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Sam Onukwue, Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), has highlighted that Rights Issues serve as a strategic method for capital injection in banks, allowing existing shareholders to increase their shareholdings before involving external investors.
In response to recent efforts by several banks to raise capital as part of their recapitalization initiatives, Onukwue explained in an interview with Nairametrics that Rights Issues can shield companies from hostile takeovers if shareholders exercise their rights.
“However, it is a double-edged sword,” he cautioned. “If many shareholders do not participate, even though they can trade their rights, it might open the door to a takeover.”
Onukwue also discussed the benefits of Public Offers, noting that they can attract new shareholders and give existing ones a chance to increase their stakes.
“In this era of electronic offering, millennials, Gen Z, and other young investors may participate if the offer is well-publicized. This capital-raising method enables banks to raise significant funds,” he said.
He added that Public Offers can enhance a bank’s visibility and reputation. “Public Offers ensure transparency, with disclosures that banks must comply with when seeking regulatory approval, thereby boosting investor confidence through transparent processes.”
Addressing the attraction of Millennials, Gen Z, and Gen Alpha in the recapitalization program, Onukwue emphasized the importance of digital innovation for convenience.
“These generations, often referred to as digital natives, prefer seamless online experiences and mobile banking solutions. Banks investing in user-friendly mobile apps can cater to these tech-savvy preferences,” he noted.
He referenced the successful deployment of an electronic Initial Public Offering (e-IPO) by MTN three years ago as a paradigm shift, noting that the Nigerian Exchange (NGX) is continuously enhancing investors’ access and experience in the market to attract tech-savvy investors.
Regarding the capital market’s readiness to absorb the banks’ capital-raising efforts, Onukwue commented on the importance of investor confidence in a company’s future performance.
“Banks play a crucial role in every economy by providing efficient payment systems and enabling business transactions. Investors are more likely to invest in banks that operate professionally, maintain strong corporate governance, demonstrate profitability, and offer regular dividends and capital appreciation.”
He concluded by noting that many quoted banks on the NGX are currently undervalued, which presents an opportunity for high-net-worth investors to expand their portfolios with bank shares.
“The strong fundamentals and encouraging financial performance of many quoted banks will attract investors who see the long-term value in these institutions,” he said.
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