The 213-member Nigeria Stock Exchange All Share Index, whose 21 percent gain is second in the continent to the 28 percent advance of Kenya's benchmark index, may reach 30,490 by yearend from 25,409 on June 30 as the Asset Management Corp. set up by the West African nation to buy toxic assets from lenders starts operating, said Sebastian Spio-Garbrah, chief executive officer of DaMina.
If Amcon does "only half of its work well," this will still trigger "a consolidation in the banking landscape, catalyze more foreign interest in the local market, and spur it to even higher values by yearend," New York-based Spio-Garbrah
said by e-mail.
Banks, which make up about 60 percent of the Nigerian equities market by weighting, will lead the resurgence, he
A debt crisis in 2009 left the country's lenders with toxic assets of about $10 billion, Spio-Garbrah estimated a year ago while working as an Africa analyst at Eurasia Group.
The central bank fired the top managers of eight of the country's 24 lenders and gave the industry an injection of 620 billion naira ($4.1 billion) to stem the decline.
Buying that debt will cost the central bank "roughly" $5 billion as commercial banks don't have collateral to cover the bad loans, Central bank Governor Lamido Sanusi
said July 1.
"Although the Amcon is itself initially capitalized by less than $100 million, it will have the authority to issue up to $5 billion in Nigeria sovereign-guaranteed bonds to buy the impaired assets from the banks," Spio-Garbrah
wrote in a note to clients on July 6.
Some stocks that will benefit include First Bank of Nigeria Plc
, the country's biggest lender by market value, United Bank for Africa Plc and Zenith Bank Plc
These banks would want to "unload their difficult and bad debts in exchange for fresh cash," he