Banks May Opt Out, As Proposed AMCON Creates Fresh Apprehension


Sunday, 27 June 2010, Lagos:  The uncertainty over the template on which the proposed public Asset Management Company of Nigeria (AMCON) recently passed by the Senate, would function may have thrown operators of the capital market into yet another round of apprehension. Also, there are indications that some banks for which the scheme is being designed may eventually opt out.


While the promoters seem to be more concerned about banks, stockbrokers are clamouring for a bailout arrangement that would cater for all sectors of the economy.   


Specifically, they are asking the promoters, Federal Ministry of Finance and the Central Bank of Nigeria (CBN), to factor huge losses experienced by stock broking firms into the scheme. Shareholders of the 10 stressed banks, are also said to be worried over how operations of the anticipated AMCON would affect their holdings when it eventually takes off.


Some market analysts, who have long cautioned the Finance Ministry and CBN to be guided by market volatility in making public statements on the proposal, see the present unease in the market as fallout of government’s indecision on its operational style.


Managing Director of Dependable Securities Limited, Mr. Chineyem Anyanwu, confirmed yesterday in a telephone chat that some banks are more comfortable watching the values of their equities appreciate than surrendering them to AMCON. Anyanwu, who, however, downplayed the effect AMCON’s takeoff may have on shareholders, said: “You may be surprised to know that some banks are not willing to cooperate with asset management. They feel that they will do better managing their equities; holding it; talking to shareholders and other people that are exposed while waiting for it to appreciate than surrendering it to AMCON… some banks may opt out of it.”


He added that stock brokers are not yet sure that their inputs into the Asset Management Bill, which harmonized version was passed on Thursday by the Senate, would be reflected in the final copy. This, he said, was giving stakeholders serious concern, considering the fact that the bailout would not make sense if designed for only banks.


Earlier, brokers under the aegis of the Association of Stock Broking Houses of Nigeria (ASHON) reportedly submitted a position paper on the issue, contending that the scheme should be extended to other sectors, including theirs, against the stand of Finance Ministry and CBN.


Yet, a source confirmed at the weekend that investors had begun to panic that the value of their investment might shrink further if the company adopts unfavourable pricing model in the planned non-performing assets take-over.


“The current fear is that shareholders of stressed banks might get less than the current market value of their shares. That may not be true because the present prices do not reflect their true value but since investors have experienced so much shock in the past, it is difficult to explain this to them.


“As we are talking now, the position of the majority of big investors on the affected banks is wait and see. Of course, they still buy other stocks but you know how infectious stocks are. If the 10 banks are hit again, you can be sure that other equities will be affected. And some wise investors already know this,” said the source. 


Recently, Minister of Finance, Olusegun Aganga, reportedly confirmed in Lagos that the pricing model that would be used to acquire the toxic assets had not been decided. This, he said, was the reason AMCON’s formation would tarry a little longer.


Aganga’s disclosure came at a time some stakeholders intensified their call for pricing arrangement that would favour all parties. They advocated that a hybrid of historical price and market price would be the fairest value.


Meanwhile, activities and modalities used by the technical team set up by CBN to value the assets are still mired in secrecy, which is also brewing anxiety.   


Source: The Guardian




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