Nigeria banks

By Charles Okeahalam, AGH Capital

Nigeria is facing a number of difficulties, most notably the absence of security in the north-east of the country where Boko Haram has killed thousands of people. Linked to this atrocity is the equally atrocious low level of civil, social and economic governance. Poor governance is correlated with social instability. It is also influenced by economic inefficiency. Therefore, only a simple or naïve analysis could attempt to wish away cause and effect.

Presidential and state governorship elections which were scheduled to take place in February have now been postponed to March and April respectively. As the elections approach we need to ask: what is the state of the Nigerian economy and what do we have to do to improve it? These are important questions that need to be addressed following the presidential election. Read more

By Peter Leger, Coronation Fund Managers

So you thought a six-month break on a desert island looked appealing and spent long hours in silent meditation, reflecting on self-actualisation, harmony and humanity’s ceaseless race to consume the planet. Now you’ve just made the return journey to find that the oil price collapsed from over $110/barrel to less than $50. Peak theorists having turned into piqued theorists. You didn’t see that coming. And, frankly, neither did we. Nor did we expect to see the Swiss franc jump 28 per cent in a single day – as it did recently.

The lesson being that extreme volatility has to be an assumption when building portfolios, and doubly so when investing in frontier markets, where volatility is often amplified. Read more

By Melissa Cook, Africa Sunrise Partners

The headlines about Boko Haram’s deadly and vicious attacks in Nigeria threaten to overshadow what we see as considerable progress on one of the country’s top priorities: power reform and privatization. Despite ongoing challenges ranging from inadequate gas supply to funding shortfalls and antiquated wiring and transformers, the Nigerian power sector is moving full-steam ahead.

Access to electricity could be a game-changer for Africa’s largest economy. We realize that it may take years to get Nigeria’s power capacity up to the 40GW target from today’s 4-5GW (see chart). But step by step, we see barriers to business, household activity, and entrepreneurial activity dropping as power generation and distribution companies—and the government-owned transmission company—refurbish or repair assets. Read more

For Nigerian banks and their investors, the financial crisis of 2009 may feel like a long time ago. The Nigerian Stock Exchange has been one of the world’s standout performers over the past year and prices of bank shares have soared. They’re not out of the woods yet though, according to the International Monetary Fund, which has taken an in-depth look at the sector in a report released this week calling for further tightening of regulation. Read more

Nigerian banks have a way of finding their own solutions, be it fixing a crisis or getting first-time borrowers and savers into the system.

Or listing in London, for that matter. Three Nigerian banks have listed global depositary receipts on the London Stock Exchange. Zenith Bank is the latest, and is the second to do so among the country’s five Tier-1 banks. The move is one born of new confidence, and a search for new investors. Read more

Two years on from the start of its cleanup operation for Nigeria’s banking crisis, the Asset Management Corporation of Nigeria (AMCON) – the country’s ‘bad bank’ – is courting foreign investors.

Since its establishment in 2010, Amcon has issued five series of zero-coupon bonds with a combined face value of just under N5.7tn – that’s almost $36bn – which it has used to buy non-performing loans and recapitalise struggling banks. The first series – face value N1.7tn ($11bn) – matures in December 2013, and with African sovereign debt in high demand, Amcon is considering turning to international markets for refinancing. Read more

Zenith Bank, Nigeria’s second largest bank by market share, has successfully listed on the London Stock Exchange on Thursday. The bank has listed 125m global depository receipts – but the move is not capital raising, as the bank has bought back shares in Nigeria to make the move.

So why the switcheroo? And what does it say about listing in Nigeria? Read more

Or he could take it to the bank

In the last few years Nigeria’s banks have been to the bottom and back again, with the 2009 crisis, bailouts, mergers and the creation of a bad bank, Amcon. So is 2013 the year when they get a chance to shine?

According to a report from rating agency Standard & Poors, The Nigerian Banking Sector Outlook 2013: At The Start Of A New Cycle, the mixture of strong economic growth in Nigeria and political stability should underpin a year of expansion. Could anything go wrong? Read more

With painful irony, oil-rich Nigeria is unable to supply its own population with electricity. The country ranked 178th of 185 economies on access to electricity for new businesses in the World Bank’s latest “Doing Business” publication.

Infrastructure is, not surprisingly, a key to the country’s future development, as an FT Special Report sets out. Read more

The Nigerian banking sector has been put through the wringer in the last few years, to say the least. But after the cleanup, are things as shiny as they seem? Rating agency Fitch sounded a few alarms earlier in July, saying rapid credit growth in Africa’s most populous country could carry the risk of weakening bank asset quality.

And on Wednesday, Standard and Poor’s published a report with the rather alarming title of Why Standard & Poor’s Calculation Of Capitalization For Nigerian Banks Is Lower Than The Regulatory Measure. In a nutshell – don’t look at the official figures, they are too high. Read more

After the crisis of 2009, Nigeria’s banking system has been cleaned up, with the sector performing impressively this year. So everything’s fine?

Not quite, according to a new report by the ratings agency Fitch. Rapid credit growth in Africa’s most populous country could carry the risk of weakening bank asset quality. Read more

The turnaround for Nigeria’s banks has been dramatic, if a little costly. Bailouts, mergers, the formation of a bad bank. Total bill? $21.5bn.

But it looks like it is starting to pay off. After Standard and Poor’s tentative thumbs up earlier this year, the first quarter figures and 2011 full year numbers for nine of Nigeria’s banks are something to cheer. Read more

After 10 bailouts, $21bn spent and several mergers, Nigeria’s banks have been given a positive report by Standard and Poor’s.

It’s a tentative thumbs-up though. There is still work to be done, especially in regulation. But it’s a long way from the crisis of 2009. Read more