A rights issue is a way for Nigerian listed companies to raise fresh capital by offering existing shareholders the right to buy new shares at a specified price. This guide explains how rights issues work, what the three shareholder options are, and why direct CSCS registration matters when a rights issue is announced.
This article is for educational purposes only. It does not constitute financial or investment advice. Whether to take up your rights is a personal investment decision — seek independent regulated financial advice before acting.
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Rights issues are a routine but important corporate event for shareholders in Nigerian listed companies. When a company you own shares in announces a rights issue, you will need to understand your options and the timeline for acting on them. This guide explains the mechanics in plain language.
A rights issue is a way for a publicly listed Nigerian company to raise additional capital by offering its existing shareholders the opportunity to buy new shares — before they are offered to new investors. The offer is typically made at a price below the current market price (the "subscription price" or "offer price") and is proportional to the number of shares you already hold.
For example, a company might announce a "1-for-4 rights issue at ₦20 per share" — meaning for every 4 shares you already own, you are entitled to buy 1 new share at ₦20. If the market price is ₦25, the rights issue is priced at a discount to incentivise participation.
Companies raise capital through rights issues for a range of reasons: funding expansion or acquisition plans; strengthening the balance sheet to meet CBN capital adequacy requirements (common for banks); retiring existing debt; or investing in new infrastructure. The specific reason is disclosed in the company's rights issue prospectus, which all eligible shareholders receive.
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Rights are allocated based on your shareholding as at the "record date" — the date the company sets to determine which shareholders are entitled to participate. If your shares are registered directly in your name in the CSCS, you will automatically be on the company's shareholder register as at the record date, and rights will be allocated to your CSCS account.
If your shares are held in a nominee or pooled account at an investment platform, the rights will technically be received by the nominee holder. Your platform should notify you and give you the option to participate, but the process depends on the platform's policies — this is one of the practical advantages of direct CSCS registration.
When a rights issue is announced, you have three choices. The right decision depends on your personal financial situation and investment objectives — this is not advice on which to choose:
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If you let your rights lapse without selling them, your percentage ownership of the company will decrease after the rights issue — because new shares are issued to those who did subscribe, increasing the total number of shares outstanding. The value of each existing share is also theoretically adjusted downward (the "theoretical ex-rights price" or TERP) to reflect the new shares issued at a discount.
Whether dilution is a significant concern depends on the size of the rights issue and your specific circumstances. This is an important factor to discuss with an independent financial adviser before the rights issue deadline passes.
No. Participation in a rights issue is optional. You can choose to subscribe, sell your nil-paid rights, or let them lapse. The right choice depends on your financial situation, view of the company, and investment goals. Seek independent financial advice before the deadline.
If the subscription period closes and you have not taken any action, your rights will lapse. In some rights issues, the company may sell lapsed nil-paid rights on behalf of shareholders and remit the proceeds — but this is not guaranteed. Check the rights issue prospectus for the specific terms.
If your shares are registered directly in your CSCS name, you should receive notification of the rights issue from the company's registrar. Contact your broker or investment platform for the specific process to submit your subscription or sell your rights within the offer period.
Nil-paid rights are the entitlements to buy new shares under the rights issue. They are called "nil-paid" because you have not yet paid anything for them — they represent the right to buy, not the shares themselves. During the rights issue offer period, these rights may be traded on the NGX, allowing shareholders who do not want to subscribe to sell their rights to investors who do.
The subscription price is set below the prevailing market price to make the rights issue attractive and ensure sufficient shareholder participation. If the rights issue were priced at or above the market price, shareholders would have little incentive to subscribe (they could simply buy shares in the open market at the same or lower price). The discount is the incentive to subscribe.
Important disclaimer
This article is for general information and educational purposes only. It does not constitute financial advice, investment advice, or any recommendation to buy, sell, or hold any security or to participate or not participate in any rights issue. The value of investments can fall as well as rise. Past performance is not a guide to future results. Seek independent regulated financial advice before making any investment decision. Shares Saver does not provide financial advice.
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