Nigeria’s stock market is bracing for a potential downturn in February, as the Financial Derivatives Company (FDC) predicts a decline in stock prices due to the activities around bank recapitalisation.
According to the FDC, the introduction of new shares by banks to meet the Central Bank of Nigeria’s recapitalisation requirements will lead to an increase in supply, causing stock prices to fall.
This forecast has sparked concerns among investors, who are now anxiously awaiting the market’s performance in the coming weeks.
“Stock prices will fall in February to reflect the new shares of bank recapitalisation,” the FDC stated in its latest Lagos Business School (LBS) Breakfast Session with Bismarck Rewane and the FDC Think Tank.
Similarly, there were no new equity offers in the market last week. However, analysts noted ongoing offers, such as the Zenith Bank Plc offer, which comprised a Rights Issue of 5,232,748,964 ordinary shares at N36.00 per share and a Public Offer of 2,767,251,036 ordinary shares at N36.50 per share. The Public Offer recorded a 160.47 percent subscription rate, with 4,440,587,250 shares allotted following the offer terms and the Central Bank of Nigeria’s capital verification exercise.
In addition, Wema Bank plans to raise N200 billion in fresh capital through a Rights Issue and a Special Placement Exercise, set to commence on April 1, 2025. This marks the second and final tranche of its capital-raising initiative, complementing the N40 billion raised in the first tranche.
Stanbic IBTC Holdings Plc also announced the commencement of its Rights Issue of N148.7 billion, scheduled to close on Friday, February 21, 2025. The group offered existing shareholders 2,944,772,083 ordinary shares of 50 kobo each at N50.50 per share, based on 5 Issue Shares for every 22 Ordinary Shares held as of October 29, 2024.
These developments highlight the continued capital-raising activities within the financial sector as banks position themselves for growth and regulatory compliance. Despite concerns over short-term price declines, analysts believe that the recapitalisation process will ultimately strengthen the banking sector, improve liquidity, and enhance long-term investor confidence.
Market watchers are now keenly observing how the influx of new shares will impact overall market performance and whether demand will absorb the increased supply.
Investors, on the other hand, are advised to adopt a cautious approach, carefully evaluating opportunities amid the ongoing recapitalisation wave.
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