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Nigeria’s banking sector recorded a strong start to the year, with the NGX Banking Index surging by 9.76 per cent in January, significantly outperforming the broader market, according to a corporate report obtained from the Nigerian Exchange Group on Tuesday.
The rally was fueled by increased investor confidence amid the ongoing recapitalisation exercise, which has seen banks raise a total of N1.7 trillion in new equity capital in the first phase of the capital-raising drive.
The apex capital market regulator, the Securities and Exchange Commission also confirmed the figures, highlighting robust participation from investors.
NGX noted that the banking sector’s stellar performance in January was driven by strong demand for financial stocks.
The NGX Banking Index posted a 9.76 per cent year-to-date gain, significantly outpacing the NGX All-Share Index, which rose just 1.53 per cent within the same period.
In specific terms, Wema Bank Plc led the gainers with a 25.8 per cent increase, pushing its share price from N9.10 to N11.45. FCMB Group Plc followed with a 17.55 per cent rise, closing at N11.05 from N9.40, while Stanbic IBTC Holdings gained 11.71 per cent, moving from N57.60 to N64.35 per share.
The gains were underpinned by strong financial results, with Wema Bank, FCMB Group, and Stanbic IBTC Holdings reporting significant profit growth in their full-year 2024 earnings.
The Central Bank of Nigeria’s recapitalisation directive, which mandates banks to meet new minimum capital requirements by March 2026, has been a key driver of market sentiment.
Under the new guidelines, commercial banks with international licenses must hold N500 billion in capital, while national commercial banks require N200 billion. Regional commercial and merchant banks must meet a N50 billion threshold.
Three banks have already met the new capital requirements, while seven others raised funds through public offers in 2024, with many experiencing oversubscriptions.
Speaking on the recapitalisation drive, the Managing Director of Globalview Capital Limited, Aruna Kebira, stated that the current market performance reflects strong investor appetite for banking stocks.
He added that with N1.7 trillion already raised, banks are well on track to meet the recapitalisation deadline without the forced mergers seen in 2004.
Similarly, the Managing Director of APT Securities & Funds, Mallam Kasimu Kurfi, noted that the 24-month timeline provides ample time for banks to explore multiple fundraising options.
He explained that, unlike previous consolidation phases, banks today have stronger fundamentals and diversified capital-raising strategies, including private placements and foreign investments.
With investor sentiment remaining bullish, analysts predict that the NGX Banking Index will continue to outperform the broader market as more banks announce their financial results and recapitalization plans.
The Managing Director of Arthur Steven Asset Management, Olatunde Amolegbe, highlighted that the sector’s fundamentals remain strong and will likely sustain the current growth momentum.
He stated that recapitalised banks will be stronger, more profitable, and better positioned to deliver higher shareholder returns, adding that the sector remains one of the most attractive investment options in 2025.
“As Nigeria’s banking industry moves towards compliance with the CBN’s new capital framework, the ongoing recapitalisation drive is expected to deepen market liquidity, enhance financial stability, and sustain long-term growth in the sector”, Amolegbe said.
