The Asset Management Corporation of Nigeria (AMCON) said yesterday it would retire N2 trillion worth of its N5.7 trillion of bonds this year and next, from bad loan recoveries and refinance what’s left with the Central Bank of Nigeria (CBN).
AMCON has recently been talking to debt investors on a non-deal road show in London, as it looks to float debt to refinance a N5 trillion ($31 billion) debt.
If this is achieved, it would mean AMCON has made great progress on recovering bad loans and that after the refinancing, the CBN will be the sole holder of its bonds.
It said retiring the N2 trillion worth of bonds will cut its liabilities by 35 percent.
AMCON will also start divesting its shares in three lenders nationalised by the central bank in the next 30 days, starting with Enterprise bank, it said in a statement.
AMCON sold bonds to fund the purchase of bad debt and took over three of the rescued banks after regulators deemed them unlikely to meet a recapitalisation deadline.
AMCON is a unique institution that combines the buying of bank non performing loans (NPLs) with the restructuring or refinancing of performing loans and the recapitalisation of troubled financial institutions.
It was set up in 2010 as a resolution mechanism for the Nigerian banking crises.
Data from AMCON shows that it spent N5.6 trillion ($35.5 billion) in 2011 to acquire non-performing loans, giving banks more capacity to lend to the private sector.
The intervention by AMCON has helped to reduce the banking industry NPL ratios to an industry average of about 5 percent in 2012 from over 30 percent in 2010.
Banks have also resumed lending, with some like UBA planning to increase loans by as much as 40 percent this year, to fund oil, power and manufacturing projects.
However, there has been some suggestion of the need to have a sunset clause for the ‘bad bank’.
The International Monetary Fund (IMF) in its latest report, commended Nigeria’s success in stabilising its banking sector but recommended AMCON wind down its operations to curb “moral hazard”, whereby a party is more willing to take a risk, knowing that the potential costs of taking such a risk will be borne by others.
AMCON CEO, Mustapha Chike-Obi, said last year that AMCON’s aim was to gradually reduce its operations and cut staff in the next five years, as a full banking recovery makes it no longer needed.
“We are not buying any more non-performing loans,” Chike-Obi said.
“We have cleaned up the banking system, bad loans are under 5 percent and we want to make sure that everybody adheres to the prudential guidelines.”
AMCON which reported a one off N2.37 trillion loss for the 2011 period at the end of last year, said it intends to repay bondholders in December 2013 with cash and liquid instruments.
PATRICK ATUANYA
with agency reports
