rising unclaimed dividends, attributing them to information gaps and regulatory non-compliance by investors.

Stakeholders agree that resolving these delays requires collective effort. Regulators must collaborate to eliminate bottlenecks, while banks should enhance transparency to build trust. By addressing these challenges, the Nigerian banking sector can remain resilient, competitive, and capable of driving sustainable economic growth.