Shareholders under the aegis of the Independent Shareholders Association of Nigeria (ISAN) have raised concerns over the possibility of share reconstruction by banks following their capital-raising exercises on the Nigerian Exchange Limited (NGX).
The caution was sounded by Mr. Moses Igbrude, National Coordinator of ISAN, at a workshop in Lagos.
The workshop, themed “Banks’ Recapitalisation: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market,” provided a platform for discussing key challenges and opportunities in the ongoing recapitalisation efforts within the banking sector.
Igbrude warned that some banks, after raising fresh capital from shareholders, might resort to share reconstruction—a move he described as manipulative and detrimental to investors. He cited examples from the banking consolidation period of 2004–2005, where banks raised capital from shareholders but later opted for share reconstruction instead of buybacks.
“These companies have ways of manipulating shareholders and reconstructing shares after completing capital raising exercises,” Igbrude said. “The performance of these companies should drive their stocks, not share reconstruction.”
He urged shareholders participating in the recapitalisation exercise to remain vigilant about the volume of shares banks issue to meet the Central Bank of Nigeria’s (CBN) N500bn capital requirement.
He noted that some banks previously listed shares at high prices, which later depreciated due to poor performance.
Highlighting the critical role of shareholders in the capital market, Igbrude emphasized that exchanges could not function without them, as they play a pivotal role in capital formation when companies raise fresh capital.
Igbrude also addressed regulatory challenges, urging the Securities and Exchange Commission (SEC) and NGX to involve all key stakeholders in policy creation. He cautioned that while technology has facilitated access to the capital market, it has also excluded older shareholders from participating in some banks’ rights issues and public offers.
“The elders are excluded from the banking recapitalisation. How do you expect them to have access to this information?” he queried, adding that many senior shareholders struggled to access public offerings due to technological barriers.
He called on regulatory bodies to prioritize shareholder protection and ensure transparency in the recapitalisation process to safeguard investments. “When SEC or NGX are making rules, they must always consider human factors,” he stressed.