As Nigeria’s banking sector faces the Central Bank of Nigeria’s (CBN) directive to raise capital, several financial institutions are opting for rights issues to secure the additional funds needed to meet the new regulatory standards. FBN Holdings and United Bank for Africa (UBA) are among the first to take this route, with large-scale offerings to existing shareholders.

FBN Holdings is currently in the market with a N150 billion rights issue, offering 5.98 billion ordinary shares priced at N25 per share. The offer, based on one new share for every six held, will close on December 12, 2024.

Similarly, UBA is seeking to raise N239.39 billion via its rights issue, with 6.84 billion shares priced at N35 each. This offering, available to shareholders on a 1-for-5 basis, is the first step in UBA’s broader N400 billion capital raising program. Group Chairman Tony Elumelu highlighted that the funds will not only strengthen UBA’s capital base but also help expand its lending capacity and digital infrastructure while supporting sustainable business practices across Africa.

In addition, Stanbic IBTC Holdings is preparing a N148.71 billion rights issue of approximately 2.94 billion shares, priced at N50.50 each. This offer is awaiting approval from the Nigerian Exchange Limited and is expected to provide shareholders with an opportunity to further invest in the bank.

Wema Bank, which already listed its N8.57 billion rights issue in July 2024, is also responding to CBN’s directive for banks to raise additional capital to meet the new minimum requirements.

Capital market analysts like Rotimi Fakayejo suggest that these rights issues are primarily driven by majority shareholders seeking to maintain control and strengthen their stakes in the banks. According to Fakayejo, the rights issue strategy allows existing shareholders to prevent new investors from diluting their control.

While shareholders like Eric Akinduro of the Ibadan Shareholders Association argue that the decision ultimately lies with the board, he encouraged investors to take up their rights to maximize returns. On the other hand, Moses Igbrude of the Independent Shareholders Association of Nigeria pointed out that the CBN’s directive was aimed directly at the bank owners, not external investors, allowing the banks to raise the necessary funds from existing shareholders before considering new investors.

With more banks expected to follow suit, the capital raising process is expected to play a critical role in ensuring the stability and growth of Nigeria’s banking sector amid increasing regulatory demands.