Shareholders to recover lost investment as Senate passes harmonised AMC


THURSDAY, 24 JUNE 2010 01:22


Shareholders hitherto relegated to the back ground in preference for saving depositors’ fund will soon recover their lost investment as the Senate yesterday finally passed the harmonised Asset Management Corporation (AMCON) Bill.


A statement signed by Mohammed Abdullahi, head, corporate communications of the apex bank said “”the ministry of finance and the Central Bank of Nigeria remain convinced that with the setting up of this corporation, the nation is close to a final resolution of the banking crisis and the repair of bank balance sheets. Also, AMCON will ensure that shareholders recover part of their lost investment and assist in reducing the debt overhang that has slowed down the recovery of the capital market”.


Investors will be particularly pleased to see their investments recouped after a year of steep downturn at the nation’s capital market.Afrinvest Research estimated that non-performing loans, otherwise referred to as toxic assets worth over N1.0 trillion have been drowned in the rough waters that hit the financial market early last year, with the stock market investors incurring substantial losses.


But with the passage of the AMCON Bill, the toxic assets will be bought over, thus allowing the markets – money and capital – some growth space.“We also reiterate that the soak up of toxic assets will bear heavily on the outlook for the distressed banks in particular, and for equities in general, as banks remain quite reluctant to create new risk assets (after huge provisions made for bad loans)”, said Afrinvest in its first quarter review.


Abdullahi said the AMCON is a multi-purpose resolution vehicle that is empowered to purchase non-performing assets from banks as well as inject needed capital in the form of appropriate securities (Tier 1 or Tier 2). In the case of distressed banks, AMCON will therefore play the key role of facilitating mergers, acquisitions or capital injection by new investors. The boards of directors of the banks have led and reached an advanced stage of discussion with interested parties.


The bill is expected to be submitted to President Goodluck Ebele Jonathan for assent after which it becomes an Act of the National Assembly. This will pave way for the formal establishment of the corporation as a principal vehicle for recapitalisation of troubled banks. It would be recalled that the AMCON bill was tabled by the executive branch and, therefore, an expedited assent is expected.


Wale Abe, chief executive of the Financial Market Dealers Association of Nigeria (FMDA), told BusinessDay in an interview that the development will bring about improved liquidity situation in the system, as well as reduce the burden that was almost crippling some banks, particularly the rescued ones. This will also ensure that the banks become slimmer to be able to function properly.


Abe said he expects either the AMCOM or the central bank to come out with guidelines that will help establish proper pricing for the toxic assets to allow for seamless take-off of the vehicle that is expected to bring succour to the financial industry.Razia Khan in her recent report titled On-The-Ground (OTC), Nigeria – Assessing Inflation Risk, said though the decline in the growth rate of private-sector credit preceded the bank rescue, record levels of provisioning across the banking sector last year may have taken heavy toll.


“Banks are risk averse and still cautious about new private-sector exposure”, she said. She however expects the situation to turn around once AMCOM is operational and banks have been relieved of their non-performing loans.Stock exchange sources, however, disclosed that Ndi Okereke-Onyiuke, incumbent director general, is expected to proceed on terminal leave soon.






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