By Omoh Gabriel, Business Editor
LAGOS— STANDARD and Poor, an international rating agency, yesterday, described Nigerian banks as extremely risky despite the Central Bank of Nigeria, CBN, intervention in the sector last year.

Managing Director for financial institutions at Standard and Poor, Mr John Gibling, was quoted by Reuters as saying that Nigerian banks had continued to look extremely risky, despite a bail-out of the sector last year.

Gibling said: “The Nigerian banking system is very high risk. The ratings we have for the banks are in the single B category, it’s a very low level compared to most banks in the world. We continue to see the Nigerian banking system as very high risk.

In regulatory reform there is still a long way to go. Nigeria’s central bank is hoping investors will recapitalise nine banks rescued last year in an unprecedented $4 billion bailout. Lax risk management had left the institutions so weakly capitalised they posed a systemic risk.”

Gibling, however, praised Central Bank Governor Lamido Sanusi and his predecessor Chukwuma Soludo for pushing through banking sector reforms, saying the bailout had been a “very, very brave move” which had prevented a catastrophe.

He noted that risk management needed to improve if foreign investor confidence was to increase, adding: “What Nigerian banks really need is to continue improving their risk management culture, particularly in developing strong asset quality measures.

They are very dependent on short-term funding. They need to develop more long-term funding, which would help them in funding more long-term financing projects for the economy.”

Companies in frontier markets

Meanwhile Investec Asset Management, a South Africa asset management company, said it aimed to more than triple its African management assets to $10 billion over the next five years.

The firm is targeting companies in frontier markets such as Kenya and Nigeria that benefit from rising consumer demand. It also expects a wave of privatisation across the continent to help spur investment, said John Green, Investec Director of Global Business Development.

Investec Asset Management, the fund arm of South African bank, Investec, has $30 billion in assets under management across the continent, with $3 billion of that outside of South Africa.

Green said in an interview on the sidelines of the Fortune Global Forum in Cape Town: “In three to five years, that could be $10 billion. For the last six years we have been on an active campaign to bring people with capital to the continent. It’s about investment, not aid. Aid is not creating a sustainable economic benefit.”

Green said he liked banks in Nigeria, Africa’s most populous nation, and Kenya, East Africa’s biggest economy, noting: “Financial services are one of the early beneficiaries of growth. The consumer story is really the story that we back.”

Nigerian banks include Zenith Bank and First Bank, while Kenya Commercial Bank and Barclays Bank of Kenya are among Kenya’s largest lenders. He also liked food companies such as Nigeria’s Dangote Sugar Refinery and Kenya’s East African Breweries.

Expected privatisation in countries such as Angola is also likely to draw more investment.

He said. “The privatisation of some of the big state-owned enterprises is probably the next thing on the agenda for many of the policy-makers.

There are still plenty of difficulties for investors looking at Africa, including a lack of brokerage research on companies and little liquidity in some markets – making it difficult for big institutional investors to buy and sell shares in bulk.”