Stockbrokers’ Institute unfolds recommendations on banks recapitalisation

As a prelude to investiture of the 13th President and Chairman of the Governing Council of Chartered Institute of Stockbrokers (CIS), Mr Oluropo Dada, on Friday, Chartered Institute of Stockbrokers (CIS), has offered 10 recommendations to Central Bank of Nigeria (CBN) and capital market regulators to ensure successful implementation of banks recapitalisation in Nigeria.

The apex bank, had on March 28, announced new capital base on the basis of a bank’s authorisation, ranging from N200 to N500 billion and this is expected to commence in next two years.

In a paper entitled, ‘Stockbrokers’ Position Paper on the Banking Sector Recapitalisation Programme of the Central Bank of Nigeria (CBN),’ released at the weekend, the institute noted that the programme will position the banks in Nigeria to support the growth of the economy, position them for global competitiveness, promote financial inclusion and generate about N3.9 trillion.

It said: “In order to ensure effective capital raising exercise by banks, the institute strongly recommends as follows: There should be a wholesome adoption of technology in every stage of the process. As we have seen in recent public offerings, the path of reaching out to investors through telephone apps is what endears the young generation, including the millennials to modern day investments. Banks should consider raising a significant portion of the additional capital through public offers, in order to increase the number of investors in the market.

“It is sad that in a country of over 200 million people, we still have just about seven million people that have investments in the capital market. So, attracting more new investors should be a key objective of the exercise.

“It is important to emphasise that time is of essence in the recapitalisation process. We recognise the fact that the CBN will have to check and verify the list of subscribers to every new bank issue before the list is sent to the SEC for approval to allot shares. We urge the CBN to carry out this verification process speedily, using technology, in order to reduce the time involved.

“Furthermore, the issuing houses may send the list of subscribers to the CBN in batches, on a daily or weekly basis, from the date the issue opens until it closes. By this, the load of verification will be substantially reduced for the CBN when the offer closes and returns are made.

“Between the CBN and the SEC, the time taken from an offer’s closing date to the allotment date should not exceed 20 working days. This assurance is important as investors do not want their monies to sit idle for an extended period of time. The CBN and SEC should work closely together in the recapitalisation process.

“The CBN should, in the course of this process, open up the banking industry to more players to deepen competition and de-concentrate market control from the hands of a few big banks. The US has over 4,000 commercial banks in the system, while the UK has over 300.

“With increase in the market capitalisation of banks, the concentration risks where a few listed companies control a high percentage of the total market capitalisation will be reduced, as more banks join the league of mega-companies.

“Given the possibility of money laundering, CIS urges greater due diligence on persons and institutions making abnormally large investments during the exercise. Furthermore, there should be strict adherence to good corporate governance by all participating entities. Adequate provisions should be made for the protection of minority shareholders in the implementation of the bank recapitalisation policy.

“We enjoin capital market operators to provide wholesome professional advice to both existing and prospective investors during the exercise. This will entail revamping their research machinery and investing more on skilled personnel and technology.”

The general public is strongly advised to seek professional advice from certified stockbrokers, who are the first line experts in securities and investment matters.

“We urge all parties concerned to ensure that they comply with all relevant laws of the land in the course of the banking sector recapitalisation exercise. Investors may verify from the Securities and Exchange Commission (SEC) the authenticity of any institution claiming to be a party to any of the bank offers.

“Additionally, investors may obtain the list of bonafide individual stockbrokers from the Chartered Institute of Stockbrokers’ website or that of securities dealing firms from the Association of Securities Dealing Houses of Nigeria (ASHON). They may also obtain valid information from the Nigerian Exchange Group (NGX Group), the FMDQ Securities Exchange, NASD and other SEC-licensed securities exchanges in Nigeria.

“CIS represents the rule of law, so the 2024-2026 banking sector recapitalisation programme should be undertaken strictly in accordance with the extant laws of the Federal Republic of Nigeria and the rules, regulations and usages governing the Nigerian financial system, money and capital markets. The exercise bears a strong and feasible potential to move Nigeria closer to sustainable double-digit GDP growth and the envisaged $1 trillion economy.”

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