Chartered Institute of Stockbrokers (CIS) has called on the Central Bank of Nigeria (CBN) and capital market regulators to ensure a wholesome adoption of technology in every stage of the recapitalization process of the banking sector.
The 13th President and Chairman of the Governing Council of Chartered Institute of Stockbrokers (CIS), Mr Oluropo Dada who stated this in a statement made available to Nairametrics said this will ensure effective capital raising exercise by banks.
The apex bank, on March 28 this year, announced a new capital base on the basis of a bank’s authorization, ranging from N200 billion to N500 billion and this is expected to commence in the next two years.
In a paper entitled: ” Stockbrokers’ Position Paper on the Banking Sector Recapitalisation Programme of the Central Bank of Nigeria (CBN) released at the weekend, the Institute noted that the programme would position the banks in Nigeria to support the growth of the economy, position them for global competitiveness, promote financial inclusion and generate about N3.9 trillion.
“There should be a wholesome adoption of technology in every stage of the process. As we have seen in recent public offerings, the path of reaching out to investors through telephone apps is what endears the young generation, including the millennials to modern-day investments,” he said.
Additional capital through public offers
Dada noted that banks should consider raising a significant portion of the additional capital through public offers, in order to increase the number of investors in the market.
According to him, a country of over 200 million people still has just about 7 million people who have investments in the capital market.
He added that attracting more new investors should be a key objective of the exercise.
Dada said that it is important to emphasise that time is of the essence in the recapitalization process adding that the institute recognize the fact that the Central Bank of Nigeria (CBN) will have to check and verify the list of subscribers to every new bank issue before the list is sent to the SEC for approval to allot shares.
He urged the CBN to carry out this verification process speedily, using technology, in order to reduce the time involved.
“Furthermore, the issuing houses may send the list of subscribers to the CBN in batches, on a daily or weekly basis, from the date the issue opens until it closes.
By this, the load of verification will be substantially reduced for the CBN when the offer closes and returns are made,” he said.
He noted that between the CBN and the SEC, the time taken from an offer’s closing date to the allotment date should not exceed 20 working days.
Dada noted that the assurance is important as investors do not want their monies to sit idle for an extended period of time adding that the CBN and SEC should work closely together in the recapitalization process.
De-concentrate market control
He said that the CBN should, in the course of this process, open up the banking industry to more players, to deepen competition and de-concentrate market control from the hands of a few big banks.
The CIS Boss said the US has over 4,000 commercial banks in the system, while the UK has over 300.
He added that with an increase in the market capitalization of banks, the concentration risks where a few listed companies control a high percentage of the total market capitalization will be reduced, as more Banks join the league of Mega-companies.
“Given the possibility of money laundering, CIS urges greater due diligence on persons and institutions making abnormally large investments during the exercise.
Furthermore, there should be strict adherence to good corporate governance by all participating entities.
Adequate provisions should be made for the protection of minority shareholders in the implementation of the bank recapitalisation policy,” he said.
Professional advice to investors
He enjoined capital market operators to provide wholesome professional advice to both existing and prospective investors during the exercise.
According to him, this will entail revamping their research machinery and investing more in skilled personnel and technology.
“The general public is strongly advised to seek professional advice from certified stockbrokers, who are the first-line experts in Securities and Investment matters.
We urge all parties concerned to ensure that they comply with all relevant laws of the land in the course of the banking sector recapitalization exercise. Investors may verify from the Securities & Exchange Commission (SEC) the authenticity of any institution claiming to be a party to any of the bank offers,” he said.
