The market capitalization of banking equities listed on the Nigerian Exchange has decreased by around N1.62 trillion since the Central Bank of Nigeria ordered the nation’s banks to recapitalize.... CLICK TO READ THE FULL NEWS HERE▶▶
Deposit Money Banks were instructed in March to recapitalize by the Central Bank of Nigeria. According to the CBN circular, this round of recapitalization will only recognize the share capital and share premium items on the shareholder fund component of the balance sheet.
Investor decisions were influenced by regulations issued by the federal government and the Apex Bank in the days and weeks following the CBN recapitalization instruction, as the banks rushed to the market to raise the necessary money.
The most recent is a 70% windfall tax, which will be applied retroactively to bank gains realized in the fiscal year 2023 and will cover all foreign exchange earnings earned from the new FX policy’s introduction until the end of 2025.
Experts speaks on reforms
During a recent press conference in Lagos, Tayo Aduloju, the CEO of the National Economic Summit Group, voiced concerns regarding the government’s policies’ lack of coherence, particularly with regard to the windfall tax.
He stated, “The problem with the conveyor belt of reforms is that when it is just coming out piece by piece, it’s hard to coordinate and therefore the outcome will have some unintended consequences.
“So at a time you are telling investors to bring funds into Nigeria, some reforms are creating a more difficult environment for those same investors. You have a tax holiday on food, and drugs that will affect your import bill, but you also increase your demand for forex.”
Due to the sensitive nature of the situation, a stockbroker who talked with The PUNCH on the condition of anonymity stated that there was a lot of interest when the CBN made the announcement but emphasized that it had since slowed down.
“A lot of investors were looking forward to the offers but since then, a lot has happened – the pressure from CBN and the Federal Government. We have had restrictions on the use of retained earnings as a capital-raising instrument, we have seen recently the windfall tax and the dormant account. All of these increased regulatory actions are disincentives to investors.
“If you look at the pricing of the offers, my personal view was that the pricing would encourage the investors to pick up their rights, but what we are seeing is that investors would rather buy stocks in the secondary market than take up their rights. So the pricing is a big deal,” the stockbroker stated.
The stockbroker continued by saying that some participants were even discussing a review of the market regulations, which would result in the capital market’s shares of banking companies being unavailable for trade while their offers were active.
Former Chartered Institute of Stockbrokers President Tunde Amolegbe expressed concern over the pricing of the offers but acknowledged that it was still too early to determine investors’ appetites.
Amolegbe, the managing director of Arthur Steven Asset Management Limited, confirmed that younger investors will probably participate more after the NGX E-offering platform is launched.
