Recapitalization
Wema Bank to Raise N200bn via Rights and Private Placement
Wema Bank has announced plans to raise an additional N200bn in its final tranche of the recapitalisation exercise.
In a statement released by the bank on Wednesday, it was revealed that the funds would be raised through a combination of rights issues and a private placement exercise, which is scheduled to begin on April 1, 2025.
The Central Bank of Nigeria (CBN) issued new capital thresholds for banks in March 2024. According to the CBN’s directives, commercial banks with international authorization must raise their capital base to N500bn, those with national licenses must meet a N200bn threshold, while banks with regional authorization are required to achieve a N50bn capital floor.
Non-interest banks with national and regional authorizations are also mandated to increase their capital to N20bn and N10bn, respectively.
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Banks have until March 2026 to meet these capital requirements, using options such as issuing new shares, rights issues, private placements, mergers and acquisitions, or adjusting their license authorization by either upgrading or downgrading.
Wema Bank, which pioneered Africa’s first fully digital bank, ALAT, noted that this capital raise would mark the second and final stage of its recapitalisation effort, following the N40bn raised in the first phase. The new capital will enable Wema Bank to exceed the CBN’s minimum requirement for national banking authorization.
In December 2023, Wema Bank launched a N40bn rights issue, which received approval from the CBN and the Securities and Exchange Commission (SEC) in 2024.
Commenting on the upcoming rights issue, Wema Bank’s Managing Director/Chief Executive Officer, Moruf Oseni, expressed confidence that the capital raising process would be successful. He assured shareholders and other stakeholders that the process would be transparent, with regular updates provided throughout.
Oseni stated, “We stand strong today not just as Nigeria’s oldest indigenous bank but also as Nigeria’s leading innovative bank. Wema Bank turns 80 this year and I can safely tell you that we have never been more driven to excel. I am blessed to lead with the support of a team of determined and driven professionals who will leave no stone unturned in achieving our strategic aspirations. Indeed, we are building Wema Bank into a formidable force in the African financial services landscape.”
He added, “We remain dedicated to maintaining transparency throughout this process and will provide regular updates to all stakeholders and shareholders as we go forward. This capital raise will be a win-win for us all. You can trust as always that your investment in Wema Bank will produce exceeding returns. This is our promise to you.”
Oseni has previously stated that the bank intends to retain its national operating license.
Background Information
Wema Bank completed its first round of recapitalization through a N40 billion rights issue launched in December 2023. The bank aimed to meet the new capital requirements set by the Central Bank of Nigeria (CBN) in March 2024, which mandated commercial banks with national licenses to raise their capital to at least N200 billion.
Strategy:
Rights Issue: Wema Bank used a rights issue to raise the N40 billion. In a rights issue, existing shareholders are given the opportunity to purchase additional shares at a discounted price, allowing them to maintain their proportional ownership in the bank.
The rights issue was approved by both the CBN and the Securities and Exchange Commission (SEC) in 2024, ensuring it met regulatory requirements.
Private Placement: Wema also considered private placement as an additional strategy to complement the rights issue. Private placements involve selling shares to a select group of institutional or accredited investors rather than the general public.
Shareholder Participation: The rights issue provided existing shareholders with the chance to inject capital into the bank, and their participation was critical for the success of the exercise.
Market Confidence: The rights issue strategy was designed to demonstrate the bank’s commitment to its recapitalization goals, ensuring that shareholders were involved and aligned with the bank’s long-term plans.
Outcome:
The N40 billion raised in the first phase has positioned Wema Bank to meet the CBN’s minimum capital requirements for national authorization. This was crucial as the bank aimed to maintain its national banking license while enhancing its financial position.
The funds from the rights issue helped Wema Bank take a significant step towards reaching the N200 billion capital threshold needed by March 2026.
This initial recapitalization phase set the stage for the second round of fundraising, where the bank plans to raise an additional N200 billion through further rights issues and private placement, scheduled for April 1, 2025.
