The Central Bank of Nigeria (CBN) needs to expedite its capital verification process in order to ensure that ongoing banks’ offers are concluded timely.
Capital market stakeholders at the weekend said the delay in the conclusion of capital verification exercise is frustrating the investing public and becoming counterproductive to the digitisation of the share issuance processes.
Experts who speak at the annual workshop of the Capital Market Correspondents Association of Nigeria (CAMCAN) at the weekend in Lagos, said the inability of the apex bank to conclude verification of capital raised since the beginning of the offers is worrisome. The theme of the workshop was: “Recapitalisation: Bridging the gap between investors and issuers in the nigerian capital market.”
The CBN is regarded as the final signatory in a tripartite committee that included the Securities and Exchange Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC). The committee is saddled with scrutinising new funds being raised by banks under the ongoing banking sector recapitalisation exercise.
Under the guidelines for the recapitalisation exercise, capital verification is a major requirement before the clearance of the allotment proposal and release of the funds to the bank for onward completion of the offer process and addition of the new capital to its capital base.
CBN has not released any verification result since the first offers were concluded more than five months ago.
Chairman, Nigerian Exchange Group, (NGX Group), Dr Umaru Kwairanga, said it could be counterproductive to hold up investors’ funds for such a long period, keeping all parties in limbo.
Highlighting the landmark launch of a full electronic offering platform, Kwairanga said the NGX has been able to double the number of investors in the Nigerian capital market over the past six months.
The e-offering platform of the NGX, NGX Invest, allows existing and new investors to buy into rights issue and public offers by clicking few buttons on their mobile devices, under a new seamless digital platform.
He said the NGX has played its roles creditably under the ongoing recapitalisation exercise, noting that the Exchange has served its primary role as a bridge between investors and issuers.
“After the offers are concluded , the Nigerian Exchange will ensure that the banks meet their disclosure requirements promptly and fully so that investors are kept abreast of how their monies are being used,” Kwairanga said.
Group Managing Director, Cowry Asset Management Limited, Mr Johnson Chukwu, said the CBN needs to deploy available infrastructure technology and Bank Verification Numbers (BVN) to tackle delay in the verification of banks’ offers and ensure speedy conclusion of the process.
According to him, the deployment of high-level technology by the CBN and the use of the BVN would fast-track the process of accepting or rejecting offers and enable investors get their allotment or deploy their funds in other profitable economic activities.
He argued that while the apex bank’s role in verifying the source of the capital invested is important, the longer period for completion of the verification process is dampening investors’ confidence.
According to him, this is particularly worrisome for investors whose funds may be returned where the offers may be oversubscribed given the missed reinvestment opportunities.
Chukwu noted that the current CBN requirements for investors investing in banks shares are seen by many as overly stringent and creating barriers for both issuers and investors.
He cited the provision of three-year audited financial statements, board resolution authoring the investment and tax clearance certificates for the past three years for corporate investors, noting that these requirements are disincentive to investment in the capital market.
He added that while regulation is necessary for maintaining the stability and integrity of the financial system in ensuring that unqualified capital is not invested in the banks, there is need to leverage on existing customer information in the banking system to avoid imposing onerous conditions on investors.
He described banks’ recapitalisation as a key strategy for strengthening the Nigerian banking sector and fostering economic growth.
He, however, argued that the success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market.
Outlining the role of the capital market in the recapitalisation exercise, Chukwu noted that when banks access the capital market and demonstrate their ability to raise capital through successful IPOs, rights issues and bonds, it strengthens investors confidence and sends a positive signal to the broader financial market.
This is because a well-capitalised bank is perceived as financially stable, reducing risk for investors and enhancing market confidence. Chukwu added that this encourages further investment in the banking sector, which is essential for the sustainable growth of the industry.
He, however, called for concerted efforts from both banks and investors, supported by regulators in ensuring that the Nigerian banking sector remains resilient, competitive, and capable of driving the country’s economic growth for the future.
Chukwu also urged the CBN and other regulatory bodies to work together in creating a more predictable regulatory environment for banks and investors.
Said he: “The frequency of regulatory policy changes need to be moderated to allow for better planning for both banks and the investing public as well as reduce the regulatory and operational risks associated with these frequent changes.
“Banks must commit to improving their transparency and disclosure standards. This includes the publication of detailed and accurate financial statements, risk disclosures, and forward-looking guidance.
“By addressing the challenges of information asymmetry, regulatory uncertainty, and liquidity, while improving transparency, corporate governance, and financial innovation, the Nigerian capital market can unlock new opportunities for bank recapitalisation”.
Director-General, Securities and Exchange Commission (SEC), Dr Emomotimi Agama, pointed out that the key to bridging the gap between issuers and investors remained the harnessing of innovation for inclusive growth.
He said that SEC, through the aid of digital platform, is exploring the integration of blockchain technology for secure and transparent transaction processing, a step that will redefine trust in the market.
He reiterated SEC’s commitment towards ensuring transparency and efficiency in the recapitalisation process.
Agama, who was represented by the Divisional Head, Legal and Enforcement of SEC, Mr John Achile, noted that the framework on the banking sector recapitalisation (2024–2026) provided clear guidance for issuers while also safeguarding the interests of investors.
He said that the oversubscription of most recapitalisation offers in 2024 reflected strong investor confidence.
To sustain this momentum, he said that SEC has intensified efforts to enhance disclosure standards and corporate governance practices.
According to him, expanding financial literacy campaigns and collaborating with fintech companies to provide low-entry investment options will democratize access to the capital market.
He assured stakeholders of the commission’s steadfastness in achieving its mission of creating an enabling environment for seamless and transparent capital formation.
Said he: “Our efforts are anchored on; providing issuers with clear guidelines and maintaining open lines of communication with all market stakeholders, reducing bureaucratic bottlenecks through digitalisation, ensuring timely review and approval of applications, and enhancing regulatory oversight to protect investors while promoting market integrity”.
Agama listed the constraints to the exercise to include: addressing market volatility, systemic risks, limited retail participation as well as combating skepticism among investors who demand greater transparency and accountability.
He stressed that the success of recapitalisation efforts depends on collaboration among regulators, issuers, and investors.
Speaking on market infrastructure at the panel session, Achile said SEC provides oversight to every operations in the market, ranging from technology innovations to market infrastructure.
“We are committed to transparency because we are mindful of the benefits and risks associated with technology adoption. SEC does due diligence to all the innovative ideas that comes into the market to ensure adequate compliance with the requirements,” Achile said.
On the rising unclaimed dividend figure, he blamed the inability of investors to comply with regulatory requirements and information gap, noting that SEC has done everything within its powers to ensure that investors receive their dividend at the appropriate time.
He however assured that the commission would continue to strengthen its dual role of market regulation and investor protection to boost confidence in the market.
