By Amaka Ifeakandu
Strong indications emerged Wednesday that Ecobank Nigeria is planning to raise additional fund in order to boost its tier-1 capital.
Ecobank Nigeria’s total capital adequacy ratio as at the end of the first half of 2014 stood at 13.3 per cent. Blueprint gathered that the additional capital will be a boost as the recent Central Bank of Nigeria (CBN) draft guidelines categorised the bank as a systemically important bank.
The subsidiary of Ecobank Transnational Incorporated (ETI) recently raised $250 million in tier-2 capital, thereby lifting its capital adequacy ratio (CAR) to 16.5 per cent.
According to Adesoji Solanke of Renaissance Capital, “Considering the Central Bank of Nigeria’ (CBN’s) preference for tier-1 capital for a bank of this scale, we think the subsidiary needs a tier-1 capital injection.”
Group Chief Executive, ETI, Albert Essien, said recently that Ecobank expects South Africa’s Nedbank to convert a $285 million loan to shares in the Lome-based bank before the end of the year.
He was confident that Nedbank would exercise the conversion option and also top up the conversion amount with $206 million to give it a 20 per cent stake in Ecobank.
After the Nedbank deal, Ecobank expects its capital adequacy ratio to hit 18.7 per cent of assets by year-end, up from the 17.5 per cent it was in the first six months of the year.
“The Nedbank stake is capped at 20 per cent. If they do convert I think that will strengthen the business relationship that we have (had) since 2008,” Essien said. He added that: “The conversion will trigger reciprocal board seats. We see it as very positive and we expect that it will happen.”
Management of ETI expects to invest a portion of the Nedbank top-up into its Nigeria operations to boost capitalisation levels.