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Nigeria’s mobilised finance sector is making massive progress

Article - December 19, 2012
The nation’s banks are functioning again thanks to a highly comprehensive rescue package from the Asset Management Corporation of Nigeria (AMCON)
The Asset Management Corporation of Nigeria (AMCON) has gone a long way towards stimulating new growth in Nigeria’s financial system since it was established in 2010. Set up by the Central Bank of Nigeria (CBN) and the Ministry of Finance, the corporation’s role is to positively assist the economy by complementing the recapitalisation of affected Nigerian banks; provide opportunities for banks to sell off non-performing loans; free up valuable resources and enable banks focus on their core activities; and basically, get banks lending again.

Tasked with cleaning up the banks’ balance sheets following a multibillion-dollar rescue of eight failing institutions, AMCON absorbed their non-performing loans, exchanging them for government-backed bonds. By buying up the bad loans that were crippling the banks, the corporation has enabled them to continue doing business and making new loans to facilitate the running of the economy.

Lamido Sanusi, Governor of the CBN, has praised AMCON for what it has achieved so far in its campaign to reduce non-performing loans.

“We have acquired approximately
N3.14 trillion-worth of loans, of which
we have recovered
N600 billion so far.”

Mustafa Chike-Obi,
Managing Director and CEO of AMCON
“With AMCON buying up the banks’ toxic assets, the remaining bank debt will only be between 300 billion and 400 billion naira [$1.89bn-$2.52bn]; this will reduce the credit crunch in the system and allow banks to resume their lending roles to the economy,” he says.

“We are very satisfied with progress so far,” comments AMCON’s CEO and Managing Director, Mustafa Chike-Obi. “We have set an ambitious target for this year in terms of debt recovery. We have acquired approximately N3.14 trillion-worth of loans of which we have recovered N600 billion so far.”

Jibril Aku, Managing Director of Ecobank Nigeria, has also praised the CBN and the creation of AMCON, highlighting that the latter “helps resolve the portfolio challenges of the banks so that they can resume their business and lend to the sector.”

Alex Otti, Managing Director of Diamond Bank PLC, further testifies to AMCON’s success. He says: “The banking industry cannot be forgotten in this ambitious growth that the government has set for itself, and AMCON and the CBN have played a key role in repositioning the industry.”

Nigeria’s banks are queuing up to praise AMCON for its assistance. The Managing Director of Afrinvest West Africa Limited, Ike Chioke, adds: “AMCON puts banks back on the path of liquidity to enable them commence lending.”

“The strong banks probably dipped in terms of profitability but absolutely nothing happened to their capital base,” states Olusegun Agbaje, Managing Director, Guaranty Trust Bank. “The setting up of AMCON has obviously helped because that allows the banks to sell off some of their assets.”

Despite AMCON not being equipped with regulatory powers, the institution has contributed significantly to improving relationships between the private and the public sectors, and has introduced more transparency and good governance to the Nigerian financial sector. “I think the Central Bank does this with its reform agenda and standards,” says Mr Chike-Obi. “We have helped free banks from being undercapitalised – by injecting liquidity into the banks we have helped the banking system.

“ANCOM is well-governed and transparent and it can set an example to other institutions, not just banks, as to how a government agency can be run in a transparent way and with integrity,” he adds.

With the Nigerian banking sector now back on track there are real growth opportunities for the sector. AMCON will continue to strive towards creating a stable financial sector.