Nigerian banking stocks have emerged as the top performers on the Nigerian Exchange Limited (NGX) this year, posting a Year-to-Date (YtD) gain of 7.76% as the sector’s recapitalisation exercise gains traction. The NGX Banking Index has outperformed the broader market indicator, the NGX All-Share Index, which closed February 28, 2025, at 4.76%.
Recapitalisation Drives Investor Confidence
Following the Central Bank of Nigeria’s (CBN) directive for banks to raise their capital base, several banks have successfully floated offers, with many being oversubscribed. Zenith Bank Plc, Access Holdings Plc, FCMB Group Plc, and Fidelity Bank Plc are among the institutions that have completed their capital-raising exercises. However, Guaranty Trust Holding Company (GTCO) and others are still in the process of raising nearly N2 trillion to meet the new requirements.
The recapitalisation exercise, which began in March 2024, requires commercial banks with international authorisation to raise their minimum capital base to N500 billion, while national and regional banks must achieve N200 billion and N50 billion, respectively. Merchant banks and non-interest banks are also required to meet new capital thresholds.
Top Performers in the Banking Sector
Wema Bank Plc, FCMB Group Plc, and Stanbic IBTC Holdings Plc led the pack in price appreciation during the first two months of 2025.
Wema Bank’s stock price surged by 30.8%, closing at N11.90 per share in February 2025, up from N9.10 at the start of the year.
FCMB Group’s shares appreciated by 12.8%, closing at N10.60 per share.
Stanbic IBTC Holdings saw an 11% increase, with its stock price rising to N64.00 per share.
These banks also reported impressive unaudited financial results for the year ended December 31, 2024. Wema Bank declared a profit of N102.1 billion, a 134% increase from 2023, while FCMB Group posted a profit of N117.29 billion, up 12.3% year-on-year. Stanbic IBTC Holdings reported a profit of N303.8 billion, marking a 76% growth from the previous year.
Sectoral Performance and Market Sentiment
While banking stocks flourished, the NGX Oil & Gas Index emerged as the worst-performing sector, dropping by 5.55% YtD, followed by the NGX Insurance Index, which declined by 0.24%.
Mr. Aruna Kebira, Managing Director of Globalview Capital Limited, attributed the banking sector’s strong performance to favorable macroeconomic conditions and investor optimism.
“The market is believing that relevant rates will tank in 2025. Inflation figures spiked in 2024, but using the year as the new base year, the numbers for inflation have no other option than to decline,” Kebira said. He also highlighted the impact of the Dangote Refinery’s reduction in petrol prices and the earnings season as key drivers of market activity.
Recapitalisation Timeline and Investor Appetite
The CBN’s 24-month recapitalisation timeline ends on March 31, 2026. So far, seven banks have raised approximately N1.7 trillion in new equity funds, with offers being oversubscribed. Investment banking experts believe that banks are well-positioned to meet their capital requirements, citing strong investor appetite and resilient earnings.
Kebira noted that the current recapitalisation exercise differs from the 2004 scenario, where mergers and acquisitions were prevalent. “The market is not expecting any merger and acquisition this time. Each bank is expected to rise to the occasion and do the needful,” he said.
Expert Insights
Mallam Kasimu Kurfi, Managing Director of APT Securities & Funds, emphasized that banks still have ample time to meet their recapitalisation targets. “The period to conclude recapitalisation is still over a year, so it is too early to assume mergers. We are hopeful that other banks will come to the capital market and meet their capital requirements,” Kurfi said.
Looking Ahead
With investor confidence high and banks demonstrating strong financial performance, the Nigerian banking sector is poised for a transformative period. The recapitalisation exercise is expected to strengthen the sector, enabling banks to deliver higher returns and contribute to the nation’s economic growth.