The Business NG - September 05, 2025

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Editorial Focus

Investors must tread carefully as Nigerian banks raise fresh equity to meet recapitalisation targets. While the capital injections strengthen balance sheets and improve liquidity, analysts caution that the short-term effect could be a dilution of earnings per share (EPS). With more shares in circulation and earnings growth lagging behind, individual shareholder returns may come under pressure by year-end 2025.

This development also carries implications for price-to-earnings (P/E) ratios, which already stand at 2.5x—above the three-year average of 2.2x. Portfolio managers may need to adjust strategies, focusing more on forward P/E projections than trailing metrics when evaluating valuations.

Still, the underlying performance of the sector remains strong, with net earnings up 66% and gross earnings up 56% over the past three years, underscoring the resilience of Nigerian banks in turbulent conditions. The temporary EPS squeeze should therefore be viewed as part of a broader growth strategy aimed at expanding credit, deepening financial intermediation, and sustaining long-term value.

For investors, the message is clear: recalibrate, but don’t retreat.