Economy

Four banks open bid to raise N1tr from capital market

Published

8 months ago

July 8, 2024

Admin

Banking recapitalisation got unto the fast-lane with four banks jostling to raise more than N1 trillion in the first cluster of offers.

This is expected to be hallmark of the two-year plan.

Four commercial banks with international license – Fidelity Bank Plc, Access Holdings Plc, Guaranty Trust Holding Company (GTCO) Plc and FCMB Group Plc – which altogether needed to increase their capital base to N2 trillion, are seeking to raise about N1 trillion in the first phase of intense competition for investors’ funds.

The first cluster of offers came as the Central Bank of Nigeria (CBN) at the weekend said the ongoing recapitalisation will produce resilient and fit-for-purpose banks with more ability to grow the economy.

CBN Governor, Olayemi Cardoso, said banks recapitalisation will further strengthen the financial system and make it robust to be able to withstand economic headwinds.

Regulatory reports yesterday indicated that three other banks- Access Holdings, GTCO and FCMB have gotten approval to join Fidelity Bank in the capital market, with the four offers’ periods expected to overlap.

The four banks, which have combined share capital and share premium of N644.995 billion, need to raise N1.355 trillion to meet the new minimum capital requirement of share capital and share premium of N500 billion each, for a bank with international license.

Access Holdings will today open acceptance list for a N351 billion rights issue. Access Holdings is offering about 17.773 billion ordinary shares of 50 kobo each to existing shareholders at N19.75 per share. The rights are pre-allotted on the basis of one new share for every two ordinary shares held as at June 7. The offer is scheduled to close on Wednesday, August 14.

Fidelity Bank had launched a N127.1 billion hybrid offer including a rights issue of 3.2 billion ordinary shares of 50 kobo each at N9.25 per share and a public offer of 10 billion ordinary shares of 50 kobo each at N9.75 per share.

The acceptance and application lists for Fidelity Bank’s combined offer, which opened on June 20, are scheduled to close on July 29. The rights issue was pre-allotted on the basis of one new ordinary share for every 10 existing ordinary shares held as at the close of business on January 05.

In the largest of the fund raising so far, GTCO is launching a N400.5 billion public offer by 9.0 billion ordinary shares of 50 kobo each at N44.50 per share. GTCO, which had secured approval of the Nigerian Exchange (NGX), will meet with capital market stakeholders today to outline facts behind its offer, preparatory to the opening of formal application list.

FCMB Group has also secured approval for a N113.98 billion public offer. The group is offering 15.197 billion ordinary shares of 50 kobo each at N7.50 per share.

The current capital raisings by Access Holdings and GTCO are more than enough to meet their new capital requirements.

However, Fidelity Bank and FCMB Group are implementing multi-layered recapitalisation plans that may see the banks coming to the market as many times as needed to meet their capital requirements. There is indication that Fidelity Bank may raise more than N127.1 billion under the ongoing combined offer, given the generally positive investors’ sentiment around the bank. The board of Fidelity Bank has already launched a regulatory process that will allow the bank to absorb excess funds in the event of potential oversubscription.

Under the current recapitalization process, the Central Bank of Nigeria (CBN) is using a distinctive definition of minimum capital as addition of share capital and share premium, rather than the entirety of shareholders’ funds used under the 2004 recapitalisation plan. With the distinctive definition, nearly all banks need to raise funds to retain their banking license.

Access Holdings has share capital and share premium of N251.81 billion; FCMB, N125.29 billion; Fidelity Bank, N129.705 billion and GTCO, with N138.187 billion.

Speaking at the weekend during the launch of a new book: “The Power of One Man- How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players”, Cardoso said it was important that banks are recapitalised to the levels, where they will be able to absorb any shocks that come and also be able to grow the economy. The book was written by renowned journalist, Dr. Ray Echebiri.

Cardoso, who was represented by Deputy Governor, Financial System Stability, Phillip Ikeazor, said the apex bank had kept close touch with former CBN Governor and Governor of Anambra State, Prof. Chukwuma Soludo in the course of recapitalisation.

He said the decision taken by Soludo 20 years ago on banking consolidation was a very bold one at that time with banks’ capital base of N2 billion raised to N25 billion.

“That is about 12 and half times. Incidentally, the current management of CBN has embarked on another round of banking consolidation. Why was it necessary then, Prof Soludo wanted to make the banks robust, resilient and fit for purpose to grow the economy, and that is exactly the reason why we are embarking on a similar journey today.

“I think by coincidence, if you check the amount of the minimum capital levels that we required, it is pretty similar because international banks are moving from N50 billion to N500 billion, which is 10 times, similar to Soludo’s 12 and half times. Our national banks are moving from N25 billion to N200 billion, roughly about 10 times. When you do consolidation, you would look at the microeconomic headwinds, the microeconomic conditions on ground and of course apply your stress test.

“And when you apply your stress test today, which I am sure all of the big banks have done, they would have second-guessed where the capital levels are going to land. If you compare the bank assets in Nigeria to Gross Domestic Product (GDP) and compare it with similar economies in Africa, you can see that we are way, way behind,” Cardoso said.

Providing more reasons why bank recapitalization was crucial, he said: “Remember that when the current administration came into place, there were unification of forex rates, and removal of petrol subsidy. And the impact on the economy and manufacturing sector has started manifesting in 2024 and will continue over the next few years. So, it is important that the banks are recapitalized to the levels, where they will be able to absorb any shocks that come and also position the banks to be able to grow the economy”.

Addressing the consistent hike in interest rates, he said although the jury is out and everyone debating what it should be, Cardoso insisted on the need to tame and control inflation to ensure the economy does not go into hyperinflation.

He explained that hyperinflation is very difficult to reverse and takes several years to get out of it.

“There is a South American country that still has quite significant oil reserves but is facing hyperinflation. Everybody is aware of what is happening in that economy. We have our brothers in East Africa, who are also facing hyperinflation and we know how hard they are struggling to come out of it,” Cardoso said.

On how long the CBN will sustain the hike in interest rate, he said the apex bank will continue to maintain high interest rate, as long as it is able to control and reverse galloping inflation.

He explained that Western countries, have also raised interest rates for long, and are yet to lower the rates, at present.

“So, it is important that we tighten and hold on for a little while, and in no distant future, we will be able to be slowing down on the rate hikes,” Cardoso said.

Economy

SEE Naira To Dollar Exchange Rate, Black Market– March 2

Published

1 day ago

March 2, 2025

Naijablitznews

The naira is exchanging for ₦1,500 to 1 US Dollar at the parallel market (black market) in Nigeria.

This means that for every one dollar, you can get the equivalent in naira of ₦1,500 on March 2, 2025.

The black market rate signifies the value at which individuals can trade their dollars for naira outside the official or regulated exchange channels.

Note that the Black Market Exchange rate is typically higher than the official exchange rate because it is not regulated by the government.

Today’s March 2 exchange shows that the naira has remained stable against the dollar, maintaining the same rate as it traded on Saturday, March 1, when the naira exchanged at ₦1,500.

The value of any nation’s currency is determined by aggregate supply and demand.

The forces of supply and demand are themselves influenced by a number of factors, including interest rates, inflation, capital flow, and money supply.

Economy

Nigeria’s economy experiencing growth as GDP grows 3.84% in Q4

Published

6 days ago

February 26, 2025

Kayode Sanni-Arewa

Nigeria’s strategy to reduce its dependence on oil is proving effective, with the non-oil sector contributing 95.40 percent to the gross domestic product (GDP) in real terms in the fourth quarter of 2024.

The oil sector, however, only accounted for a scant 4.60 percent during this period.

The National Bureau of Statistics (NBS) had previously communicated its plans to rebase the GDP but has since reverted to the traditional approach.

Although there was no explanation from the statistics house on why it failed to rebase the GDP, speculations are that it stepped back because of the backlash it received from the rebased CPI figures it released just last week.

Analysts say the inability to release rebased GDP figures is a significant concern, noting that rebased figures are essential for providing an accurate and up-to-date picture of the economy.

They say that without rebasing, the GDP figures may not accurately reflect the current structure and size of the Nigerian economy, particularly given the rapid changes in sectors like technology and services.

The reform measures introduced by the present administration brought with them intense hardship on the populace. With high inflation draining the purchasing power of the citizens, many businesses have either shut down or found their way out of the country, throwing many into the unemployment market.

According to the report released yesterday, the gross domestic product (GDP) in real terms grew by 3.84 per cent in the fourth quarter (Q4) of 2024 on a year-on-year basis, which is 0.38 percentage points higher than the rate recorded in Q4 2023, which was 3.46 per cent.

The report shows that the year 2024 ended with an overall annual GDP growth rate of 3.40 per cent. This is higher than the projections by agencies like the International Monetary Fund (IMF), which had earlier projected that the country’s GDP would grow by 3.2 per cent in 2024.

The NBS reports that the services sector remains the major driver of the economy, growing by 5.37 per cent and contributing 57.38 per cent to the aggregate GDP. On a quarter-on-quarter basis, the real GDP grew by 10.99 per cent in Q4 2024, reflecting a higher production level than in Q3 2024.

The estimated economic activity in real terms for Q4 2024 stood at ₦22,610,393.45 million, which is higher than the rates recorded in Q3 2024 and Q4 2023, which stood at ₦20,115,766.93 million and ₦21,773,263.25 million, respectively.

In nominal terms, aggregate GDP stood at ₦78,374,120.95 million in Q4 of 2024, indicating a year-on-year nominal growth rate of 18.91 per cent.
This is higher than the value of ₦65,908,258.59 million in Q4 2023 and ₦71,131,091.07 million in the preceding quarter.

The NBS reports that the economic performance of the non-oil sector in Q4 2024 is attributed to the growth recorded in some economic activities, including rail transport and pipelines, metal ores, financial institutions, road transport, quarrying and other minerals, and insurance.

An analysis of the report shows that the major contributing economic activities in real terms in the quarter under review are crop production (23.42 per cent), trade (15.11 per cent), telecommunication (14.40 per cent), real estate (5.88 per cent), financial institutions (5.76 per cent), and crude petroleum (4.60 per cent).

The agricultural sector grew by 1.76 per cent, while the industry grew by 2.00 per cent, showing a decline compared to the rate recorded in Q4 2023 at 2.10 per cent and 3.86 per cent.

The report shows that agriculture contributed 25.59 per cent, industry 17.03 per cent, and services 57.38 per cent. Agriculture and industry’s contributions were less than their contributions in Q4 of 2023 by 0.53 per cent and 0.31 percentage points. The services sector had the highest contribution to the GDP in Q4 2024, surpassing its contribution in the corresponding quarter of 2023 by 0.83 percentage points.

The annual contributions of the economic sectors show that agriculture contributed 24.64 per cent in 2024, which is lower compared to its contribution of 25.18 per cent in 2023. Similarly, the industry sector’s annual contribution was 18.47 per cent, which is also lower than the figure recorded for 2023, which was 18.65 per cent.

However, the services sector’s contribution for 2024 was 56.89 per cent, exceeding the 56.18 per cent recorded for 2023.

Further disaggregation of the economic activities into oil and non-oil sectors shows that oil GDP grew by 1.48 per cent in Q4 2024, which is a decline compared to 12.11 per cent recorded in Q4 2023 and the previous quarter of Q3 2024, which stood at 5.17 per cent.

The annual oil GDP for 2024 grew by 5.54 per cent, which is 7.75 per cent higher than the annual GDP recorded for 2023 (-2.22 per cent), while the annual contribution of oil stood at 5.51 per cent in 2024, higher than its contribution in Q4 2023, which was 5.40 per cent.

The report also shows that the fourth quarter of 2024 recorded an average daily oil production of 1.54 million barrels per day (mbpd), lower than the daily average production of 1.56 mbpd recorded in the same quarter of 2023 by 0.03 mbpd.

On the contrary, the fourth quarter of 2024 production volume was higher than that of the third quarter of 2024 (1.47 mbpd) by 0.06 mbpd.

Reacting to the GDP report, Professor Godwin Oyedokun of Lead City University, Ibadan, said the GDP growth is a moderately positive sign, but the lack of rebased figures raises concerns.

He said, “The Nigerian government needs to address the challenges of data collection and rebasing, as well as focus on inclusive growth and economic diversification. This lack of current data makes it harder to properly create effective economic policy.”

Economy

CBN targets single-digit inflation in three years

Published

2 weeks ago

February 21, 2025

Kayode Sanni-Arewa

The Central Bank of Nigeria (CBN) has set its sights on reducing inflation to a single digit in the medium to long term, following the recent rebasing of the Consumer Price Index (CPI) and subsequent decline in inflation to 24.48 per cent.

CBN Governor, Dr Olayemi Cardoso, who spoke yesterday at a press briefing after the first Monetary Policy Committee (MPC) meeting of 2025, reiterated the apex bank’s commitment to orthodox monetary policies, noting that the positive outcomes so far indicate that inflation is trending downward.

He said that after two days of deliberation, the MPC decided to maintain all key monetary policy parameters, including the Monetary Policy Rate (MPR) at 27.50 per cent, the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio (CRR) at 50.00 per cent for Deposit Money Banks and 16.00 per cent for Merchant Banks, and the Liquidity Ratio at 30.00 per cent.

Clarifying the impact of the rebased CPI, Cardoso explained that the lower inflation figure should not be misinterpreted.

He underlined the need to analyse more data before drawing comparisons, noting that the CBN is currently assessing the figures and will provide further guidance in due course.

Despite the complexities, he pointed out that inflation is gradually declining, supported by the recent stability and appreciation of the foreign exchange rate, with the differential between the official and parallel markets now less than one percent.

He stressed the critical importance of collaboration between monetary and fiscal authorities in sustaining recent economic improvements.

He cited the recent Monetary Policy Forum as an example, where stakeholders from the organised private sector, Bureau de Change operators, and government representatives, including the Minister of Finance, participated.

Cardoso noted that both sides are committed to deepening their dialogue and holding regular meetings to address key economic issues proactively.

Addressing concerns about the impact of elevated borrowing costs on economic growth, the CBN Governor assured that the apex bank’s primary objective is to stabilize the foreign exchange and financial markets.

He expressed confidence that such stability would attract increased foreign investments, stimulating the much-needed economic growth.

He also highlighted the competitiveness of the Nigerian currency, which has spurred growing interest from international investors.

Cardoso said that improved oil production, reaching 1.54 million barrels per day by the end of January 2025, would strengthen Nigeria’s current account position and positively impact external reserves. Despite prevailing macroeconomic challenges, the MPC observed that the banking sector remains resilient. However, the Committee urged the CBN to maintain vigilant oversight, particularly in light of ongoing banking system recapitalisation, ensuring that only quality capital is injected.

The MPC noted several factors expected to positively influence price dynamics in the near to medium term, including the stabilisation of the foreign exchange market, the moderation of Premium Motor Spirit (PMS) prices, and the federal government’s efforts to improve security in food-producing areas.

The Committee emphasised the need for continued collaboration between monetary and fiscal authorities to maintain and build upon these gains.

Additionally, the MPC acknowledged improvements in the external sector, with the convergence of exchange rates between the Nigeria Foreign Exchange Market (NFEM) and Bureau de Change (BDC) operators.

The Committee commended CBN’s recent measures, such as the Electronic Foreign Exchange Matching System and the Nigeria Foreign Exchange Code, aimed at enhancing transparency and credibility in the forex market.

The MPC expressed confidence that recent monetary and fiscal policy measures would attract increased foreign direct investment, portfolio inflows, and diaspora remittances as investor confidence grows.

The Committee also assured of its commitment to sustaining these measures to anchor inflation expectations, ease exchange rate pressures, deepen financial inclusion, and enhance the effectiveness of monetary policy transmission mechanisms.