Lagos, Nigeria – In a strategic move to ensure broader participation and accommodate its diverse shareholder base, United Bank for Africa (UBA) Plc, one of Nigeria’s leading financial institutions, has announced a two-week extension of its ongoing rights issue application period. The decision, which was recently approved by the Securities and Exchange Commission (SEC), extends the deadline from the initial closing date to January 27, 2025, providing shareholders additional time to subscribe to the new shares offered by the bank.
Background of the Rights Issue
The rights issue, launched on December 2, 2024, is a critical component of UBA’s capital-raising strategy aimed at strengthening its financial position and supporting its long-term growth objectives. The bank is offering 6,839,880,229 ordinary shares at N45.00 each, with a nominal value of N0.50 per share. This offer is structured on the basis of one new ordinary share for every five existing shares held by shareholders as of the close of business on October 16, 2024. The rights issue, valued at approximately N307.79 billion, is a significant step toward bolstering UBA’s capital base in compliance with the Central Bank of Nigeria’s (CBN) revised minimum capital requirements for commercial banks.
The CBN, in March 2024, introduced new capital requirements for banks operating in Nigeria as part of efforts to strengthen the resilience of the country’s financial sector. Commercial banks with international authorization, such as UBA, are required to maintain a minimum capital base of N500 billion, while those with national and regional licenses must hold N200 billion and N50 billion, respectively. These requirements are designed to enhance banks’ ability to absorb economic shocks, support credit growth, and drive financial inclusion across Nigeria.
UBA’s rights issue is a proactive response to these regulatory changes, ensuring the bank remains compliant while positioning itself to capitalize on emerging opportunities in Nigeria’s dynamic financial landscape. The extension of the application period reflects UBA’s commitment to inclusivity, allowing shareholders—both retail and institutional—ample opportunity to participate in the capital-raising exercise.
Rationale for the Extension
According to a statement released by UBA and filed with the Nigerian Exchange Limited (NGX), the decision to extend the rights issue application period was driven by feedback from shareholders and the need to accommodate logistical and procedural challenges faced by some investors. The additional two weeks, approved by the SEC, provide shareholders with greater flexibility to complete the subscription process, particularly for those navigating cross-border transactions or facing delays due to documentation requirements.
A spokesperson for UBA emphasized that the extension underscores the bank’s dedication to ensuring that all eligible shareholders can exercise their rights and benefit from the opportunity to increase their stake in one of Africa’s most prominent financial institutions. “We recognize the importance of this capital-raising exercise for our shareholders and the broader financial ecosystem,” the spokesperson stated. “By extending the application period, we aim to maximize participation and ensure that no shareholder is left behind due to timing or logistical constraints.”
The extension also reflects UBA’s responsiveness to the complexities of Nigeria’s financial market, where retail investors, in particular, may require additional time to mobilize funds or complete the necessary paperwork. For shareholders based in the diaspora, the extended period offers a critical window to address foreign exchange challenges and regulatory requirements in their respective jurisdictions.
UBA’s Strategic Vision and Financial Performance
Founded in 1949, United Bank for Africa has grown to become one of Africa’s largest and most respected banking groups, with operations spanning 20 African countries, as well as the United Kingdom, the United States, France, and the United Arab Emirates. The bank serves over 45 million customers globally, offering a wide range of financial services, including retail banking, corporate banking, investment banking, and digital banking solutions.
UBA’s decision to pursue a rights issue aligns with its broader strategic vision of maintaining a robust capital base to support its ambitious growth plans. The bank has consistently demonstrated resilience in the face of economic challenges, leveraging its diversified operations and innovative product offerings to sustain profitability. In its 2024 half-year financial results, UBA reported a profit before tax of N401.6 billion, representing a significant increase from the N378.2 billion recorded in the corresponding period of 2023. This performance underscores the bank’s ability to navigate Nigeria’s volatile macroeconomic environment, characterized by inflation, currency depreciation, and regulatory changes.
The proceeds from the rights issue are expected to enhance UBA’s capacity to expand its lending portfolio, invest in digital transformation, and strengthen its presence in key markets across Africa and beyond. The bank has been a pioneer in leveraging technology to drive financial inclusion, with initiatives such as its Leo chatbot and mobile banking platforms gaining widespread adoption among customers. By bolstering its capital base, UBA aims to accelerate these initiatives, positioning itself as a leader in the rapidly evolving fintech space.
The Importance of Rights Issues in Banking
Rights issues are a common mechanism for publicly listed companies, particularly banks, to raise capital without diluting the ownership of existing shareholders. Unlike public offerings, which are open to new investors, rights issues prioritize existing shareholders by granting them the right to purchase additional shares at a discounted price. This approach not only rewards loyal investors but also ensures that the company can raise funds efficiently while maintaining its ownership structure.
For UBA, the rights issue serves multiple purposes. First, it ensures compliance with the CBN’s revised capital requirements, which are designed to create a more resilient banking sector capable of withstanding economic shocks. Second, it provides UBA with the financial flexibility to pursue strategic initiatives, such as expanding its footprint in underserved regions, investing in technology, and enhancing its risk management frameworks. Finally, the rights issue reinforces UBA’s commitment to its shareholders, offering them an opportunity to increase their stake in a bank with a strong track record of growth and profitability.
The decision to extend the application period highlights the importance of shareholder engagement in such exercises. By providing additional time, UBA is demonstrating its commitment to transparency and inclusivity, ensuring that all shareholders—regardless of their location or financial capacity—have the opportunity to participate.
Broader Implications for Nigeria’s Banking Sector
The extension of UBA’s rights issue application period comes at a time when Nigeria’s banking sector is undergoing significant transformation. The CBN’s recapitalization directive has prompted banks across the country to explore various capital-raising strategies, including rights issues, public offerings, and private placements. This wave of recapitalization is expected to reshape the competitive landscape, with stronger banks emerging as leaders in the race to capture market share and drive innovation.
For UBA, the successful execution of its rights issue will solidify its position as one of Nigeria’s tier-1 banks, alongside competitors such as Access Bank, Zenith Bank, and First Bank. These institutions have also announced plans to raise capital to meet the CBN’s requirements, signaling a broader trend of consolidation and strengthening within the sector. The increased capital base will enable banks to expand their lending capacity, support small and medium-sized enterprises (SMEs), and contribute to Nigeria’s economic recovery.
Moreover, the recapitalization exercise is expected to enhance the global competitiveness of Nigerian banks, enabling them to compete with international financial institutions and attract foreign investment. UBA, with its extensive operations across Africa and beyond, is well-positioned to leverage its strengthened capital base to expand its influence in key markets such as Ghana, Kenya, and Côte d’Ivoire.
Challenges and Opportunities for Shareholders
While the rights issue presents an attractive opportunity for shareholders to increase their stake in UBA, it also comes with challenges. For retail investors, the financial commitment required to participate in the rights issue may be significant, particularly in an economy grappling with high inflation and currency volatility. The naira’s depreciation against major currencies has increased the cost of transactions for investors, particularly those in the diaspora, who must navigate foreign exchange markets to participate.
To address these challenges, UBA has taken steps to streamline the subscription process, partnering with registrars and financial institutions to provide guidance to shareholders. The bank has also leveraged its extensive branch network and digital platforms to facilitate seamless participation, ensuring that shareholders can access the necessary resources and support to complete their subscriptions.
For institutional investors, the rights issue represents an opportunity to deepen their investment in a bank with a strong growth trajectory. UBA’s consistent dividend payments and robust financial performance make it an attractive proposition for long-term investors seeking exposure to Nigeria’s banking sector. The extension of the application period is likely to encourage greater participation from institutional investors, who may require additional time to conduct due diligence and secure approvals for their investments.
The Role of Regulatory Oversight
The Securities and Exchange Commission’s approval of the extension underscores the critical role of regulatory oversight in ensuring the integrity of capital-raising exercises. The SEC, as Nigeria’s apex capital market regulator, is responsible for protecting investors and maintaining the stability of the financial markets. By granting UBA’s request for an extension, the SEC has demonstrated its commitment to fostering an inclusive and transparent process that prioritizes shareholder interests.
The CBN’s recapitalization directive, combined with the SEC’s oversight of capital market activities, reflects a coordinated effort to strengthen Nigeria’s financial system. These regulatory measures are expected to enhance investor confidence, attract foreign capital, and promote sustainable economic growth.
Looking Ahead: UBA’s Growth Trajectory
As UBA moves forward with its rights issue, the bank is poised to capitalize on emerging opportunities in Nigeria’s financial sector. The additional capital will enable UBA to expand its lending activities, particularly in sectors such as agriculture, manufacturing, and technology, which are critical to Nigeria’s economic diversification efforts. The bank’s focus on digital innovation is also expected to drive growth, as more customers embrace mobile and online banking solutions.
Furthermore, UBA’s pan-African presence positions it to benefit from the African Continental Free Trade Area (AfCFTA), which aims to create a single market for goods and services across the continent. By strengthening its capital base, UBA can play a leading role in facilitating cross-border trade and investment, supporting the growth of African businesses and economies.
The extension of the rights issue application period is a testament to UBA’s commitment to its shareholders and its vision for sustainable growth. By providing additional time for participation, the bank is ensuring that its investors—both large and small—can contribute to its success and share in the rewards of its ambitious growth strategy.
Conclusion
United Bank for Africa’s decision to extend its rights issue application period by two weeks reflects its dedication to inclusivity, transparency, and shareholder value. The move, approved by the SEC, provides eligible shareholders with additional time to participate in a capital-raising exercise that is critical to UBA’s long-term success. As one of Nigeria’s leading financial institutions, UBA is well-positioned to navigate the challenges and opportunities of the evolving banking sector, leveraging its strengthened capital base to drive innovation, expand its operations, and deliver value to its stakeholders.
The rights issue, valued at N307.79 billion, is a pivotal step in UBA’s journey toward maintaining its leadership in Nigeria’s banking industry and reinforcing its presence across Africa and beyond. With a robust financial performance, a commitment to digital transformation, and a strategic vision for growth, UBA is poised to emerge stronger and more competitive in the years ahead. Shareholders are encouraged to take advantage of the extended application period, which closes on January 27, 2025, to participate in this landmark opportunity.
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