What Is a Share Buyback? How It Works for Nigerian Shareholders
A share buyback is a company repurchasing its own shares. Here is how buybacks are approved and announced in Nigeria, and what happens to your holding when one runs.
A share buyback is when a listed company uses its own money to repurchase some of its issued shares from shareholders, either cancelling them or holding them as treasury shares. It is a corporate action, like a dividend, a rights issue or a bonus issue, and it is regulated by company law, the Securities and Exchange Commission and the NGX. This guide explains what a buyback is, how one is approved and announced in Nigeria, and what it means mechanically for a shareholder. It takes no view on whether buybacks are good or bad.
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Important disclaimer. This article is for educational purposes only. It is not financial advice and is not a recommendation to buy any specific share or investment product. Always do your own research and consider seeking independent financial advice before making any investment decision.
The Legal Basis for Buybacks in Nigeria
For many years Nigerian companies were largely prevented from buying their own shares. The Companies and Allied Matters Act 2020 changed that. Under sections 184 to 187 of CAMA 2020, a company may buy back its shares if its articles of association permit it and its shareholders approve by special resolution, the purchase is funded from distributable profits, and the directors make a statutory declaration that the company will remain solvent after the buyback. Shares that are repurchased and not cancelled are held as treasury shares, and the Act caps treasury shares at fifteen percent of the issued shares of that class.
For listed companies two more layers apply. The SEC's rules on share buybacks govern how a public company may conduct one, and the NGX Rulebook sets the conditions for buybacks by listed companies. Company announcements typically cite all three: the CAMA section, the SEC rule and the NGX rule. The first buyback on the Nigerian market under this framework was Dangote Cement's programme, which began in December 2020; the company has since run further SEC-approved programmes in tranches.
How a Buyback Is Approved and Announced
- The board proposes a buyback and calls a general meeting, often an extraordinary general meeting, where shareholders vote on a special resolution authorising it, including the maximum number of shares and the period.
- The company applies to the SEC for approval of the programme and complies with the NGX rules, including the required disclosures.
- The company announces the programme to the market through an NGX filing, stating the method, the maximum number of shares, any price parameters and the timetable.
- The buyback runs, often in tranches. Each tranche is announced with its start and end dates, and the company reports the result afterwards, including how many shares were bought.
- The repurchased shares are cancelled or recorded as treasury shares, and the company's issued share capital figures are updated accordingly.
The Methods a Company Can Use
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- Open-market purchase: the company's appointed stockbroker buys shares on the NGX during normal trading, like any other buyer. Most shareholders never interact with it directly.
- Pro-rata offer: the company offers to buy a proportion of every shareholder's holding at a stated price. Each shareholder decides whether to accept.
- Court-sanctioned scheme: a scheme of arrangement approved by shareholders and sanctioned by the court, used for larger or more complex repurchases.
- Purchases from an employee share scheme: buying shares held under a company's own employee scheme.
What It Means for a Shareholder, Mechanically
In an open-market buyback, nothing happens to your account unless you happen to sell during the programme and your order is matched against the company's buy order, in which case the sale is like any other. Your shares stay in your CSCS account under your CHN, your name stays on the register, and your entitlement to dividends and votes is unchanged. Because the total number of shares in circulation falls, each remaining share represents a slightly larger fraction of the company. Whether that matters to you, and what it does to the price, depend on many other things and are not something this article can predict.
In a pro-rata offer, you receive a document from the company or its registrar setting out the offer and the deadline. If you accept, the relevant shares are transferred out of your CSCS account and the payment is made to your mandated bank account. If you do nothing, you keep your shares. Whether to accept is a personal decision to make with independent advice if you need it.
Treasury shares held by the company carry no voting rights and receive no dividends while the company holds them. The company may later cancel them, sell them or use them for an employee share scheme, subject to the rules.
A buyback is not a dividend. A dividend pays cash to every shareholder in proportion to their holding. A buyback pays cash only to the shareholders who sell, and changes the number of shares in issue for everyone else.
Where to Read the Details
Every buyback by a listed company is documented on the NGX disclosure portal and usually on the company's own investor relations page: the notice of the meeting, the resolution, the SEC approval, each tranche announcement and the results. The annual report then shows the treasury shares and the change in issued capital. These are the primary sources; commentary elsewhere is secondary.
Corporate actions like buybacks are communicated to shareholders on the register. Shares Saver registers your shares in your own name so that notices reach you directly.
See How It WorksShare Buybacks in Nigeria: FAQs
Do I have to sell my shares in a buyback?
No. In an open-market buyback the company is simply a buyer on the Exchange and you are not involved unless you choose to sell. In a pro-rata offer you can accept or ignore the offer. Only a court-sanctioned scheme can bind all shareholders, and that requires the approvals set out in CAMA 2020.
What are treasury shares?
Shares a company has bought back and holds itself rather than cancelling. Under CAMA 2020 they carry no votes and no dividends while held, and a company may not hold more than fifteen percent of the issued shares of a class as treasury shares.
How will I know a company I hold is running a buyback?
The company files each announcement with the NGX, which publishes it on its disclosure portal, and shareholders on the register receive notice of the general meeting that approves the programme. Your broker or platform may also pass on corporate action notices.
Does a buyback affect my dividends?
If you keep your shares, your dividend entitlement per share is unchanged; dividends are declared by the board separately. A buyback does not commit a company to pay any particular dividend in future.
Is a buyback the same as a delisting?
No. A buyback repurchases some shares while the company stays listed. A delisting removes the company from the Exchange altogether, and is a separate process with its own rules and shareholder protections.
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. The value of investments can fall as well as rise. You should seek independent regulated financial advice before making any investment decision. Shares Saver does not provide financial advice.
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