Ecobank shuns capital markets to raise $600m through debt instruments

Ecobank Transnational Incorporated, a pan-African financial institution with a national banking licence in Nigeria, will sidestep the Nigerian Exchange and other capital markets in its plan to raise $600 million to meet Nigeria’s recapitalisation requirements.

The funding will be raised through senior-ranked debt or loan facilities that offer the lowest interest rates and are given the highest priority in terms of repayment. The bank which hit a $2 billion revenue in its 2023 revenue, will also consider debt that ranks below senior debt and come with higher interest rates.

By focusing on debt instruments outside the capital market, Ecobank will be avoiding the domestic market which could be crowded due to other financial institutions trying to raise funds alongside the federal government, according to Benedict Egwuchukwu, an investment research analyst with Afrinvest West Africa Limited.

The company is also looking to take advantage of “better interest rate offers from economies who have started implementing policy rate cuts, thereby reducing the borrowing rates,” Egwuchukwu said.

The company could also be prioritising debt because the amount they need to meet the recapitalisation requirement— ₦200 billion—is relatively small, said Olumide Sole, banking analyst at Vetiva Capital Management Limited.

The Nigeria Exchange offers equity and debt funding to listed companies. However, financial institutions like FCMB, Stanbic IBTC, and Fidelity are raising additional funds primarily through equity on the Nigerian Exchange and markets outside the country.

Fidelity Bank on Wednesday, June 5, 2024, commenced its push to raise ₦127 billion from the Nigerian Exchange. Other companies are expected to join Fidelity before the end of the month.

This would not be the first time Ecobank Transnational Incorporated is raising money outside the capital market. In March 2024, the company secured a $250 million loan facility from African Export-Import Bank and Africa Finance Corporation to support trade and generate corporate purposes.

“Ecobank Transnational Incorporated doesn’t just operate in Nigeria, hence the dollar consolidated financial statements,” Egwuchukwu said.

If Ecobank raises the proposed figure, it will receive a liquidity boost, diversify its funding sources, and improve its overall market stability.