When a listed Nigerian company needs to raise additional capital, it may do so via a rights issue — offering new shares to existing shareholders first, before the general public. Your rights entitlement is your individual allocation of that offer. Understanding how entitlements are calculated, what options you have, and what nil-paid rights are helps you make an informed decision when you receive a rights issue notification.
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Definition
A rights entitlement (also called a provisional allotment) is the right given to an existing shareholder to subscribe for a specified number of new shares in a company's rights issue, at a set subscription price, in proportion to their current shareholding. Entitlements are calculated as at the record date from the CSCS register.
Your entitlement is calculated in proportion to the shares you hold on the record date. The ratio is set by the company and stated in the rights issue circular. For example, a 1-for-4 rights issue means you are entitled to subscribe for one new share for every four shares you currently hold. If you hold 10,000 shares, your entitlement is 2,500 new shares. The total subscription cost is 2,500 × the subscription price per share.
Nil-paid rights represent your entitlement before you have paid the subscription price — the right to subscribe, but not yet exercised. Where NGX allows nil-paid trading, you can sell your entitlement to another investor during a defined period without paying the subscription price. The sale price of nil-paid rights reflects the difference between the market price and the subscription price. Fully paid rights (or fully paid new shares) are the new shares you receive after you have paid the subscription price in full and the allotment is complete.
If you do not accept your rights and nil-paid trading is not available, your entitlement lapses. Your existing shareholding is unaffected but becomes a smaller proportion of the enlarged share capital after the rights issue — this dilution effect means your ownership percentage decreases. In some rights issues, the company or registrar sells lapsed entitlements and distributes any proceeds above a minimum amount to non-subscribing shareholders. The specific terms are stated in the offer circular.
In many rights issues, you can accept a portion of your entitlement rather than the full amount. The acceptance form allows you to specify how many of the new shares you wish to subscribe for. Some issues also allow shareholders to apply for excess shares (above their entitlement) if other shareholders have not taken up their allocation.
Your entitlement is calculated from the CSCS register on the record date. Shares held directly in your name at CSCS ensure you appear on the register and receive your entitlement automatically. Shareholders in nominee structures may receive their entitlement through the nominee holder and should confirm the process with their platform.
No. A rights entitlement is the right to subscribe for new shares — it is not yet a share. The new shares are issued and credited to your CSCS account after you have paid the subscription price and the allotment is completed.
If the company has arranged for nil-paid trading on the NGX during the rights issue period, you can sell your entitlement to another investor. Not all rights issues include a nil-paid trading period. Check the rights issue circular for details.
A renounceable rights issue allows shareholders to sell or transfer their entitlement (via nil-paid trading or private renunciation) to another party. A non-renounceable rights issue does not allow transfer — you must either accept or let the entitlement lapse.
If you buy shares after the record date, the entitlement has already been allocated to the previous holder. Shares trading after the record date trade ex-rights — you receive no entitlement for those shares in the current offer.
Your entitlement is stated in the Provisional Allotment Letter (PAL) sent by the registrar. It is also typically available through your investment platform if your account is correctly linked to your CSCS holding.
Important disclaimer
This page is for general information and educational purposes only. It does not constitute financial advice or legal advice. Rights issue terms, procedures, and entitlement calculations vary between transactions. Always refer to the specific rights issue circular and prospectus for the offer you are participating in. Shares Saver does not provide financial or legal advice.
Shares Saver lets you buy and own NGX-listed shares directly in your own name through regulated broker execution.
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