BASEL III: More banks to adopt additional

Banking hall

Tier-1 debt structure — RenCap

By Nkiruka Nnorom  

Renaissance Capital, a global investment house, has said that the adoption of Basel III by the Central Bank of Nigeria (CBN) has created a new capital instrument in the form of additional tier-1debt with more banks expected to adopt the funding option in the coming year.

Samuel Sule,  Acting  CEO, Nigeria, for Renaissance Capital,  stated this at the firm’s virtual press conference with the theme: “Wrapping up 2021 and Looking out for Opportunities in 2022 for Nigeria and its Fintech sector”.

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He stated that the Eurobond market would remain a key source of funding mix in 2022 even as investors continue to monitor the performance of the recently launched eurobond issue to guide their appetite.

Recall that a number of corporates accessed the eurobond market to raise funds this year.

Some them include the  US$300million 5-year eurobond issuance by Ecobank Nigeria;  US$350million 10-year Tier-2 Sustainability Bond by Ecobank Transnational Incorporated (ETI); US$500million Additional Tier-1 eurobond by Access Bank Plc and a US$300million 5-year eurobond and tender offer by United Bank for Africa.

Sule,   however, said that inflation would remain a key issue watched closely by markets and would have an impact on all forms of capital as investors focus on real returns.

He said: “This year is a record one in terms of primary dollar issuance across Africa, particularly for Nigeria, with the sovereign, banks and corporates having already accessed the markets thus far. We expect to see more borrowings both in foreign and local currencies.  

“The Nigeria sovereign will require funding for its budget deficit and this will be sourced internally and externally from commercial and multi-lateral entities. We expect the eurobond markets to remain a key part of the funding mix and investors will continue to monitor the performance of recently launched and historical issues to guide further appetite

“The adoption of Basel III by the Central Bank of Nigeria, with new guidelines in place, has effectively created a new capital instrument in the form of Additional Tier 1 debt. Renaissance Capital successfully partnered with Access Bank on the first Additional Tier-1 issue from Nigeria, and we expect this non-dilutive form of capital to be embraced by banks across both foreign and local currency markets.

“We believe 2022 will be opportunistic and issuers and investors alike will do well to be nimble and decisive.”

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