By Obinna Chima, 08.22.2010

 

There are indications that the 10 year tenure, which the Assets Management Corporation of Nigeria (AMCON) has been pegged, may be extended.The capital market source told THISDAY last Friday that a group in the financial market would present a proposal to that effect to the Central Bank of Nigeria (CBN) and the Ministry of Finance before the end of next month.

 

The source, who is the Managing Director and Chief Executive Officer of a leading capital market firm, stressed that the valuation model, which was not clearly explained by the Act would be a major constraint for the scheme, disclosing that the proposal would be to canvass for a15-year tenure.  He added, “What we are saying is that the 10 year period proposed would not be realistic if we really want the economy to stabilise and also for AMCON to effectively play its role. For instance, there has been lull in the capital market and there is still tension in the banking industry because of the proposed sale of the sick banks.”

 

President Goodluck Jonathan last month signed the AMCON, expected to help stabilise the nation’s financial sector. AMCON is expected to boost the liquidity of troubled banks by buying their toxic assets, make their balance sheet look healthier and restore confidence in the financial system among others. It had been agreed that for the 10 years earlier fixed for its existence, banks are to contribute 0.3 per cent of their balance sheet worth to a fund as a way of supporting its funding.

 

BGL Plc, had in its Financial report titled, ‘Nigeria in Numbers: Counting down Analytically to Our Golden Jubilee’, March 2010, argued that for a developing country like Nigeria, a tenure of 10 years for the AMCON may not be realistic.The firm also based its position on the potential litigations that might arise from assets take-over and the nation’s lengthy judicial process, thereby proposing an indefinite life span for the corporation so as to give it latitude to accomplish its mandates.The report stated, “Experience has shown that government controlled institutions are weighed down by bureaucratic bottlenecks in exercising their mandates.

 

Based on experience from Korea, Sweden and Ireland, which have established Assets Management Companies, there is no uniformity in the tenure of public assets management companies because of the divergent circumstances that premised their formation. In Korea, the KAMCO has an indefinite tenure.” According to the report, the economy would be jump-started if banks have the liquidity to stimulate lending to businesses.

 

Source:ThisDay