Nigeria: Onukwue - Bank Recapitalisation Will Revive Primary Market

11 June 2024
This Day (Lagos)

The Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwue has stated that with the proposed new capital requirements of banks, shall spur activities in the primary segment of the Nigerian capital market, which has remained largely inactive due to paucity of new issues over the years.

Central Bank of Nigeria (CBN), had on March 28 this year, announced new capital base on the basis of a bank's authorization, ranging from N200 billion to N500 billion and this is expected to commence in the next two years.

Onukwue, commended the apex bank for the proposed minimum share capital, given the level of risks that banks bear nowadays. He also explained that the development would create transactions in the primary market arm of the Nigerian capital market.

"I believe that the Central Bank of Nigeria (CBN), has done the right thing if our banks should compete in the global market, including the African Continental Free Trade Area (AfCFTA). With the current inflation rate and exchange rate, it has become almost impossible for our banks to operate in line with new global minimum capital threshold.

"Besides, the level of risks, which the banks bear today has significantly been exacerbated by the current macro-economic vagaries. I also believe the apex bank is repositioning the banks to be o able to finance the envisaged $1 trillion economy in the ñext 7-8 years. In the light of the foregoing, I have no doubt that the apex bank is fair enough to base the new share capital on the level of authorization of each bank. The next thing is for every bank to justify why it should continue to operate in the banking sector.

"The primary market has been relatively inactive over the years because of the general lull in the economy. Potential companies that would have floated initial Public Offerings (IPOs) were reluctant for fear of undersubscription. To worsen the situation, many investors have lost money in the primary market due to failure of companies to list their shares in the secondary market after capital raising in the primary market. However, with the directive on banks' recapitalization, activities shall bounce back in the primary market.

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