By Ademola Alawiye

Tuesday, 16 Nov 2010

The Asset Management Corporation of Nigeria will purchase less than 60 per cent of some rescued banks‘non-performing loans, investigation by our correspondent has revealed.

It was gathered by our correspondent from a source from one of the rescued banks that a large part of the NPLs in some banks would not be eligible for sale to AMCON.

According to the source who craved anonymity, some banks are looking at anywhere between 50 to 60 per cent of their NPLs by value being eligible for sale to AMCON.

He said, ”AMCON is not buying all the NPLs, some of them are not eligible for sale to AMCON. The corporation will end up buying 80 per cent of some banks NPLs, while some will have just 60 per cent bought by AMCON.”

On what the banks are doing to recover insider related loans, the source said, ”Insider related loans in some banks account for a bulky part of total NPLs. Insider related loans are part of our NPLs. So efforts are made to aggressively recover these loans including the use of reputable debt recovery agents.”

The Minister of Finance, Mr. Olusegun Aganga, had said that the finance ministry and the Central Bank of Nigeria had already provided the N20bn share capital set in the AMCON Act for the corporation‘s take-off, adding that the operations could not be delayed till next year.

AMCON had approved at its first board meeting in Abuja, the purchase of all the margin loans in the banking sector, including total non-performing loans of banks rescued by the CBN last year, noting that the total loans to be purchased were in excess of N2.2tn.

The corporation indicated that it would reach agreements with Nigerian banks regarding the pricing of the non-performing loans by November 15, 2010.

AMCON, in a statement, signed by its management, had said that in line with the agreed valuation methodology, it would value non-performing loans backed by shares of listed companies ”at an implied premium of approximately 60 per cent on the 60-day average of recent prices, ending November 15, 2010.”

In addition, AMCON indicated that it would acquire other NPLs backed by other forms of collaterals based on the current market valuation of the collateral, while unsecured loans would be valued at five per cent of the principal value.

AMCON is expected to be funded through a N50bn annual contribution from the CBN for a period of 10 years. The deposit money banks will also make an annual contribution of 30 basis points of their total assets to a sinking fund.

Source: Punch