A bonus issue distributes additional shares to existing registered shareholders at no cost. This guide explains how Nigerian bonus share issues are calculated and distributed, how they differ from dividends, and what CSCS-registered shareholders should expect to see in their accounts.
This article is for educational purposes only. It does not constitute financial or investment advice. Seek independent regulated financial advice before making any investment decision.
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If you hold shares in a Nigerian listed company and receive a notification about a bonus issue, you may be wondering what it means and whether you need to do anything. This guide explains the mechanics of a bonus share issue in plain language.
A bonus issue (also called a scrip issue or capitalisation issue) is when a listed company issues additional shares to its existing shareholders free of charge, in proportion to their current holdings. No money changes hands — the company simply converts reserves from its balance sheet into issued share capital and credits new shares to registered shareholders.
For example, a "1-for-2 bonus issue" means you receive 1 new share for every 2 shares you already hold. If you hold 1,000 shares, you receive 500 bonus shares, increasing your holding to 1,500 shares.
Companies issue bonus shares for several reasons: to reward loyal shareholders without distributing cash; to bring the share price down to a more accessible level (more shares outstanding means a lower price per share, all else equal); to signal confidence in the business; and to convert retained earnings or revaluation reserves into permanent share capital.
A bonus issue does not inject new cash into the business. It is an accounting reclassification that increases the number of shares in issue while reducing the reserve that funded the bonus.
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This is the most commonly misunderstood aspect of bonus issues. Receiving more shares does not automatically make you wealthier, because the share price adjusts proportionally. After a 1-for-2 bonus issue, the theoretical price per share falls to approximately two-thirds of its pre-bonus level — reflecting the fact that the same total company value is now spread across more shares.
Example: if a share is trading at ₦30 before a 1-for-2 bonus issue and you hold 1,000 shares (value: ₦30,000), after the issue you hold 1,500 shares. The theoretical price adjusts to approximately ₦20. Your total holding value remains approximately ₦30,000 in theory. In practice, the adjusted price may differ from the theoretical level based on market demand.
A cash dividend transfers money from the company to you — your bank account increases and the company's cash reserves decrease. A bonus issue transfers no money — you receive more shares, but the per-share price adjusts. Over the long term, a company that consistently pays cash dividends and a company that consistently issues bonus shares may be equally rewarding for shareholders, but the mechanics are different.
Some companies do both in the same year: pay a cash dividend and issue a bonus. These are separate decisions and are not mutually exclusive.
Make sure your shares are registered directly in your CSCS name so bonus shares are credited automatically. Open a free Shares Saver account.
The bonus date is typically the same as or shortly after the qualifying date. The company's registrar processes the bonus allocation and credits the new shares to each eligible shareholder's CSCS account. You should see the additional shares in your CSCS holding shortly after the allotment date specified by the company.
To receive bonus shares, your CSCS account must be active and your share registration must be in your own name. Shareholders whose shares are in nominee accounts should check with their platform how bonus shares are credited in their specific arrangement.
The tax treatment of bonus shares in Nigeria — particularly in relation to capital gains tax when the bonus shares are later sold — is a matter for a qualified Nigerian tax adviser to advise on based on your specific circumstances. This article does not constitute tax advice. Always seek qualified advice before making decisions with tax implications.
No action is required. Bonus shares are allocated automatically to eligible registered shareholders as at the qualifying date. The registrar processes the allocation and credits the shares to your CSCS account without you needing to submit any form or payment.
The tax treatment of bonus shares — particularly capital gains tax treatment when they are sold — is subject to Nigerian tax legislation and may depend on your specific circumstances. Consult a qualified Nigerian tax professional for advice specific to your situation.
After a bonus issue, the share price adjusts downward to reflect the increased number of shares outstanding. This is the theoretical ex-bonus price (TEBP). Your total holding value should be approximately the same before and after the adjustment, because the lower price per share is offset by the increased number of shares you hold.
On the day of the bonus issue, not necessarily — the price adjusts proportionally and the total value of your holding remains approximately the same. Over time, if the company's earnings grow and the share price recovers, the additional shares from the bonus issue may appreciate in value. But the bonus issue itself is not a windfall in the same way that a cash dividend is.
Both a bonus issue and a stock split increase the number of shares outstanding and reduce the price per share proportionally. The difference is accounting: in a bonus issue, the company converts reserves into share capital. In a stock split, the existing share capital is divided into more shares without changing any balance sheet reserves. The practical effect for shareholders is similar.
Important disclaimer
This article is for general information and educational purposes only. It does not constitute financial advice, investment advice, or tax advice. 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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