BusinessDay... the voice of business: S&P sees Nigeria, Ghana, Kenya bank bond issues

S&P sees Nigeria, Ghana, Kenya bank bond issues
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Anonymous on 04 May, 2008 02:00:00
 
Ratings agency Standard & Poor’s expects an upsurge in bond issuance from
sub-Saharan African banks most likely beginning in Nigeria, Ghana and Kenya as
it emerges from post-election violence.
S&P has so far rated four Nigerian banks, giving them the same rating as
Nigeria itself — BB for foreign currency bonds and BB- for local currency. So
far, it said two had issued bonds.
“It’s coming to the point where the need for long-term financing is
increasing so there is the need for international debt issuance,” analyst
Matthew Pirnie said weekend. “The appetite is definitely there.”
Bond issues could be up to $500 million (N58.5 billion) in Nigeria, he said,
while in small African countries they were likely to be smaller and around $200
million. He would not say if the agency had been approached to issue ratings for
other African banks. Investor interest was likely to be strong despite trouble
in global markets, he said, with many keen to tap good growth in Africa’s
strongest economies, particularly Nigeria, the continent’s largest oil
producer.
“The market fundamentals are very good in Nigeria,” he said. “The banking
sector is looking incredibly strong. As the economy booms and the private sector
widens, there’s a lot of opportunity.”
Emerging funds are increasingly targeting Africa, aiming to take advantage of
growth predicted by the International Monetary Fund (IMF) to only fall
marginally this year to 6.5 percent despite a global slowdown.
While political risk was high across Africa — as evidenced by Kenya’s
largely unpredicted sudden slide into violence after disputed elections in
December — corporate governance was improving, he said.
“The big banks in Nigeria are so worried about the perception of corporate
governance that their risk management processes are very good,” he said.
“They often don’t lend to the government because it is seen as so
untransparent.”
As well as issuing local and foreign currency bonds, he said he expected most
major Nigerian banks to launch micro-finance arms, taking deposits from the very
poorest as another way of boosting growth and cash.
Ghana — which issued a sovereign Eurobond last year — was the likely next
location for bank bond issues and ratings, he said, followed by Kenya as peace
and confidence return.
“Kenya is looking less good at the moment but I think appetite will return
and in a year’s time (the violence) will be old news,” he said.
Further down the line, he said the next countries to see issues from banks
would likely include Mauritius, Namibia, Botswana and possibly large
state-backed banks in countries such as Ethiopia, Mali, Benin or Angola.
“The private banks are likely to come first because they are more
ambitious,” he said. “Being state-controlled gives banks other options and
they tend to be less ambitious than independent banks.”
(Reuters)