What Is the Difference Between a Primary Offer and a Rights Issue in the Nigerian Stock Market?

In the Nigerian stock market, a Primary Offer and a Rights Issue are both ways a company raises capital, but they differ significantly in who can buy the shares and how the shares are offered.
Feature
Primary Offer
Rights Issue
Who can buy?
General investing public
Existing shareholders only
Purpose
Raise new capital and attract new investors
Raise new capital from current shareholders
Eligibility
Anyone who meets the requirements
Only shareholders on the qualification date
Share Allocation
Based on subscriptions received
Based on existing shareholding ratio
Ownership Impact
May dilute existing shareholders if they don’t participate
Allows shareholders to maintain ownership percentage
Tradable Rights
Not applicable
Rights may be renounceable and tradable
1. Primary Offer
A primary offer (sometimes called a public offer) is when a company sells new shares directly to investors for the first time or issues additional shares to the public.
Example
Suppose Dangote Cement Plc wants to raise ₦500 billion.
It may offer:
10 billion new shares
At ₦50 per share
To any interested investor
You can apply even if you have never owned the company’s shares before.
Benefits
Opportunity for new investors to become shareholders.
Usually accompanied by a prospectus explaining the offer.
Can increase the company’s shareholder base.
Example from Nigeria
The recent banking recapitalization exercises have involved several primary offers where banks sought fresh capital from the public.
2. Rights Issue
A rights issue is an offer made only to existing shareholders.
The company gives current shareholders the “right” to buy additional shares, usually at a discounted price.
Example
Assume you own:
10,000 shares of a company
The company announces:
1 new share for every 4 shares held
At ₦20 per share
You are entitled to:
2,500 additional shares
You can:
Buy all the shares.
Buy some of them.
Ignore the offer.
Sell the rights (if the rights are tradable).
Why Companies Use Rights Issues
Existing shareholders already know the company.
Faster and cheaper than a public offer.
Helps shareholders maintain their ownership percentage.
Simple Illustration
Imagine a company has 100 shareholders.
Primary Offer
The company sells shares to everyone.
Existing shareholders can buy.
New investors can buy.
Result:
Many new shareholders may enter.
Existing ownership percentages may decrease.
Rights Issue
The company offers shares only to current shareholders.
Result:
Existing shareholders get first priority.
They can maintain their ownership stake by taking up their rights.
Real-Life Example
Suppose you own 1% of a company.
Rights Issue
You participate fully.
Your ownership remains close to 1%.
Rights Issue (You Ignore It)
Other shareholders buy the new shares.
Your ownership may fall to 0.8% or lower.
This reduction is called dilution.
For a Nigerian Investor Using InvestNaija, Bamboo, or a Stockbroker
When a rights issue is announced:
The company checks the shareholder register on a specified qualification date.
Eligible shareholders receive an allotment based on shares already owned.
You can subscribe through your stockbroker.
After allotment, the new shares are credited to your CSCS account.
If you are not already a shareholder before the qualification date, you generally cannot participate directly in the rights issue (unless you acquire tradable rights from another shareholder, where permitted).
Quick Summary
Primary Offer = Company sells shares to the public; anyone can participate.
Rights Issue = Company offers new shares only to existing shareholders, usually at a discount.
Primary Offer brings in new investors.
Rights Issue gives current shareholders first opportunity to invest more and avoid dilution.