President gives assent to Asset Management Corporation of Nigeria (AMCON) Bill
The Presidential assent to the Asset Management Corporation of Nigeria (AMCON) Bill is perhaps the signal for a turnaround in Nigeria’s financial services sector.
The Corporation when established would be responsible for the efficient management and disposal of toxic assets of Nigerian banks, including non-performing loans (NPLs) and non-core assets. With an estimated N2 trillion (US$13.3 billion) of NPLs on the balance sheets of the 9 affected banks and further NPLs carried by other banks, we estimate that the AMCON would be funded between N1.5 trillion and N2 trillion (US$10.0 billion - US$13.3 billion). The Central Bank of Nigeria and Ministry of Finance have funded the Corporation with N20 billion with the balance of funding expected to come from Government sovereign bond issues and contributions from the private sector. With a proposed 10-year tenure, the AMCON should benefit from recovery in the financial system and the economy and it is estimated that the net resolution cost to Nigeria should be between N700 and N800 billion (US$4.7 - US$5.3 billion), approximately 2.8 to 3.2% of GDP.
The key benefits of AMCON include the re-opening of credit markets and improved liquidity in the equities market which should fuel the performance of the All Share Index. It should also provide a vehicle for recapitalising the affected banks. We believe that today’s announcement is a big step in the right direction in the rejuvenation of the Nigerian financial services sector and the economy.
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