The Managing Director and Business Officer of Optimus by Afrinvest, Ayodeji Ebo, has pointed out that the success of banks’ recent public offers and their recapitalization efforts will hinge on their effectiveness in attracting foreign investors.
Ebo made this remark while speaking during the Nairametrics industry outlook webinar with the theme, ‘Banking Public Offers: Buy, Sell, or Hold’? held on Saturday.
According to him, foreign investors will be pivotal to the success of the current public offers by these financial institutions.
He noted that many of these investors will be drawn to the offers due to the narrow gap between the public offer prices and the market prices, making the investment particularly attractive to them.
“Foreign investors will play a major role in the success of the current public offers.
“They will also be investors that banks would have to get to ensure that the offers and recapitalization are successful.
“The banks have long-term prospects and it’s an opportunity for these investors to want to key in,” Ebo said.
Conditions for Investing in Public Offers
Speaking further, Ebo emphasized that prospective investors should carefully consider several factors before investing in a bank’s public offer.
He explained that simply purchasing shares because they appear attractive is insufficient; investors must also conduct thorough due diligence.
According to him, this includes assessing the bank’s current performance, reviewing its past dividend yields, and other critical metrics.
Ebo also highlighted the importance of continuously monitoring the bank’s quarterly performance after investing to evaluate how the bank is progressing.
“Before you invest in a bank public offer, look out for their last dividend yields.
“Before buying a share, look at how well the bank is being run.
“Also, once you have invested in a share, you need to also monitor quarterly performance,” Ebo added.
What you should know
Nairametrics had previously reported in March that the Central Bank of Nigeria (CBN) unveiled a recapitalization initiative aimed at bolstering the capital reserves of Nigerian banks.
- This program is designed to enhance banks’ capacity to manage higher risks, boost liquidity, and expand their ability to absorb losses.
- Additionally, the initiative is anticipated to significantly influence the broader Nigerian economy and the financial sector.
- Under the recapitalization program, banks are required to increase their minimum paid-in common equity capital and adhere to the Capital Adequacy Ratio (CAR) specific to their license category.
- Additionally, they must collectively raise approximately $4 billion in total capital by the end of 2024. The program also offers banks the flexibility to upgrade or downgrade their license authorization, or to pursue mergers and acquisitions with other banks.
The CBN gave a 24-month deadline for banks to secure the necessary funds, with the policy taking full effect from April 1, 2026.
To meet up with these requirements, some of the banks have launched public offers to raise funds. These include Fidelity Bank, GTCO, and Zenith Bank.