Funso Akere, CEO, Stanbic IBTC Capital has said that a possible solution to meeting the new capital base could be as simple as a right issue for Pension Fund Administrators (PFAs).
He stated this during an event tagged, “Beyond Capital: A workshop on capital raising and strategies in Nigeria’s pension industry,” organised by the Pension Fund Operators Association of Nigeria (PenOp), and monitored by Nairametrics.
Following the announcement of recapitalization in April, barely a half of the existing 22 PFAs in Nigeria have reportedly been able to meet the threshold of N5 billion set by the regulator from N1 billion. The stakeholders also advised on quick implementation of possible action that PFAs may want to explore.
What stakeholders are saying
Akere stated that to meet the new capital base, the fiPFAs could consider rights issues – for those that do not want to deal with the intricacies of a merger – in terms of how to capture market shares and grow.
He said that merger and acquisition is an important piece that gives opportunity to grow with combined strength, adding that some firms may also explore the option of partnering with a PFA that is doing well whilst also raising the option of private placement, which has to do with raising equities through capital from non-shareholder.
Akere also said, there is work to be done in terms of the merger and acquisition process because most of the PFAs are private, and would have to get approval from the Federal Competition & Consumer Protection Commission (FCCPC) and the National Pension Commission (PenCom).
He added that by now, PFAs should have already commenced the merger and acquisition process which takes typically six months.
Also speaking at the event, Tayo Ojutalayo, Head, security, FBN Quest Merchant bank, said, the quickest and most cost-effective option would depend on a comprehension of the operators’ current capital structure. According to him, PFAs would need to consider the financial, tax, and legal implications in line with the overall corporate objective.
He also proposed that the capital-raising effort might be explored through the private equity market as this is administratively less costly and guarantees control compared to other alternatives.
“This will be implemented through a private placement or right issue which will be determined by evaluation of the firms and the objectives,” Ojutalayo said.
Temidayo Ajayi Bello, Partner, Detail Commercial solicitor stated that regulator engagement is a key legal consideration in any decision that involves rights issues, merger and acquisition, getting foreign investors and local private equity investors.
The event provided an opportunity for shareholders and executive management of a number of Pension Fund Administrators to deliberate on strategies for raising additional capital and to analyze the outlook of the pension industry post recapitalisation.