Investors in Nigerian banks are raising concerns over delays in verifying their capital contributions under the ongoing recapitalization programs. This issue stems from the Central Bank of Nigeria’s (CBN) strict verification processes, which aim to ensure transparency but have inadvertently caused a slowdown, frustrating shareholders and affecting market confidence.
The recapitalization effort requires banks to raise funds through rights issues and other instruments, with the CBN verifying that the money comes from legitimate sources. While this approach is essential to maintaining integrity and avoiding creative accounting practices, it has created significant delays.
Some investors have waited up to three months for confirmation of their share purchases, leading to a loss of confidence and demands for refunds, a Proshare market intelligence report revealed.
“We are getting more calls from investors asking for their money back because they haven’t received share allocation confirmations. In a high-inflation environment, this is not sustainable. Investors are losing patience,” the report stated quoting an anonymous banker.
Investors argue that while the CBN’s rigorous checks are commendable, speed is equally important. With inflation eroding the real value of their funds, shareholders are concerned that their investments are stuck in limbo.
One investor noted, “Even if I put my money in a government treasury bill, I’d earn 18% interest. Leaving it idle for months feels like financial suicide.”
The delays have also disrupted banks’ broader plans. Some had intended to launch additional fundraising efforts, such as private placements or initial public offerings (IPOs), in late 2024. These plans are now on hold due to the bottleneck created by the CBN’s verification processes, causing frustration among stakeholders.
The situation is further complicated by a directive from the Federal Inland Revenue Service (FIRS) requiring banks to pay foreign exchange windfall taxes by December 31, 2024. Investors see this as an additional burden during an already challenging period.
A financial expert highlighted the strain, pointing out that timing of the tax demand, coupled with the delays in share verification, has created a perception of regulatory misalignment.
Analysts agree that the CBN’s emphasis on transparency is necessary, but they stress the importance of balancing thoroughness with timeliness.
According to them, the prolonged verification process risks discouraging future investments, as shareholders worry about the opportunity cost of locked-up funds.
“If the CBN wants to sustain confidence in the banking system, it must address these delays without compromising integrity,” one market analyst observed.
The CBN’s recapitalization drive is a critical step toward strengthening Nigeria’s banking sector. However, delays in confirming investors’ shares are undermining its objectives.
To avoid eroding trust, investors have urged the apex bank to streamline the processes while maintaining transparency, stressing that meeting investors’ expectations and safeguarding their funds against inflation is equally paramount.
“The CBN should adopt a more time-sensitive approach to foster confidence and ensure the success of future fundraising efforts, otherwise it will dampen the interest of genuine investors in future capital raising,” shareholder rights activist, Mr. Boniface Okezie, cautioned.
The national coordinator of the Progressive Shareholders Association of Nigeria advised the financial market apex regulator never to destroy the very house it is trying build.
