News Column

Banks Paid N126 Billion to Amcon As 'Sinking Fund'

May 20, 2014

Kayode Ekundayo and Kayode Ogunwale

Fifteen banks paid the sum of N126bn, equivalent to 0.5 per cent of their total assets, to the Asset Management Corporation of Nigeria (AMCON) as sinking fund, the banks 2013 financial reports have shown.

The banks' chief executives had, at the monthly bankers' meeting in August 2013, signed a resolution called Trust Fund Deed between them and AMCON where they agreed to contribute 0.5 percent of total assets and 0.5 percent of 33 percent of their off balance sheet items to the sinking fund.

The deal, according to insider sources, was not backed by law as the corporation's Amendment Act that would have permitted it to carry out such responsibility is still with the National Assembly.

The fund is to serve as a safety net for AMCON to ensure that it meets its obligations arising from debt securities issued by it and to insulate the tax payer from obligations occasioned by financial mismanagement by the banks.

Looking at the financial statements for the year ended December 2013, off the N25.127trn total assets recorded by the banks, First Bank paid the highest with N19.355bn of its N3.871trn total assets, Ecobank Transnational Incorporation (ETI) paid N18bn from N3.600trn total assets, Zenith Bank paid N15.715bn from N3.143trn, United Bank for Africa (UBA) paid N13.210bn from N2.642trn total assets and Guaranty Trust Bank paid N10.515bn from N2.103trn total assets.

Also, Access Bank which has N1.835trn as total assets in 2013 contributed N9.175bn, Diamond Bank paid N7.595bn from its total assets of N1.519trn, Skye Bank paid N5.585bn from N1.117trn, FCMB paid N5.040bn from N1.008trn and Union Bank N5.015bn from N1.003trn.

Others are Fidelity Bank, StanbicIBTC, Sterling Bank, Unity Bank and Wema Bank with payments of N4.572bn, N3.815bn, N2.018bn and 1.654bn respectively.

Alex Otti, the group Managing Director of Diamond Bank, had last month voiced out his frustration before the bank's shareholders where he told them of his helpless situation.

According to him, he was the only person that voted against the implementation of such policy when it was presented to them at the bankers' committee meeting last year.

Speaking on the facts behind the figures of the bank to the investing public on the Nigerian Stock Exchange recently, Managing Director and Chief Executive Officer of Fidelity Bank Mr. Nnamdi Okonkwo said the AMCON levy is part of the key pressure points in financial year 2013.

He said the increase in AMCON levy from 0.3 per cent to 0.5 per cent of total assets increased operating expenses of the banks.

But the spokesman for AMCON, Kayode Lambo, said the implementation of the sinking fund was an agreement with the banks but it has now been codified into the amendment bill currently before the National Assembly.

According to him, the amendment is aimed at strengthening the AMCON as an institution to be able to carry out its obligated functions, adding that the bill would remove contradictions relating to the purchase agreements between AMCON and financial institutions.

Lambo also said the inclusion in the Act is to protect the future remittance of the fund to AMCON so that no chief executive will come and deny its existence.

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Source: AllAfrica