Concerns have emerged from shareholders about the possibility of banks opting for share reconstruction following the completion of their capital raising exercises on the Nigerian Exchange Limited (NGX).
Speaking at the 2024 Capital Market Correspondent Association of Nigeria (CAMCAN) annual workshop, Mr. Moses Igbrude, National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), warned investors to be vigilant as the banking sector undergoes recapitalization.
Themed “Banks’ Recapitalization: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market,” the workshop highlighted the growing concerns of shareholders, particularly in light of past experiences. Igbrude reminded attendees that during the banking sector consolidation of 2004-2005, banks raised fresh capital from shareholders, only to later engage in share reconstruction rather than buybacks.
“After raising capital, some banks opted for share reconstruction instead of doing a share buyback. This process often leaves shareholders at a disadvantage,” Igbrude said, suggesting that banks may manipulate shareholders through share reconstruction rather than improving performance to drive stock values.
The ISAN coordinator emphasized the importance of ensuring that banks’ stock prices are driven by strong performance rather than artificial adjustments like share reconstruction. He also cautioned shareholders participating in the current capital raising initiatives about the amount of shares they use to meet the Central Bank of Nigeria’s (CBN) N500 billion recapitalization requirement.
Igbrude further expressed concerns over the poor performance of some banks, which leads to the depreciation of their stock prices after listing at high prices on the NGX. He reminded shareholders that without their participation, exchanges like the NGX would not exist, highlighting the crucial role individual and corporate shareholders play in capital formation.
He also raised issues surrounding technology’s impact on shareholder inclusion, especially for elderly investors who may not have access to digital platforms. “Many of our members, especially the elders, are excluded from the ongoing recapitalization due to their inability to access the technology needed to participate in rights issues or public offers,” Igbrude said.
To address these concerns, Igbrude called for regulatory bodies, including the Securities and Exchange Commission (SEC) and NGX, to protect shareholders’ interests and ensure that all investors, regardless of age or technological proficiency, are included in the process.
“We must be mindful of human factors when developing policies and technologies. If those behind the systems lack integrity, the technology could be misused,” Igbrude warned, calling for more inclusive practices to ensure that no shareholder is left behind.
