The launch of the Dangote Petroleum Refinery and Petrochemicals IPO is creating an unusual intersection between Nigeria’s banking and capital markets, as banks seek to make it easier for customers to finance share purchases.
United Bank for Africa (UBA) for instance, is promoting loan-access to the Dangote Refinery IPO through its banking channels and directs customers who need funding to its personal-loan facility, which offers up to ₦30 million, subject to eligibility and lending conditions. UBA’s published personal-loan terms include a repayment period of up to 60 months.
The strategy mirrors a comprehensive business opportunity for the offering banks, who are looking at turning the enormous public interest in the refinery’s IPO, into additional lending, payments and investment activity.
Some of the following below, are the clear outline of why Nigerian banks are interested in further promoting and proposing a loaning for this initial public offer’s opening.
Interest and fee income – lending creates an opportunity for banks to earn interest on credit extended to customers, while the wider IPO process can generate transaction, processing and other financial-service revenues. Growing loans demand – share-financing gives banks another avenue for deploying funds into retail credit. Rather than simply holding deposits, banks can convert part of their balance sheets into interest-earning loans, subject to their credit-risk policies. More transactions – customers borrowing to invest are likely to use bank accounts, mobile applications and payment channels to fund their subscriptions and manage their investments. This can increase customer activity and strengthen banks’ digital ecosystems. Customer acquisition – Investment-linked lending can also help banks attract customers who may subsequently use savings, wealth-management, payment, insurance and other financial products.
The Dangote Refinery IPO is designed to accommodate retail participation, with 4.1 billion shares offered at ₦525 each and a minimum subscription of 10 shares, worth ₦5,250. The offer is expected to raise about ₦2.15 trillion.
As for Nigerians who are salivating over this offering, bank-supported financing could lower the immediate cash barrier to participation. It potentially allows salary-workers and other eligible borrowers to acquire shares, without paying the entire investment from existing savings.
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