Renaissance Capitalhas said the plunge in Nigeriaâ€™s interbank rate to 2.2 per cent from 26 per cent a year ago shows lenders are recovering from the crisis in which 10 of the biggest 24 lenders failed.
The Nigeria Interbank Offered Rate for overnight loans, the benchmark for interest payments between financial institutions, has dropped to the lowest in, at least, two years after the Central Bank of Nigeria, CBN, provided a N620 billion bailout for the lenders that failed an audit last August and fired their chief executive officers.
Nigerian banks are likely to increase lending by between 20 per cent and 25 per cent this year, Akintola Akinbamidele, a Lagos-based analyst with Rencap, said.
â€œAt the moment, the banks are keeping a lot of cash,â€ said Akinbamidele. â€œFor the banks to start making profit, they have to lend.â€
Bank stocks led a 34 per cent plunge in Nigeriaâ€™s All-Share Index last year, the worldâ€™s second-worst performer after Ghanaâ€™s gauge.
Nigeriaâ€™s index, which is 40 per cent comprised by banks, has risen 10 per cent in 2010, Africaâ€™s second-biggest gainer after Kenya.
Stocks will â€œrally in the next few weeksâ€ in response to bank results, Akinbamidele said. Among the lenders due to report are Wema Bank Plc, whose share price has climbed 31 per cent this year following a 93 per cent drop in 2009, and Skye Bank Plc, which is 30 per cent higher this year, paring its 36 per cent decline last year.
Debt Recovery meanwhile, Nigeriaâ€™s economy, Africaâ€™s biggest oil producer, is set to grow 4.8 per cent this year after expanding 4.3 per cent in 2009, according to the World Bank. That compares with the Washington-based lenderâ€™s forecast for 2.7 per cent growth in the global economy. Oil has jumped to $79 a barrel from about $35 in December 2008.
Governmentâ€™s plan to boost spending on health, education and road upgrades will spur bank lending, Akimbamidele said.
Acting President, Goodluck Jonathan, last week approved $2bn of spending from the governmentâ€™s Excess Crude Account, a fund set aside for an emergency and when oil prices are high .
With fewer loans provided so far this year, problem debt is likely to shrink, he said.
Recover of bad debts has picked up.
Bank PHB Plc, one of the rescued lenders, in January announced plans to recover N61bn of non-performing loans, and wants to recover the amount by the second quarter. The lenders shares have surged 45 per cent this year.
Afribank Plc repaid half its debt to the CBN and recovered N42bn of non-performing loans, it said in December.
Oceanic Bank International Plc said it had recovered N41bn by December.
â€œWe expect a lot of write- backs,â€ Akinbamidele said.
The 7-day Nigeria Interbank Offered Rate, or Nibor, declined to 4.4 per cent, its lowest level in, at least, two years, from a peak of 26 per cent on March 17, 2009, Rencap data show.