Nova Bank explains mission in Nigeria’s capital market

Nova Merchant Bank says its entrance into the Nigerian capital market is part of its strategy to mobilise developmental financing to support the country’s economic recovery.

This came few weeks after its debut bond issue was oversubscribed by over 300 per cent.

Managing Director of the bank, Mr. Anya Duroha, said in an online post-issue media briefing that the bank, which set out to raise N10bn, realised over N31bn.

Duroha, who described the offer as well received by the market, said the terms of the subordinated bond issue to be counted as Tier 2 capital was for seven years tenor recoverable after five years at between 12 and 12.5 per cent rate.

He lamented the scourge of the Coronavirus Disease on the global economy, saying the impact had seriously stressed the Nigerian economy, necessitating efforts to support a recovery.

“As part of Nova’s strategy, we knew that as a merchant bank with an objective to do developmental financing, we needed to get long-term funds to finance long-term assets. That was why we went to the capital market to raise funds to finance long-term loans for our customers.

“But it was over-subscribed by about 300 per cent, with diversified investors from individuals, corporate entities, asset management companies, insurance companies and foreign investors that contributed over N31bn,” he added.

With the overwhelming acceptability of the offer, Duroha said the bank planned to return to the market for more funds.

Although the timing for the return to the capital market was yet to be agreed by the bank’s management, the MD said the bank, at the moment, was preoccupied with the deployment of the already raised funds to key sectors of the economy that require support to recover.

On projects and sectors the funds would go to after the first tranche, Duroha said the bank was looking at the prospect of creating medium to long term loans with tenor between three and five years for industries like agriculture, telecoms and healthcare, where clear opportunities exist.

He said a substantial part of the funds would also go to financing and building capacity for exports for the country.

Insisting that the primary reason for raising the bond was not for capital, but for long-term funds for its customers, the MD said with the bank’s capital base of over N20bn, its capital adequacy ratio is at about 53.57 per cent as of 2019, above the regulatory ratio of 10 per cent.

Reviewing the performance of the bank in the last three years it has been in business, he said it had done very well, with earnings growing from about N1.2bn in 2017 to about N5.8bn in 2019, with profitability also on the upswing.

In its first year of operations, he said the bank made N510m profit and in the second-year, doubled the figure to N1.15bn, and to N1.65bn in 2019.

Lamenting the impact of COVID-19 crisis, he said Nova saw ahead of the pandemic, adding that immediately the outbreak was reported in China, it knew it was inevitable it would get to everybody around the world.

Consequently, he said the bank began to prepare to take advantage of the business opportunities that would come out of the crisis situation.

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