Lagos, Nigeria – November 4, 2024 – FBN Holdings (FBNH) has unveiled plans to raise N149.56 billion through a rights issue aimed at enhancing the capital base of its key subsidiary, First Bank of Nigeria Limited. The move aligns with the Central Bank of Nigeria’s (CBN) recapitalization requirements and is part of the company’s broader strategy to strengthen its position in a challenging economic environment.
The rights issue will be open from November 4, 2024, to December 12, 2024, offering 5,982,548,799 new Ordinary Shares at a price of N25.00 per share. Shareholders as of the close of business on October 18, 2024, will be eligible to purchase the new shares on a 1:6 basis (one new share for every six existing shares).
Strengthening Capital Adequacy
A major portion of the funds raised—N103.12 billion (or 68.95%)—will be used to improve First Bank’s Capital Adequacy Ratio (CAR). This is a crucial move in response to CBN’s increased capital requirements for Nigerian banks, designed to enhance their ability to withstand economic volatility. FBN Holdings aims to bolster the bank’s CAR, which stood at 17.75% in the first half of 2024, ensuring that First Bank remains compliant with regulatory standards and well-positioned to continue lending effectively in a high-risk market.
The capital boost will further support First Bank’s ability to weather financial stress, ensuring its ability to maintain healthy lending practices in the face of currency fluctuations, inflation, and other macroeconomic challenges.
Focus on Expanding Lending
In line with its growth strategy, FBNH plans to direct significant portions of the rights issue proceeds toward expanding lending in both the corporate and retail sectors.
- N77.34 billion will be allocated to expand corporate lending, focusing on critical sectors like agriculture, manufacturing, and technology, which are essential to Nigeria’s economic diversification.
- N25.78 billion will target expanding First Bank’s retail lending operations, focusing on financial inclusion and tapping into Nigeria’s young and underbanked population.
As of September 2024, First Bank’s total loans and advances amounted to N12.7 trillion, with further expansion planned to support both corporate and retail growth.
Digital Transformation and Automation
A portion of the raised funds, N14.73 billion (9.85%), will be invested in enhancing First Bank’s digital banking infrastructure. This includes upgrading its automation systems, artificial intelligence (AI) capabilities, and strengthening cybersecurity measures. This move is aimed at improving the bank’s ability to deliver a seamless, secure, and customer-friendly banking experience, especially given the growing demand for digital solutions from Nigeria’s young, tech-savvy population.
The investment in digital infrastructure is expected to drive efficiencies by reducing operational costs and enabling First Bank to respond more quickly to market changes, further solidifying its competitive edge.
International Expansion Plans
In a bid to diversify its revenue streams and reduce reliance on the Nigerian market, FBNH has allocated N29.46 billion (19.7% of the proceeds) to international expansion. The funds will be used to strengthen the bank’s presence in key West African markets such as Ghana and Sierra Leone, as well as expand operations in Europe and Asia, including through its offices in Paris and Beijing.
FBN Holdings aims to capitalize on cross-border opportunities and localize its offerings to meet the unique financial needs of each market. This international expansion will help the bank hedge against risks associated with Nigeria’s volatile economic conditions.
Issuance Costs and Administrative Details
To facilitate the rights issue, FBNH has allocated N2.25 billion (1.5% of total proceeds) to cover administrative and issuance-related costs, including logistics and regulatory fees. These costs are necessary to ensure a smooth process and compliance with relevant regulatory requirements.
Outlook for 2024 and Beyond
The rights issue is expected to have a significant impact on FBN Holdings’ performance in 2024. The funds raised will not only bolster First Bank’s capital adequacy but also position it for continued growth in both its lending operations and international presence. With a focus on enhancing digital capabilities and expanding into new markets, FBNH is positioning itself to thrive in a competitive and rapidly changing banking landscape.
The issuance is expected to boost the bank’s resilience and support its long-term strategy of diversifying revenue sources and strengthening its core operations.
