Financial analysts have stressed the need for the Central Bank of Nigeria (CBN) to deploy available technology and Bank Verification Numbers (BVNs) to tackle delays in verifying banks' offers and ensure the speedy conclusion of the process. The Central Bank of Nigeria (CBN) has been tasked with using available technology and the Bank Verification Number (BVN) to achieve a seamless process of verifying the investors who have participated in banks' ongoing capital raising activities for the 2024-2026 recapitalisation exercise.
Mr. Johnson Chukwu, Group Chief Executive Officer, Cowry Asset Management, made this point as the keynote speaker at the 2024 Capital Market Correspondents Association of Nigeria (CAMCAN) annual workshop, which discussed “Recapitalisation: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market.”
He noted that the delay in the process has raised concerns among investors, especially as the CBN has not been able to conclude any of the offers for almost four months after the closure of some.
Mr Chukwu believed using BVN and deploying the enabling technology would fast-track the process of accepting or rejecting offers, enabling investors to get their allotment or deploy their funds in other profitable economic activities.
He said, “While I acknowledge the Central Bank’s role in verifying the source of the capital invested is important, the longer period for completion of the verification process dampens investors' confidence. This is particularly worrisome for investors whose funds may be returned, where the offers may be oversubscribed given the missed reinvestment opportunities.”
The analyst also noted that the provision for the submission of a three-year audited financial statement and a board resolution authorising the investment and tax clearance certificates for the past three years for corporate investors, noting that these requirements disincentivise investment in the capital market. He added that while regulation is necessary for maintaining the stability and integrity of the financial system, there is a need to use existing customer information in the banking system to avoid imposing difficult conditions on investors.
Speaking further on the 2024-2026 banks' recapitalisation, he described it as a key strategy for strengthening the Nigerian banking sector and fostering economic growth. He, however, argued that the success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market. Outlining the role of the capital market in the recapitalisation exercise, he noted that when banks access the capital market and demonstrate their ability to raise capital through successful IPOs, rights issues and private placements, it strengthens investors' confidence and sends a positive signal to the broader financial market.
It will be recalled that on December 2nd, 2024, Proshare, in its article “Investors Worried Over CBN’s Slow Capital Raise Verification Exercise,” stressed that “While processing and approving monies raised during the recapitalisation exercise at a breakneck speed without guardrails could present some problems, not addressing investors' concerns over the delay of the verification process could prove to be mortally worse. A need for speed is not necessarily a call to greed.”
The article also acknowledged that as the CBN sticks to its goal of protecting the integrity of the recent bank capital raise or recapitalisation programme, it must equally consider the pressing worries over the time value of monies sitting in bank vaults.
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