Fidelity Bank Surpasses N127.1 Billion Target in Capital-Raising Offer

In a remarkable show of resilience, Fidelity Bank has surpassed its capital-raising target of N127.1 billion, marking the completion of the first phase of its recapitalization efforts. The bank’s offers, necessitated by the recapitalization directive of the Central Bank of Nigeria (CBN), come amid the impending windfall tax imposed on Nigerian banks by the government.

The bank’s Managing Director, Nneka Onyeali-Ikpe, expressed her delight in a message to investors, stating, “With the conclusion of the Combined Offer, I am delighted to announce that we have met and surpassed the capital-raise target we set for ourselves in the first phase of our capital-raise exercise. It is both gratifying and humbling to note this level of investor confidence in the bank.”

This milestone represents not just a financial triumph, but also a critical step in Fidelity’s efforts to comply with the stringent recapitalization requirements set forth by the CBN.

The CBN’s recapitalization directive requires tier-1 banks to shore up their capital bases to a minimum of N500 billion by March 2026, a mandate intended to strengthen financial institutions and ensure they are better positioned to handle systemic risks.

Fidelity Bank’s current paid-up share capital stands at N129.705 billion, meaning the bank needs to raise a total of N370.295 billion to meet the regulatory requirement. The first phase of the bank’s capital raise, which has already surpassed the N127.1 billion target, leaves a more manageable gap of N243.195 billion.

However, the pressure on banks is not limited to the recapitalization directive alone. The Federal Government’s proposed windfall tax, designed to capture revenue from unexpected profits earned by industries such as banking during periods of economic stress, has also added to the strain.

Fidelity Bank became the first Nigerian bank to initiate a capital-raising exercise in response to the CBN’s directive. Its combined offer comprised two key components:

• A Public Offer of 10 billion ordinary shares priced at N9.75 per share.
• A Rights Issue of 3.2 billion ordinary shares offered at N9.25 per share.

Initially set to close on July 29, the offers received a surge in demand, leading the bank to extend the offer period with approval from the Securities and Exchange Commission (SEC). This extension also allowed Fidelity to issue an additional 8.2 billion shares, divided between 5 billion shares sold in the public offer and 3.2 billion shares sold through the rights issue.

In total, Fidelity issued 21.4 billion shares, which included 15 billion shares through the rights issue and 6.4 billion through the public offer. While the exact amount raised has not been officially disclosed, the bank’s communication to investors confirmed that the initial target of N127.1 billion had been exceeded.

Fidelity Bank’s success has brought renewed attention to the broader recapitalization efforts underway in Nigeria’s banking sector. In addition to Fidelity, other top-tier banks, including Zenith Bank, FCMB Group, and Access Holdings, are in the midst of their own capital-raising initiatives, collectively aiming to raise approximately N751.9 billion.

Banks with international licenses, such as Fidelity, are at the forefront of this drive. They must collectively raise an estimated N2.26 trillion to meet the CBN’s minimum capital requirements. However, the pressures to recapitalize have only been compounded by the economic environment, where high inflation, exchange rate volatility, and political uncertainty make it more difficult to attract investors and retain capital.

The Road Ahead for Fidelity and Other Nigerian Banks

While the successful completion of Fidelity’s combined offer has bolstered confidence in the bank, there remains a sense of caution in the market. Analysts are closely watching other banks’ capital-raising efforts, especially Access Holdings, whose rights issue has reportedly faced challenges. Access Holdings sought an extension due to tepid investor interest, driven in part by the fact that its offer price remained above market value during the entire period.

Industry observers note that capital-raising initiatives in Nigeria’s banking sector are being met with a mix of optimism and skepticism. On the one hand, the need for recapitalization is clear, given the CBN’s directive and the increasing global regulatory emphasis on bank stability. On the other hand, the challenges facing banks, including Nigeria’s volatile economic environment and the proposed windfall tax, cast a shadow over these efforts.

For Fidelity Bank, surpassing the N127.1 billion target is a significant accomplishment, but the journey toward full recapitalization is far from over. If the bank achieves full subscription of the newly issued shares, it could raise up to N205.45 billion, further reducing its capital gap to N160.845 billion. However, analysts believe market conditions, investor sentiment, and regulatory pressures will play critical roles in determining the success of future fundraising efforts.

As the recapitalization deadline approaches, Nigerian banks are expected to intensify their capital-raising strategies to ensure compliance. The success or failure of these recapitalization efforts will have profound implications not only for the individual banks but also for the Nigerian banking sector as a whole.