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Nigeria's Bailed-Out Banks Surge as President Jonathan Signs Bad-Debt Bill
Nigeria’s banking index surged the most in almost four months after President Goodluck Jonathan signed into law a bill to create a company that will buy bad debts from them.
The Bloomberg NSE Banking Index that comprises of the top 10 capitalized and most liquid companies in the Nigerian banking industry rallied gained the most in a week, rising 7.77, or 2.08 percent, to close at 380.69 in the commercial hub Lagos. That’s the biggest gain since July 13. Fidelity Bank Plc advanced the most in 10 weeks, climbing 4.9 percent to 2.38 naira.
“The horizon now looks clearer,” said Chinonyem Anyanwu, chief executive officer of Dependable Securities, a Lagos-based brokerage, by phone from the city.
Advances were led by banks that received part of a 620 billion-naira ($4.1 billion) bailout from the West African nation’s central bank last year after they failed an audit.
Afribank Plc increased by the maximum daily limit of 5 percent to close at 1.89 naira, Intercontinental Bank Plc gained 4.7 percent to 1.79 naira, and Oceanic Bank Plc rose 4.9 percent to 1.7 naira.
The Asset Management Corp. of Nigeria, or Amcon, will help to “stimulate the recovery of Nigeria’s financial system from the recent crisis by boosting the liquidity of troubled banks,” presidential spokesman Ima Niboro quoted Jonathan as saying in an e-mailed statement after the market closed yesterday.
‘Delayed Effect’
“The effect may not be felt” until Amcon starts buying the toxic assets and providing liquidity,” Anyanwu said.
The asset management company will buy about $10 billion in bad debts by the end of the year, central bank governor Lamido Sanusi said on July 1.
“I don’t think that Amcon on its own will lead to significant uplift in the market,” Bunmi Asaolu, an analyst with London-based CSL Stockbrokers, said by phone today. “Other factors are needed to sustain a rally towards the end of the year, including earnings growth driven by growth in loan books of the good banks.”
Nigeria’s benchmark stock index plunged 46 percent in 2008 and 34 percent last year, making it the second-worst performer after Ghana, as banks, which make up about 60 percent of the Nigerian equities market by weighting, faced a debt crisis and financial collapse.
The central bank sacked the chief executive officers of eight of the country’s 24 lenders last year over their handling of the debt crisis and injected funds into them to stave off their closure.
To contact the reporter on this story: Vincent Nwanma in Lagos at vnwanma@bloomberg.net
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