The Nigerian banking sector has experienced a significant upsurge in stocks following major lenders’ successful capital raising efforts to meet new regulatory requirements. The NGX Banking Index reflected a 12.24% increase in stock values by the market close on February 14.
GTCO’s shares closed at ₦63.45, marking a 12.90% rise since January 7, while Zenith Bank’s shares closed at ₦51.60, showing a 4.03% increase since their announcement of capital raise.
The surge in banking stocks is part of a broader wave of increased investor confidence in Nigeria’s economy. Despite global market volatility, Nigeria has been attracting foreign investments, supported by currency reforms and other initiatives aimed at stabilizing the country’s economy.
Following the Central Bank of Nigeria’s announcement in March 2024 to raise the minimum capital requirement for banks, several major lenders resorted to the stock market to raise additional funds to meet the new standards by 2026. GTCO raised ₦209 billion in the first phase of its recapitalization plan, while Zenith Bank secured ₦350.4 billion through a rights issue and public offer.
Industry experts believe that the rally in banking stocks is driven by expectations of enhanced profitability and stability within the sector. With increased capital, banks are better positioned to expand lending activities and strengthen their financial positions.
Despite the positive outlook, experts warn that sustaining the stock rally will hinge on macroeconomic stability and regulatory clarity. The observed growth in January may not entirely reflect the underlying market fundamentals, as January often witnesses heightened stock market activity.