Nigerian Bank Nigeria CBN Central Bank Of Nigeria – Nigeria Stocks Rise Most In 3 Months On Bank Pledge

Source Bloomberg.com: Ana Monteiro And Vincent Nwanma, January 7th 2010

Jan. 7 (Bloomberg) — Nigerian stocks rose the most in three months after the central bank extended a guarantee on interbank lending and said lawmakers will approve the creation of a company to buy bad debts from lenders, boosting banks.

The Nigerian Stock Exchange All-Share Index added as much as 2 percent, the most since Oct. 5 last year, and closed 1.1 percent higher at 21,484.21 in Lagos, according to the bourse’s Web site. Zenith Bank Ltd. and United Bank for Africa Plc, which account for about 16 percent of the index, led gains, rising 4.3 percent and 4.6 percent respectively.

The West African nation’s main index was the world’s second-worst performer after Ghana’s last year, falling 34 percent mainly on concerns about bad debts at Nigerian banks. New York-based Eurasia Group estimated in 2009 that the lenders had as much as 1 trillion naira ($6.8 billion) of toxic assets.

A central bank audit of the industry resulted in 620 billion naira being injected into 10 banks to cover bad debts in August and September last year. The chief executive officers of eight banks were fired and replaced.

Nigeria’s bailed-out banks “have hit the bottom and there is nothing else for investors other than to buy,” said Vincent Ukoh, a trader at Securities Trading & Investments Ltd. Oceanic Bank Plc, a bailed-out lender, fell 85 percent last year and today extended a 10-day rally after its Chief Executive Officer John Aboh said deposits had risen 30 percent to 560 billion naira from his appointment on Oct. 5 to Dec. 18.

‘Terrible Discount’

“Prices are attractive at such a terrible discount,” said Raheem Mohammed, general manager of Lagos-based Kundila Finance. “Those who never dreamt of owning 100,000 Oceanic shares, which were as high as 35 naira, can afford to do so now.” Oceanic Bank gained 4.6 percent to 2.03 naira.

Investor Mark Mobius said he may buy more shares in the “particularly cheap” frontier markets, including Nigeria, as developing nations face a “correction” that may exceed 20 percent.

“We’re finding some very interesting opportunities in those markets,” Mobius, who oversees $34 billion of developing- nation assets at Templeton Asset Management Ltd., said in a Bloomberg Television interview in Singapore. Still, liquidity may be an issue for some of the markets, he said.

The Central Bank of Nigeria will guarantee all interbank borrowings until the end of this year, and expects Parliament to approve the creation of an asset-management company that will buy bad debts from commercial banks in about three weeks, Governor Lamido Sanusi said at a briefing yesterday in the capital, Abuja. The company was intended to be operational by the end of last year.

The rate at which the Central Bank of Nigeria lends to commercial banks was kept at 8 percent, while the borrowing rate was reduced to 2 percent from 4 percent, he said. The key monetary policy rate, which acts as an anchor for other rates, was held at 6 percent.

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