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By Chukwuma Umeorah
Key players in Nigeria’s financial sector have emphasised the need for advanced technology, enhanced corporate governance and streamlined regulatory processes to accelerate the ongoing recapitalisation of the banking sector. These calls were made during the annual workshop of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos over the weekend, which centered on the theme “Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market.”
Economist and Chief Executive Officer of Cowry Asset Management Limited, Johnson Chukwu, highlighted the need for the Central Bank of Nigeria (CBN) to leverage its existing information technology (IT) infrastructure and Bank Verification Numbers (BVN) to expedite the verification of offers from banks. Chukwu expressed concern over delays in the verification process, which have persisted months after the closure of some offers, dampening investor confidence.
“Some offers closed in August and now we are in December. With the level of advanced technology, why is it taking so long for CBN to conclude these verifications,” Chukwu queried.
He argued that adopting IT and BVN would reduce the time required to accept or reject offers, enabling investors to receive their allotments promptly or deploy their funds into other profitable ventures. He stated, “The longer period for completion of the verification process is dampening investors’ confidence. This is particularly worrisome for investors whose funds may be returned where the offers are oversubscribed, given the missed reinvestment opportunities.”
He further noted that the current requirements imposed by the CBN for investors in bank shares, such as three-year audited financial statements, board resolutions authorizing the investment, and three years of tax clearance certificates for corporate investors, were seen as overly stringent. These requirements, he said, create barriers for both issuers and investors.
“While regulation is necessary for maintaining the stability and integrity of the financial system, there is a need to leverage existing customer information in the banking system to avoid imposing onerous conditions on investors,” Chukwu stated.
Strengthening investor confidence
Beyond raising money, Chukwu described banks’ recapitalisation as a critical strategy for strengthening Nigeria’s banking sector and fostering economic growth. He noted that when banks access the capital market successfully, it sends positive signals to the financial market, enhancing investor confidence. “A well-capitalised bank is perceived as financially stable, reducing risks for investors and encouraging further investments in the sector,” he said. This is even as he called for more collaboration among banks, investors, and regulators to ensure the Nigerian banking sector remains resilient, competitive, and capable of driving economic growth.
Chukwu urged regulators to create a more predictable environment, stating, “The frequency of regulatory policy changes needs 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.” He emphasized the importance of transparency, stating that banks must improve their disclosure standards by publishing detailed 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,” he concluded.
SEC’s commitment to transparency and efficiency
Echoing similar sentiments, the Securities and Exchange Commission (SEC) emphasized the importance of corporate governance and risk management in the recapitalisation exercise. SEC’s Director-General, Emomotimi Agama, represented by the Divisional Head, Legal and Enforcement, John Achile, reiterated the commission’s commitment to ensuring transparency and efficiency in the process.
Agama stated that the SEC framework for banking sector recapitalisation (2024–2026) offered clear guidance for issuers while safeguarding investor interests. He emphasized the role of innovation in fostering inclusive growth, highlighting SEC’s exploration of blockchain technology to enhance secure and transparent transactions.
“The oversubscription of most recapitalisation offers in 2024 reflects strong investor confidence. To sustain this momentum, SEC has intensified efforts to enhance disclosure standards and corporate governance practices,” Agama noted. He also highlighted ongoing financial literacy campaigns and collaborations with fintech companies to democratize access to the capital market through low-entry investment options.
Addressing challenges and leveraging opportunities
Agama identified several constraints to the recapitalisation exercise, including market volatility, systemic risks, limited retail participation, and skepticism among investors demanding greater transparency and accountability. However, he stressed that these challenges present opportunities, such as leveraging technology to deepen financial inclusion and enhance market liquidity.
“We are equally presented with opportunities which include developing innovative financial products, such as green bonds and sukuk, to attract diverse investor segments,” Agama stated. He outlined SEC’s efforts to reduce bureaucratic bottlenecks through digitalization and ensure timely application reviews. “We are committed to transparency because we are mindful of the benefits and risks associated with technology adoption. SEC does due diligence to all innovative ideas that come into the market,” Agama added.
He assured stakeholders of the Commission’s commitment to creating an enabling environment for seamless capital formation and investor protection. “Our efforts are anchored on providing issuers with clear guidelines, maintaining open lines of communication with all market stakeholders, and enhancing regulatory oversight to protect investors while promoting market integrity,” Agama said.
Addressing unclaimed dividends
Agama also addressed the rising issue of unclaimed dividends, attributing it to regulatory non-compliance and information gaps among investors. He assured that SEC would continue to strengthen its dual role of market regulation and investor protection to boost confidence in the capital market. “SEC has done everything within its powers to ensure that investors receive their dividends at the appropriate time,” he said.
Bridging gaps between issuers and investors
Beyond the role of the operators and regulators in the market, comes the need for more enlightenment through the media. CAMCAN’s Chairman, Chinyere Joel-Nwokeoma charged the journalists to up their game in educating the public through insightful and well prepared publications that will enable investors to make informed decisions. “The annual workshop is part of our contributions to the development and growth of the nation’s economy by bringing regulators, operators and company executives to discuss issues that affect the market and Nigeria at large.”
The stakeholders underscored the critical role of the capital market in the recapitalisation exercise. They noted that successful capital-raising initiatives such as IPOs, rights issues, and bonds boost investor confidence and positively impact the broader financial market.
“The success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market.”
They collectively, stressed the need for collaboration among regulators, issuers, and investors to achieve the recapitalisation goals. He urged banks to commit to improving their transparency and disclosure standards, which he said would address challenges of information asymmetry and rebuild trust.
The path forward
By addressing the challenges of regulatory uncertainty, information asymmetry, and liquidity constraints, and by harnessing technology and innovative financial products, the Nigerian capital market stands poised to unlock new opportunities for growth.
As Nigeria’s banking sector navigates its recapitalisation journey, stakeholders agree on the importance of leveraging technology, fostering collaboration, and enhancing corporate governance to ensure the exercise’s success. With these efforts, the recapitalisation exercise is expected to strengthen the Nigerian banking sector, restore investor confidence, and position the capital market as a key driver of economic growth.
