Things are looking ip in Nigeria banking sector. Business Day reports that Nigerian banks are rebounding from a record discount to lenders in South Africa as growth prospects for the continent’s two largest economies diverge. And more improvement is on the way, according to Investec Asset Management.

The Nigerian Stock Exchange Banking 10 Index saw an increase of 19 percent in 2013, compared with a 3.4 percent decline for South Africa’s six-company FTSE/JSE Africa Banks Index and a 8.2 percent decline for the MSCI Emerging Markets Banks Index. According to Bloomberg, South African lenders traded at a premium of 2.4 times to their Nigerian colleagues on a price-to-book basis, down from a record 2.7 times during the month of January.

“Guaranty Trust Bank Plc to Ecobank Transnational Inc. and Zenith Bank Plc are benefiting from financing oil, gas and power projects in Nigeria while bad debts fall as the International Monetary Fund predicts Africa’s second-largest economy will grow 7.2 percent this year,” reports Business Day.  Meanwhile in South Africans are trying to repay loans, curb profit at companies during a period in which the jobless rate climbs and the IMF forecasts 2013 growth of 2 percent, which is the slowest since the 2009 recession.

“Nigerian banks do look favorable,” Mishnah Seth, a banks analyst at Investec told Business Day. “From a valuation perspective they’re cheaper” than their South African peers. “They’ll give you superior growth” over the next two years, she said.

Nigerian banks have undergone a major overhaul. The Central Bank of Nigeria, for example, fired the heads of eight banks four years ago, and injected $3.9 billion into ailing lenders as well as created a state-owned company to buy bad debts to stabilize the industry.

Also, Nigeria’s publicly traded banks are set for profit growth of about 20 percent a year for the next two to three years, Investec’s Seth predicted. “That compares with estimated earnings growth this year of 9.8 percent at Johannesburg-based Standard Bank, which owns Nigeria’s Stanbic IBTC, and 13 percent growth for 2014, according to data compiled by Bloomberg,” reports Business Day.

Demand for Nigerian banks is being buoyed by asset sales and expansion plans.

Phone companies, including MTN Group Ltd. and Globacom Ltd., announced plans to invest at least $5 billion in Nigeria in hopes that the market–Africa’s biggest with 114 million subscriptions–will expand to 200 million by 2017, using Informa Telecoms & Media estimates.

“There’s a lot for the banks to do,” Ronak Gadhia, an African equity analyst at Exotix Ltd., told Business Day. “Telecommunication companies are pretty expansionary, oil and gas still needs quite a lot of investments.”