Nigerian bank stocks, trading at a discount to emerging-market lenders, will probably extend their gains to 42 per cent this year as they boost capital and finance oil and power projects, Vetiva Capital Management Limited has said.

The analysts said the gauge for Nigerian banks had gained 34 per cent this year compared with a 0.5 per cent drop in MSCI EM Banks Index.

Bloomberg quoted an equity analyst at Vetiva, Mr. Pabina Yinkere, as saying, “What matters to us is the valuation of the banks, their move to create risk assets and how well they manage those risk assets.

“We’ve seen emerging market banks with similar risk profile with Nigerian banks, yet trading at higher multiples.”

Nigeria’s All-Share Index has rallied 37 per cent this year, Africa’s best performer after Ghana’s benchmark equities measure.

The Bloomberg NSE Banking Index, which tracks Nigeria’s 10 biggest banks by market value, is trading at a price-to-book ratio of 0.8 times, less than the 1.4 times book value of assets for lenders in the MSCI Emerging Market Banks Index.

Nigerian lenders are seeking to raise dollars by selling international bonds to finance oil, power and other infrastructure projects in Nigeria after returning to profit from near-collapse in 2008 and 2009.

Nigeria’s economy may expand by 7.2 per cent this year compared with sub-Saharan Africa’s 5.6 per cent average, according to the International Monetary Fund.

Yinkere said, “The fund-raising is welcome, especially for the mid-tier banks that are somehow under-capitalised relative to their growth aspirations.

Nigeria is selling majority stakes in power plants and letting private investors to acquire holdings of as much as 60 per cent in six transmission and 11 power-distribution companies spun out of the former state-owned utility.

Banks have also increased lending to the oil industry as companies including London-based Heritage Oil Plc and Lagos-based Neconde Energy Limited bought stakes in fields owned by Royal Dutch Shell Plc, Eni Spa and Total SA.

Yinkere also said, “Where there might be concern for the banks is what the quality of risk assets becomes as the loan book grows. In this case, we do not see any cause to worry as the deals are for viable projects and the companies have strong cash bases.”