Nigerian credit agency cleared to operate in Kenya
Posted Sunday, May 26 2013 at 16:49
- The Capital Markets Authority said that licensing the firm opens the door to Kenya’s capital markets wider, boosting the plan to become a regional financial services hub.
Kenya’s capital markets regulator has given Nigerian credit ratings agency Agusto & Co a licence to set up operations in Nairobi, potentially easing the process of assessing creditworthiness of companies seeking to issue bonds in Kenya.
The Nigerian firm becomes the second ratings agency to be granted a licence after the first issue to Global Credit Rating (GCR) of South Africa.
The Capital Markets Authority (CMA) said that licensing the firm opens the door to Kenya’s capital markets wider, boosting the plan to become a regional financial services hub.
“We would like to see Nairobi being quoted (as a financial services hub) more than Cairo, Lagos and other markets,” said CMA chairman Kung’u Gatabaki in an interview.
Lagos-based Agusto & Co is expected to act as a gateway for firms in the region to access Kenyan capital markets.
Large investors such as insurance and pension funds rely on credit rating agencies to give a professional opinion on whether bonds, commercial papers and other securities are worth the paper they are written on before they make an investment decisions.
About eight Kenyan companies have bonds worth more than Sh60 billion listed at the Nairobi Securities Exchange.
Deal makers speculated that the entry by a Lagos-based firm may be signs of increasing investor interest from West Africa in Kenyan securities.
“It could mean there are investors looking at Kenyan securities such as bonds and they need a rating,” said Kestrel Capital chief executive Andre DeSimone.
He added that institutional investors such as pension funds prefer or by law are required to use the credit rating agencies approved by home-based regulators.
Agusto & Co is licensed by the Securities and Exchange Commission Nigeria, the equivalent of Kenya’s CMA. The company’s website says the firm became the first rating agency to be registered in Nigeria in 1992.
Even in Kenya, pension and retirement funds are required by law to invest in bonds, commercial paper that is rated by a credit ratings agency.
“Commercial Paper, Corporate Bonds, Mortgage Bonds and loan stocks approved by the CMA non listed bonds and other instruments issued by private companies, provided that the bond or instrument has been given investment grade rating by a credit rating agency registered by the CMA, and collective investment schemes incorporated in Kenya and approved by the CMA reflecting this category,” says the Retirement Benefits Authority (RBA) Act.