Investors in the Nigerian capital market are set to explore new opportunities as 12 companies announced a combined N2.26 trillion capital raising to bolster their operations and drive growth.
This large-scale capital-raising effort according to analysts marks a significant development in the market, offering investors a chance to back diverse sectors with the potential for high returns.
The initiatives span various industries, reflecting a collective push towards business expansion, strategic investments, and resilience in Nigeria’s dynamic economic landscape.
Findings show that market participants who see this as an opportunity for capital appreciation and preservation are closely monitoring these moves, anticipating attractive returns amid the evolving financial climate.
The Nigerian Tribune analysis of market data showed various amounts each of the 12 companies are seeking.
Specifically, Access Holdings has approached the market seeking N351 billion ; Zenith Bank is seeking about N290 billion; First Bank of Nigeria Holdings (FBNH) is seeking to raise N150 billion while United Bank for Africa (UGA) is seeking to raise N239. 40 billion.
Others are: Mecure N6.80 billion, C & I Leasing N5 billion, Nigerian Breweries N599. One billion, Tantalizer N1.073 billion, Cadbury N7. 036 billion, Japaul Oil N20 billion, Aradel N3.053 billion and International Breweries N588. 28 billion.
Investment Banking experts believes that while the current offers present potential rewards, it is important to assess the financial health of the companies carefully.
Johnson Chukwu, founder and chief executive officer, Cowry Assets Management Limited in an earlier interview said a cautious approach to investing in equities, particularly in sectors such as financial services, oil and gas, and agriculture is of great importance.
“Investors are encouraged to limit Commercial Paper risk exposure to only blue-chip companies with very strong cash flow and balance sheet, “ he advised.
According to Chukwu, investors should consider diversifying their portfolios with foreign currency denominated assets, enabling them to hedge against potential currency fluctuations and reducing exposure to the risks associated with the weakening Naira.
Similarly, an eminent economist and Chief Executive Officer of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane on his part, identified investment-led growth strategy as the most effective option for Nigeria’s economic growth.
According to him, Nigeria needs an investment-led strategy” to drive its economic growth rather than relying on consumption, export and government-led strategies.
While encouraging more investments in the economy, he pointed out that, right now, the stock market of Botswana is larger than Nigeria’s stock exchange. A company in South Africa, he added, “can buy all companies in our stock market with 30 percent of its global value.”
Meanwhile, Nigerian Breweries and International Breweries raised sizable funds, positioning themselves for further expansion and investment.
However, smaller firms like Tantalizer and C & I Leasing have raised capital on a much smaller scale, likely to support operational needs or growth.
The capital-raising activities indicate that Nigerian corporates need more funding with substantial investments, which shows confidence in market recovery or plans for future expansion.
Experts believe that infusion of capital would give these companies a more competitive edge, allowing them to review or modernise their operations, reduce debt, or pursue acquisitions.
FBNH recently announced shareholders’ approval to raise N150billion through a Rights Issue. The issue will offer 5,982,548,799 new ordinary shares on a 1-for-6 basis to eligible shareholders listed in the Company’s Register as of October 18, 2024.
Although promising growth prospects exist in the sectors listed above, analysts advise investors to remain cautious about smaller firms’ reliance on capital injections for survival.
Data from the Nigeria Exchange Group (NXG) showed that the local stock exchange closed the trading week on a positive note, with the All-Share Index (ASI) rising by 0.32 percent to 97,236.19 points. This gain lifted the market capitalization by the same margin, adding N188.7 billion and bringing the total to N58.92 trillion. The year-to-date (YTD) return now stands at 30.04 percent.
Further analysis showed that though sectoral performance was mostly negative, with the banking, insurance, consumer goods, and industrial
sectors declining by 0.16 percent, 0.10 percent, 0.01 percent, and 0.02 percent, respectively, the oil and gas sector saw a strong increase of 1.37 percent.
In total, 30 stocks advanced while 23 declined. Top gainers included ARADEL (+10.00%), CONOIL (+9.94%), JOHNHOLT (+9.82%), LASACO (+9.0
9%), and FTNCOCOA (+8.00%), while key decliners were MEYER, ABBEYBDS, ETERNA, SUNUASSUR, and DEAPCAP.
Analysts from Proshare Research in providing tools for investor decisions noted that some companies in the stock market like Daraju Industries, Alpha Mead, and Mecure Industries have been assigned investment-grade ratings ranging from “BBB+” to “A—,” which shows moderate to high creditworthiness.
“On the other hand, some companies, including SKLD Integrated Services ratings, were not disclosed, while MTN Nigeria Plc promised to release further updates on the issuance details,“ the analysts stated.
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