The Business NG - August 25, 2025

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Editorial Focus: Bank Recapitalisation and Investor Caution

As Nigerian banks intensify recapitalisation efforts, investors are faced with a delicate trade-off. Fresh share issuances, while strengthening capital bases and aligning with regulatory demands, risk diluting existing holdings. This dilution could erode earnings per share (EPS) and distort valuations, leaving many stocks trading at higher price-to-earnings (P/E) ratios than their fundamentals warrant.

BusinessNG’s Market Intelligence Unit warns that the pace of earnings growth may lag behind the volume of new shares, making banks appear more expensive relative to their projected performance. For investors, this signals a need to shift focus from backward-looking metrics to forward guidance and sector-specific fundamentals.

The capital-raising wave reflects the pressure on Nigerian lenders to scale up balance sheets for resilience and competitiveness. Yet, the immediate cost is borne by shareholders in the form of thinner short-term returns. The critical question is whether investors are willing to endure short-term dilution for the promise of long-term strength.

With half-year results on the horizon, clarity will emerge on whether this recalibration enhances or diminishes investor value. Prudent portfolio adjustments, anchored on future earnings capacity, remain the most sensible path forward.