Nigeria Firms Raised N50bn From Rights Issue in 2023

Nigeria companies raised N50 billion from rights issue in 2023 as they sought extra capital to meet their financial obligation and shore up their capital even amid an unstable macroeconomic landscape.

Shoring up liquidity ensures the balance sheet of entities are healthy and it is a form of shock absorber against macro shocks.

Ellah Lakes Plc, a company that engages in the production and processing of cassava, maize, soya and oil palm into their derivative products, raised N2.90 billion in rights issues even as it continues to record recurring operating losses.

Shareholders of Ikeja Hotel Plc raised N3.5 billion in rights issues as the drug maker grapples with low occupancy rates, but it was able to overcome these challenges through the cost reduction policy.

Neimeth International Pharmaceuticals Plc, raised N3.67 billion capital via rights issue as it said the proceeds of the money would be used to to comply with the Word Health Organization (WHO) current standards of Good Manufacturing Practice (cGMP) at Amawbia in Anambra State.

“It is also to be used to support the company’s strategic plan of maintaining a sustainable capital structure, leverage the company’s balance sheet, reduce cost of borrowing or finance costs and fund working capital,’’ said Ambrosie Orjiako, chairman board of Neithmeth.

Wema Bank Plc, raised N39.93 billion capital it said would be deployed to drive growth phase for the bank and accelerate improvements in the share price, deepen value creation, increase credit creation, increase digital play with technology acquisition and increase geographic expansion.

The tier-2 lender’s shares have gained 53.57 percent so far this year, outperforming the NGXASI index of 9.70 percent.

Analysts at Meristem Securities say they expect the proposed recapitalisation of banks to increase equity raises through rights issues or potential mergers as banks seek to strengthen their capital base.

For instance, First Bank of Nigeria Holdings (FBNH) Plc plans to raise additional capital of N150 billion through rights issue and awaits final approval of shareholders.

Fidelity Bank considers raising N32 billion rights issue to meet its recapitalisation plans as the mid-size lender reaped the dividend of revaluation gains that strengthened profit.

The board of directors of International Breweries Plc are considering a rights issue and an increase in share capital as the brewer is reeling from recurring losses and it intends to avoid technical insolvency.

Analysts see more capital raise this year, especially from banks and consumer good firms as lenders banks that are more susceptible to regulatory and macroeconomic headwinds have poise for another round of recapitalisation

A lot of manufacturers booked huge foreign exchange revaluation losses due to the abrupt devaluation of the currency and recorded loss after tax which overwhelmed equity capital.

There are indications that more multinationals are going to exit the country as a weak Naira and the removal of subsidies on fuel have compounded the woes of households and companies.

In November 2023, the overall inflation rate rose to 28.20 percent, surpassing the October 2023 rate of 27.33 percent. This indicates a month-on-month increase of 0.87 percent.

Nigeria’s unemployment rate is expected to rise to 40.6 percent in 2023, according to a report by KPMG. This is attributed to limited investment by the private sector, low industrialization, and slower economic growth.

“Nigeria’s unstable macroeconomic landscape triggered widespread restructuring across companies, prompting some entities to delist from the Nigerian Exchange (NGX),” said analysts at Meristem Securities Limited.

“Motivations behind the exits vary across companies; some opted to cease operations in the country entirely, while others intended to undergo a comprehensive overhaul of their business model without the scrutiny associated with being publicly traded,” said the analysts.

Three companies (with a combined market cap of N226.82bn) delisted from the NGX in 2023, while four have signified intention to delist, according to data from Meristem Securities.

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