The 5th largest Nigerian bank, GTBank, is set to seek shareholders’ approval to raise an additional $750 million in capital to meet the Central Bank’s new minimum capital requirements for large banks.
To achieve this, GTBank will have to issue new ordinary shares, preference shares, convertible notes, bonds, and other instruments.
The purpose of this strategy by the Central Bank of Nigeria is to enable major banks to reduce the impact of domestic and international financial shocks the country is experiencing now.
In addition, it enhances the stability of the Nigerian financial system, which ultimately helps the Nigerian president achieve his goal of a trillion-dollar economy by 2030.
One side effect of this move is that once the injection of the new capital is complete, the existing shareholders’ shares would become diluted. GTCO was trading at ₦41.40 after the company gave notice of the annual general meeting on Friday.
According to some bank managers, this will be the second run at raising capital following rule changes. The initial run was in 2005 when the CBN raised the minimum capital requirement from ₦2 billion to ₦25 billion.
This 12.5-fold raise triggered a wave of mergers and acquisitions, drastically reducing the number of banks from 89 to 25. Possibly, there will be a series of mergers and acquisitions before the 24-month timeline for the new capital takes effect.
