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Recapitalisation: Shareholders list conditions for banks

Some minority shareholder groups have said that they would be considering the dividend payout rates and corporate governance of the banks who would be coming to the capital market to raise funds.

 This is in light of the recent recapitalisation plan announced by the Central Bank of Nigeria.

At the annual Bankers’ Dinners, the CBN governor, Dr Olayemi Cardoso, had said that banks will be required to raise their capital base to service the $1tn economy projected by President Bola Tinubu.

While mixed reactions trailed the announcement with some economic stakeholders challenging the premise of the projected size of the economy when the GDP growth rate is less than five per cent, the shareholders are saying that this recapitalisation drive will allow them to treat some banks the way they had been treated in the past.

Speaking with The PUNCH, the President of Noble Solidarity Shareholders, Matthew Akinlade, said that while the recapitalisation was needed in light of the foreign exchange rate and increasing demand from the country’s real sector, it should not be done in a hurry.

He said, “I think if one wants to be realistic, our Naira has massively declined in terms of value and even the demand from the manufacturing sector in terms of financing their operations has grown higher. So, unless the banks recapitalise, they may not be able to do the funding. It is desirable but not to be done in a jiffy. By so doing, one can give undue advantage to some of the banks to more or less force some smaller ones into mergers and acquisitions.”

He added that minority shareholders would be looking to position themselves during the recapitalisation drive, saying, “I know minority shareholders would want to take advantage of this, especially with the banks that have impressive dividend payout rates. Such banks will have people who want to invest in them. Apart from dividend payout, other fundamentals are bothering corporate governance to ensure the security of your investment. It is even more important than dividend payout.”

Mr Boniface Okezie of the Progressive Shareholders Association of Nigeria, in his comments, said that some of the banks were already prepared to raise additional capital.

While advising the CBN to allow only small banks to access the capital market for funds, Okezie said that minority investors must do their due diligence and invest in stocks with track records.

“What we will be looking out for include those who have been paying dividends in the past, those with good capital appreciation and a good track record from their management team. How have they been communicating with shareholders when the situation was rosy or not?  I have my fears and some of those banks can’t convince me, not when my money has been trapped.  In the past, they have been reckless. Even those who acquired the shares of those banks did not pay compensation to shareholders and are using the assets of the bank as leverage to build up their branches. They are not paying dividends to shareholders but have created an empire. For such banks, shareholders must be on the lookout for them and this is the time to pay them back in their coin.”

The Chief Equity Analyst at Palesa Capital Markets Associates Limited, Nornah Awoh, revealed that a concern of his would be the number of issued shares and how that would be factored into the planned recapitalisation drive.

He said, “The challenge for me is the number of shares in issue because coming from the last capitalisation, that itself became an issue. I don’t know how that would work. I would rather wait and have a clearer picture.”

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