By Gbenga Agbana

Wednesday, 10 Nov 2010

The asset valuation of companies listed on the Nigerian Stock Exchange will soon improve with the commencement of the Asset Management Corporation of Nigeria’s operations, stakeholders in the capital market have said.

Banks are also expected to resume lending to the real sector and other sectors of the economy, once the toxic assets are bought out of their books by AMCON, some experts said.

The management of AMCON had, on Monday, approved the purchase of all the loans in the banking sector, including the total non-performing loans of banks rescued by the Central Bank of Nigeria last year.

The corporation, which disclosed this after its first board meeting held in Abuja, said the total loans to be purchased was in excess of N2.2tn.

Responding to the development, the Managing Director of Partnership Investments Limited, Mr. Victor Ogiemwonyi, commended the management of AMCON on the move to buy off toxic assets of banks.

He added that the move would enhance the value of stocks in the market and also enhance the ability of banks to resume lending to all the sectors of the economy, thus enhancing economic growth.

He said, ”I think AMCON has shown that it will be a serious organisation. Their actions to date and the fair value given to assets they are acquiring in this first phase shows that they have given themselves credibility.

“The implication for the market is very positive. Once all the toxic assets are taken off the books of banks, they will have the needed room to resume lending to the economy. The debt overhang that has weighed down the economy will now largely resolve itself, since a large part of the debt is capital market-related loans.”

He added that the stock market would soon witness an improvement that would allow the stock market asset inventory to close higher.

He added, “This will be good for many companies who invested in the stock market. They will all close their books with better valuation for their stock market portfolios, thus lifting the asset valuation of all the companies.

“We have for a long time been advocating that AMCON was the right way to go.”

The Secretary, Independent Shareholders Association of Nigeria, Mr. Adebayo Adeleke, also said, ”Some liquidity will come to the banks and the prices of stocks concerned will rally.”

Source: Punch