Catalysts...

April 1 (Bloomberg) -- Nigeria’s stock market, Africa’s best performer during the past decade, posted the biggest declines worldwide in the first quarter as bad loans to speculators pushed bank valuations to an all-time low.

The Nigerian Stock Exchange All Share Index fell 37 percent this year, the steepest quarterly decline in more than a decade and the worst of 89 benchmark indexes tracked by Bloomberg. Stocks in Africa’s largest oil-producing nation reached a five- year low last week, even as a rebound in crude spurred gains in commodity-exporting countries from Russia and Norway to Brazil.

Investors have been fleeing “the good, the bad and the ugly” of the financial industry since Nigerian regulators allowed banks to delay booking losses on so-called margin loans backed by shares, emerging-markets brokerage Renaissance Capital says. The lack of disclosure left investors unable to identify potential losses. The All Share Index may fall another 9 percent, according to Moscow-based Renaissance and London-based Exotix Holding Ltd.

“Without meaningful disclosure investors will be hesitant to come back, especially in the financials,” said Christopher Hartland-Peel, an equity analyst at Exotix. “No one can really tell how the companies are faring.”

Lenders may be holding as much as $10 billion of toxic assets, equal to about half of their capital, according to Eurasia Group, the New York-based research firm that publishes the Global Political Risk Index with Citigroup Inc. Banks have provided at least 1 trillion naira ($6.8 billion) of margin loans to allow investors to buy shares, Bank of America Corp. said in a report last week.

Slowing Economy

Growth of Nigeria’s economy may slow to 1.5 percent this year because of lower revenue from oil, which accounts for 20 percent of gross domestic product, according to Standard & Poor’s. The naira weakened 20 percent against the dollar since Nov. 26, when the Central Bank of Nigeria began limiting the supply of foreign exchange to banks to protect foreign reserves. The bank’s naira rate was unchanged at 148.10 per dollar today, compared with 172 versus the dollar in unofficial street trading, according to Mohammed Kuza, a currency dealer in Lagos.

Renaissance expects the All Share Index to drop to 18,000 in the first half from yesterday’s closing level of 19,825.08. Exotix forecast the same drop, without giving a time frame.

No Bank Failures

The market has a daily turnover of between $10 million and $20 million and a total capitalization of $30.1 billion, according to Renaissance and UBA Capital, the brokerage unit of Lagos-based United Bank for Africa Plc. That compares with an average turnover of $30.2 billion a day this year on the New York Stock Exchange and a U.S. market capitalization of $9.38 trillion, Bloomberg data show.