Allan Gray bets on Nigerian banks

Allan Gray, the largest manager of nongovernment investment funds in Africa, is betting on Nigeria’s banking industry despite poor performance by the oil companies it depends on and widespread calls for the naira to be further devalued.

The investor was adding to its stakes in Lagos-based lenders Access Bank and Zenith Bank, Allan Gray chief investment officer Andrew Lapping said. He did not say how big the holdings were or how many shares his firm was buying.

“We see a lot of value in Nigerian banks,” Lapping said. “Most people think they’re all going to zero because of the bad debts. We think they will survive because high interest rates make the banks profitable and they have less debt to equity compared with European lenders,” he said.

Access Bank CEO Herbert Wigwe said last month the bank’s nonperforming loans were expected to climb to “slightly below” 3% of total loans by the end of 2017. That compared with 2.1% for the nine months through September.

The banking industry is under stress in Nigeria, where

The ratio of bad debt at Nigerian banks rose to this level in 2016

the economy was in recession during 2016.

Nonperforming loans escalated to almost three times the regulatory maximum.

DOLLAR SUPPLIES

An oil price at half its 2014 levels, combined with sabotage and attacks on oil installations that have cut output, has limited dollar supplies in the country.

The bad-debt ratio at Nigerian banks rose to 13.4% in 2016. The naira was devalued in June and traded at 315.50 to the dollar by 6.53am in Lagos on Wednesday, while the unofficial, blackmarket rate was 507 naira to the dollar.