Oct. 30 (Bloomberg) -- Nigeria’s four largest banks will boost their domestic market share, leaving smaller rivals behind, following an audit by the nation’s central bank of lenders operating in the country, Renaissance Capital said.

First Bank of Nigeria Plc, Zenith Bank Ltd., United Bank for Africa Plc and Guaranty Trust Bank Plc may emerge from the crisis with a combined 54 percent market share “over the next couple of years” from 35 percent, Kato Mukuru, RenCap’s Lagos- based banking analyst, said in a note to clients today.

“The capital imbalances in Nigeria’s banking system will pave the way for a second round of consolidation,” Mukuru said. “Investors are best advised to buy the local acquirers, the potential leaders, as these banks will be best positioned to structure deals on favorable terms and return deal synergies to shareholders.”

The Central Bank of Nigeria conducted an audit of the country’s 24 banks this year that was aimed at stabilizing an industry reeling from bad debts. Governor Lamido Sanusi fired the chief executive officers of eight lenders and injected at least 620 billion naira ($4.12 billion) of capital into those and two other banks to boost their capital and liquidity.

The nation’s “second-tier” lenders, such as Access Bank Plc, Fidelity Bank Plc, Diamond Bank Plc, First City Monument Bank Plc, Stanbic IBTC Plc and Skye Bank Plc, all of which passed the audit, “will take advantage of the current market environment to buy scale and position their businesses for leadership status,” Mukuru said.

Diamond Bank, Ecobank Nigeria Plc, Fidelity Bank and Skye Bank could become “prized acquisition targets” of foreign banks and Nigeria’s big four, RenCap’s Mukuru said, because they offer “solid niche” businesses. Access, First City, Diamond and Skye are most likely to be buyers failed lenders, he said.

To contact the reporter on this story: Vincent Nwanma via the Johannesburg newsroom at johannesburg@bloomberg.net

Last Updated: October 30, 2009 08:26 EDT