A rights issue gives existing shareholders the chance to buy new shares before they are offered to the public. This guide walks through the Nigerian rights issue participation process from notification through to settlement, covering all three shareholder options.
This article is for educational purposes only. It does not constitute financial or investment advice. Whether to participate in a rights issue is a personal investment decision — seek independent regulated financial advice before acting.
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Receiving a rights issue notice from a Nigerian listed company can feel complex, especially the first time. The key to managing it well is understanding the process early and knowing the deadline. This guide explains each stage in the order it typically occurs.
When a company announces a rights issue, it publishes a prospectus or offer document through the NGX disclosure portal and notifies shareholders. Shareholders whose shares are registered directly in their own name in the CSCS receive notification from the company's share registrar — typically by post or email, depending on the registered contact details.
If your shares are held in a nominee account through an investment platform, the platform should notify you on the registrar's behalf. In either case, you should also monitor NGX filings for the companies you hold to ensure you do not miss announcements.
The rights issue offer document (prospectus) contains all the key information you need: the subscription price per new share, the ratio of new shares to existing shares, the record date, the subscription opening and closing dates, and the purpose for which the company is raising the new capital. Read it carefully before deciding what to do.
The prospectus also contains risk factors — material risks the company has identified that could affect its business and financial performance. Review these alongside the company's most recent financial statements before forming any view.
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You have three options (described in more detail in the companion article "What Is a Rights Issue?"):
The right option depends on your personal financial situation, your view of the company, and whether you want to maintain your proportional ownership. This is a decision where independent financial advice is particularly valuable.
If you decide to subscribe, you need to complete the Application/Acceptance Form included in the offer document (or available from the registrar) and submit it — along with payment — to the registrar before the closing date. The form confirms how many new shares you are subscribing for.
Payment is typically made by bank transfer or bank draft to the designated collecting bank account specified in the prospectus. Keep proof of payment in case of any queries. If you are using an investment platform, check whether the platform facilitates the subscription process on your behalf or whether you need to deal directly with the registrar.
Direct CSCS registration ensures you receive rights issue notifications directly from the registrar. Open a free Shares Saver account.
After the offer closes, the company and its registrar process all subscriptions and determine the allotment of new shares. If the rights issue is fully subscribed, each eligible subscriber receives their full entitlement. New shares are then credited to your CSCS account, and the company's registrar updates the shareholder register.
You should receive a provisional allotment letter or a CSCS statement confirming the new shares have been credited. The timeline from offer close to share crediting varies by issuer — check the prospectus for the indicative allotment timetable.
If you let your rights lapse without subscribing or selling the nil-paid rights, your percentage ownership of the company decreases. New shares are issued to those who did subscribe, increasing the total share count. The theoretical value of your existing shares is also adjusted downward (the TERP effect). The extent to which this matters depends on the size of the rights issue relative to the existing share capital.
You are eligible if you hold shares in the company as at the record date specified in the rights issue announcement. Monitor NGX filings for the companies you hold and ensure your CSCS registration details (including contact information) are up to date so you receive notifications promptly.
Some rights issues include a provision for shareholders to apply for excess shares — those not taken up by other eligible shareholders. Check the prospectus for whether an excess application facility is available and the process for applying.
In some rights issues, if nil-paid rights are not claimed or sold by shareholders who let them lapse, the company may sell the unclaimed rights in the market at the end of the offer period and remit the net proceeds to those shareholders. This depends on the specific terms set out in the rights issue prospectus.
The tax treatment of rights issue transactions in Nigeria can be complex, particularly for proceeds from selling nil-paid rights and for capital gains when new shares are eventually sold. This is a matter for a qualified Nigerian tax adviser to advise on based on your specific circumstances. This article does not constitute tax advice.
The timeline varies by issuer and SEC approval process, but Nigerian rights issues typically run from announcement to share allotment over a period of several weeks to a few months. The prospectus will set out the specific indicative timetable. Always work backwards from the closing date to ensure you act in time.
Important disclaimer
This article is for general information and educational purposes only. It does not constitute financial advice, investment advice, tax advice, or any recommendation regarding participation in any rights issue. The value of investments can fall as well as rise. Seek independent regulated financial advice before making any investment decision. Shares Saver does not provide financial advice.
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