Nigerian banks position themselves for mergers

By Chijioke Ohuocha

LAGOS (Reuters) - Nigerian banks are positioning themselves for a second round of consolidation after an industry-wide audit and tighter accounting rules exposed the strengths and weaknesses of their rivals.

The central bank has injected around 600 billion naira into the banking system since mid-August after its auditors found nine institutions had built up bad loans which left them too weakly capitalised to sustain operations.

It has since demanded all of Nigeria's 24 banks publish accounts as at the end of September detailing full provisioning for loan losses, a new departure in a country where corporate disclosure levels lag even smaller rivals such as Kenya.

The move, which comes ahead of the introduction of a common financial year in December, has for the first time forced banks to fully provide for non-performing loans, giving a clearer basis for comparison across the sector.

"Even until late last year, banks were still declaring profits, and all of a sudden we're seeing huge losses and provisions," said Wole Famurewa, banking analyst at Lagos-based PHB Asset Management.

"Investors are panicking because they are surprised at the level of provisioning," he said, noting that even conservative lenders considered to be among the country's strongest had posted higher provisions than many analysts expected.

For a factbox on the provisions, click on .

The central bank injected 400 billion naira into Afribank, Finbank, Intercontinental Bank, Oceanic Bank, and Union Bank on August 14 and sacked their top management after the first round of the audit.