News Column

No More Purchase of Non-Performing Loans, Says Amcon

June 10, 2014

Kingsley Ighomwenghian

The Asset Management Corporation of Nigeria (AMCON) said on Tuesday it was keen on liquidating its debt portfolio for which bonds were issued to creditors, out of which N1 trillion is already repurchased.

As such, according to Mustafa Chike-Obi, Chief Executive of AMCON, there are no plans to purchase any more non-performing loans from banks as their current ratio to risk assets is well below five per cent.

AMCON plans to further redeem about N800 billion worth of bonds this year.

Speaking at a media interactive session in Lagos, Chike-Obi said stakeholders, including the regulators, the banks and "AMCON's board and management, have agreed that there will not be further purchase of non-performing loans".

"I am sure that it will not happen when I am still the Chief Executive of the institution," he stressed.

He assured that Nigeria's banking system is today stronger and able to mitigate the crisis currently facing it, and that it is almost impossible now for banks to outsmart examiners when it comes to detecting unethical practices and poor corporate governance issues that were hallmarks of the system in the recent past.

Chike-Obi stressed that the intervention was ultimately in the interest of the banks and the economy, because it was responsible for the healthy nature of the banks, stressing that the banks would not have been better off today, without the 2010 intervention.

He pointed out that the intervention not only benefited banks, but also companies and private sector initiatives that would have collapsed and throwing more thousands into the labour market.

Any record of increased risk assets by a particular bank now, he continued, will be adjusted by the concerned institution within the quarter of its operations, assuring that risk management in financial institutions has been firmed up.

Chike-Obi decried misconceptions about the banking sector resolution sinking fund, stressing that it is held in and managed by the Central Bank of Nigeria (CBN), and that the fund in the pool represents the 0.5 per cent of total assets deducted from the books of banks and warehoused by the apex bank.

The fund, he said, was used to redeem maturing bonds while settling banks' liabilities.

He also noted that AMCON's assets were factored into the total cost of non-performing loans, which the banks, together with the funds to be recovered will offset, saying public funds can only arise from the excess that might result, when the bonds are totally redeemed.

On the issues surrounding a certain private jet, Chike-Obi said the $31 million aircraft, currently being priced at $28 million, would represent a $3 million loss, adding that the loss was not deliberately incurred.

It would be recalled that AMCON put down $27 million to complete the transaction on the aircraft, initiated by an undisclosed debtor of a bank, a move that was aimed at getting a hold on the initial deposit of $4 million made to the seller by the debtor.

The decision was made when it was obvious that the manufacturer would not release the $4 million already deposited and there was no other asset to lay hold on from the debtor.

The AMCON chief, who admitted that the decision was a costly mistake, explained that the agency did not envisage the unfolding difficulties that now hamper the smooth sale of the jet, after the injection of the huge sum.

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Source: AllAfrica

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