According to sources from Reuters news agency, Wema Bank PLC, is planning the expansion of its branch network by issuing a NGN20 billion bond approximately USD63 million.
According to the CFO of the bank, the bank is issuing local currency bonds after scrapping plans last year to issue a $100 million seven-year dollar bond because of currency risks.
“We expect to open in a couple of weeks. We are awaiting final regulatory approvals and we expect to conclude the process this quarter,” Tunde Mabawonku told Reuters by phone.
Wema, which won regulatory approval last year to switch from a regional to a national bank, plans to re-open branches in Nigeria which it closed to become a regional player, he said.
Wema obtained shareholders’ approval in May to issue bonds or preference shares this year to raise 20 billion naira in the first tranche of a 50 billion naira programme, but market conditions then deteriorated.
The Nigerian naira has dropped 40 percent since June, when Nigeria ditched its 16-month-old peg of 197 naira to the dollar in a bid to lure back foreign investors who had fled after a plunge in the price of oil, Nigeria’s economic mainstay.
Mabawonku said the mid-tier lender was watching debt markets closely for rates, adding that it had a target break-even rate at which it wanted to issue the notes.
Nigeria’s one-year treasury bill is offering around 18% yield, traders say. Yields on fixed income securities have been rising in recent months with the central bank mopping up naira liquidity to lure back foreigners.
The central bank lifted interest rates by 200 basis points last week to 14% to help fight inflation, which hit a 10-year high of 16.5% in June.
“Yes the economy has slowed but there are still business opportunities,” Mabawonku said. “We are opening locations in areas where we are not present and we see that the population is underbanked.”
Wema, which has more than 100 branches, has also said it aimed to buy a mid-sized commercial lender to build scale.
In the fourth quarter of last year, Wema Bank received a national banking license. It is expedient that its national expansion will require increase int its liquid capital positions. In its recently released Q2 result, the bank grew its revenue by 15.2%.
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