Ecobank Transnational Incorporated, a leading pan-African banking conglomerate with operations in Nigeria, has announced its intention to bypass the Nigerian Exchange and other capital markets in its efforts to secure $600 million. This capital is aimed at fulfilling the recapitalization requirements set by Nigerian regulators.
The bank plans to raise the necessary funds through senior debt or loan facilities, which typically carry the lowest interest rates and are prioritized for repayment over other forms of debt. Ecobank, which reported a revenue milestone of $2 billion in 2023, is also open to considering subordinated debt options that come with higher interest rates due to their lower repayment priority.
According to Benedict Egwuchukwu, an investment research analyst at Afrinvest West Africa Limited, Ecobank’s strategy to procure funding through debt instruments outside the capital market is a move to avoid the potential congestion in the domestic market. This congestion is anticipated as other financial institutions and the federal government may also be seeking to raise capital simultaneously.
Egwuchukwu further noted that Ecobank is looking to capitalize on more favorable borrowing rates that are emerging as some economies begin to implement policy rate cuts.
Olumide Sole, a banking analyst at Vetiva Capital Management Limited, suggested that Ecobank’s preference for debt financing could be due to the relatively modest amount required to meet the recapitalization threshold of ₦200 billion.
While the Nigerian Exchange provides avenues for equity and debt financing to its listed entities, other financial institutions such as FCMB, Stanbic IBTC, and Fidelity are opting to raise additional capital primarily through equity offerings both on the Nigerian Exchange and in international markets.
Fidelity Bank, for instance, initiated a capital raise of ₦127 billion from the Nigerian Exchange on Wednesday, June 5, 2024, with expectations that other companies will follow suit before the month’s end.
Ecobank has a history of securing funds outside the traditional capital market. In March 2024, the bank obtained a $250 million loan facility from the African Export-Import Bank and the Africa Finance Corporation to bolster trade financing and corporate objectives.
Egwuchukwu pointed out that Ecobank Transnational Incorporated’s operations span beyond Nigeria, which is reflected in its dollar-denominated consolidated financial statements.
By successfully raising the proposed $600 million, Ecobank aims to enhance its liquidity, diversify its funding sources, and reinforce its position in the market, contributing to greater financial stability.
