Fidelity Advert

Fear over illicit flow to banks as shareholders struggle with rights

Fear over illicit flow to banks as shareholders struggle with rights %Post Title

Shareholders have raised the alarm over possible hijacking of the bank recapitalisation process by ‘money bags’, who have no genuine intentions for the industry’s growth.

This comes as existing shareholders struggle to fund rights issues extended to them by different banks with some dumping shares in other companies to take their rights.

Although the regulatory authorities have warned against receiving illicit funds, the shareholders said extra caution is required to keep such money away from the market.

They warned that failure to institutionalise a robust monitoring framework may throw the control and ownership of the banks into the hands of unscrupulous individuals, a possibility that would undermine efforts to boost confidence in the financial system.

According to them, weak banks which may not want to lose their current status or downgrade to lower status may fall victim to holders of illicit money and surrender the institutions to such individuals.

Hence, they stressed the need for the involvement of the Economic and Financial Crimes Commission (EFCC) and other relevant agencies in the exercise to prevent using the window to launder stolen wealth.

Already, stakeholders are worried that falling income and harsh economy will negatively affect genuine investors, especially the minority shareholders, in the process.

The Guardian learnt that a few minority shareholders that still have valuable stocks in other companies are currently offloading their stake to participate in the ongoing rights issues.

The development is linked to the downturn witnessed in the stock market in the past few weeks. Indeed, the rights issue will dilute the shareholding of existing shareholders if they do not participate and take up their rights due to financial constraint or any other reasons.

The banking index of the exchange has been on a downtrend since the beginning of the year, losing 3.9 per cent in the half year (HI). Fidelity Bank Plc had announced a capital raising of N127.1 billion by way of rights issues to existing shareholders and a public offer. Under the rights issue, 3.2 billion ordinary shares of 50 kobo each will be offered in the ratio of one new ordinary share for every 10 ordinary shares held as of 5th of January 2024 at N9.25 per share.

Access Holdings Plc, at the weekend, announced the commencement of its N351 billion rights issue. According to the bank, the rights issue is a subset of the group’s capital raising programme aiming to generate $1.5 billion to strengthen the group’s financial footing and support ongoing working capital needs.

Wema Bank Plc has also received regulatory approval for the allotment of its N40 billion rights issue, which was initiated in December 2023. It has announced the completion of the first tranche of its recapitalisation exercise.

President of New Dimension Shareholders Association, Patric Ajudua, besides concerns on possible hijacking of the process, said the banks may record an increase in non-performing loans as a result of poor risk management framework, which may undermine the objective of the exercise.

President of Independent Shareholders Association of Nigeria, Moses Igbrude, urged shareholders to do everything within their reach to pick their rights in the ongoing exercise to avoid takeover of the banks by people of questionable character.

League of boys banner
Leave A Reply

Your email address will not be published.