A significant portion of the N1.7 trillion refinancing debt of the Asset Management Corporation of Nigeria (AMCON) will be paid before the end of this year, the Managing Director of the ‘bad bank’, Mustapha Chike-Obi, said yesterday.
The corporation had issued a total of N1.7 trillion in bonds to buy non-performing loans which were valued at N2.2 trillion during the bank bailout.
Speaking with The Nation last night, Chike-Obi said AMCON was working on paying a major chunk of its debt through debt recoveries and ‘other means.’
He, however, refused to disclose the debt to be paid by the Corporation because a board approval would be needed to make such disclosure.
He said: “AMCON will be in a position to pay down a significant amount of the debt through better recoveries and other means. I can assure you that.”
In a related development, the AMCON mchief said the Corporation has stopped buying bad loans from the banking sector.
The move, he explined, is aimed at discouraging a excessive risk-taking by lenders to prevent a reoccurrence of the 2009 financial crisis.
Chike-Obi told Reuters that AMCON would no longer serve as a lifeline to banks with bad loans.
AMCON was established in 2010 to clean up the banking system following a N620 billion injected to rescue nine banks that came close to collapse.
Before the Corporation acquired the banks’ bad loans, they made up about half of all loans but the Central Bank of Nigeria (CBN) said the bad loans have since fallen to within its target of five per cent.
The International Monetary Fund (IMF) in its latest report praised Nigeria’s success in stabilising its banking sector but recommended that AMCON winds down its operations to curb “moral hazard”, whereby a party is more willing to take a risk, knowing that the potential cost of taking such a risk will be borne by others.
Chike-Obi declined to comment on IMF’s recommendation. He told Reuters that banks now bear the full risk of loans that turn bad. They must make full provision on their balance sheets or sell bad loans to a third party,” he said.
“We are not buying any more non-performing loans,” Chike-Obi said, adding that the bank had not done so for six months.
“We have cleaned up the banking system, bad loans are under 5 per cent and we want to make sure that everybody adheres to the prudential guidelines.”
The AMCON chief said last year that the Corporation to gradually reduce its operations and rationalise staff in the next five years, as a full banking recovery makes it no longer needed.
AMCON is seeking foreign investors, help to refinance its sovereign-guaranteed debt of about N5 trillion naira . At a non-deal road show last week, the Corporation managers floated the idea of a dollar-denominated bond to achieve this.
Source: The Nation