Nigerian banks won’t raise lending to private industry until the start of next year, once they have been restructured and the central bank has bought $10 billion of toxic debt, central bank Governor Lamido Sanusi was quoted by Bloomberg as saying.
“I don’t think you’re going to have a pickup in lending until at least the first quarter of 2011,” Sanusi said in Abuja.
“This quarter is likely to be a quarter of deals, mergers and acquisitions, and for the beginning of integration.” The central bank bailed out 10 banks last year with 620 billion naira ($4.1 billion) to avoid a collapse of the financial system, and is now pushing for the takeover of some banks and the merger of others.
The purchase of toxic debt by the state-owned Asset Management Corp. will be part of those negotiations, Sanusi said. The government has not bought any toxic assets yet, he said. Bank lending to private industry has declined in five of the past eight months and is little changed from December of last year, according to the central bank website.
Banks will work with the central bank to cut the cost of running their business by 30 percent over three years, Sanusi said. The government has created a team of inspectors it can send to commercial banks in order to reduce the threat of a repeat of last year’s banking crisis, he said.
“In terms of an improvement in profitability, there is more aggressive cost reduction by the banks, so the margin will improve very quickly,” Sanusi also said.
“The share price will recover in reaction to a return to profitability.” The Nigerian Stock Exchange Banking Index, which tracks performance of the top 10 capitalized and most liquid stocks in the industry, has fallen 1.3 percent this year and is down 68 percent since the start of 2008.
Shares in Zenith Bank Plc., the country’s biggest lender by market value, have gained 8.5 percent and declined 52 percent over the same periods.
Sanusi fired the chief executive officers of eight of the country’s 24 lenders last year for their handling of the debt crisis that resulted from banks lending to speculators to buy stocks in companies traded on the Nigerian Stock Exchange. The crisis was triggered by a slump in share prices.
Nigeria’s economy, the second-biggest on the continent after South Africa, is expected to grow 7.78 percent in 2010, up from 6.96 percent last year, driven by non-oil industries, such as agriculture, Sanusi said on Sept. 21.
Growth is expected to reach 7.72 percent in the third quarter and 8.19 percent in the fourth quarter, compared with 7.69 percent in the three months through June, he said.