AMCON bonds refinance plan credit-positive, Moody’s says

Plans by the Asset Management Corporation of Nigeria (AMCON) to retire about a third of its N5.6 trillion ($35 billion) of bonds and refinance the rest by 2014 will boost the country’s creditworthiness, Moody’s Investors Service said, according to Bloomberg.

Under the arrangement, the Central Bank of Nigeria (CBN) will invest in a N3.6 trillion ($22 billion) bond that AMCON will issue in December to refinance the bank’s “entire exposure” at an interest rate of about 6 percent over a 10-year period, CBN governor, Sanusi Lamido Sanusi, said on May 21. That will make the central bank the sole creditor to AMCON by October 2014.

The “move eliminates the government’s indirect exposure to private creditors,” Moody’s said. “We view this as a credit-positive development for the government of Nigeria.”

The Federal Government established AMCON in 2010 to buy bad debt from banks and save the banking industry from collapse, as lenders reeled when loans to stock speculators and fuel importers turned bad after the global financial crisis in 2008. The agency spent N5.6 trillion in 2011 to acquire non-performing loans and incurred losses of N2.4 trillion.

Moody’s rating for Nigeria is Ba3, three levels below investment grade. While economic growth in the country is resilient, an upgrade of its rating is hindered by corruption, weak institutions and its vulnerability to oil price drops, Edward Al-Hussainy and Dietmar Hornung, credit analysts at Moody’s, said on May 14.

Meanwhile, the Nigerian Stock Exchange (NSE) has appointed Aigboje Aig-Imoukhuede, group managing director/CEO of Access Bank Plc, and Abimbola Ogunbanjo, managing partner of Chris Ogunbanjo & Co (solicitors), as first and second vice presidents of the council of the NSE.

The appointment was made after the 52nd annual general meeting (AGM) of the NSE in May 2013.

The council of the Nigerian bourse is made up of 14 members, consisting of its president, Aliko Dangote; the chief executive officer, Oscar Onyema, and other members including representatives of dealing member firms, who are highly qualified in their respective professions with a wealth of diverse experience.

Speaking on this appointment, Oscar Onyema, CEO, of the Nigerian Stock Exchange, said that “the council recognises their sterling qualities and wealth of experience, and is delighted with the appointment. We believe that they will not relent in their efforts as ambassadors to move the Exchange forward”.

The governance of the Exchange is vested in its council which directs the Exchange’s business and financial affairs, strategy, structures and policies; monitors the exercise of any delegated authority, and deals with challenges and issues relating to corporate governance, corporate social responsibility and corporate ethics.