Renaissance Capital, a financial services company says non-performing loans in Nigerian banks may double to 20 percent of total credit by 2010.

This, according to the financial experts, is attributed to lower oil prices and global recession slowing the economy and making it harder to repay debt. Even so, Nigerian banks are able to write down at least 1 trillion naira ($6.8 billion) of bad loans and still exceed minimum capital requirements of regulators, RenCap’s Mukuru said.

Government should avoid a blanket bailout of its lenders to reveal “the good, the bad and the ugly banks” as unpaid loan charges look set to double, the financial service company stated early in March.

“Good banks are trading at bad bank multiples because investors are not comfortable that they understand systematic risks and bank exposure levels,” Kato Mukuru, RenCap’s financial services analyst in Lagos, said in a report. “It is high time that we learn ‘who’s been swimming naked.’”

According to the financial experts, Central Bank Governor Chukwuma Soludo is considering buying up banks’ bad debts, the Financial Times reported, citing an interview with Soludo. He dismissed calls by foreign investors for increased disclosure by the nation’s lenders, the FT said.

A “blanket bailout” is therefore not appropriate, the RenCap analyst said. The government should rather support banks by creating an asset management company that will buy non- performing loans at a discount or introduce “A zero cost stabilization vehicle” that will allow banks to gradually recover or write-off bad loans”, Mukuru said.