Assets Management Corporation of Nigeria (AMCON) Charge incurred by Nigerian banks have increased in the last two years although an expected slowdown of growth in total assets could pave the way for another hike by the regulator.
Lenders currently pay a charge of 0.5 percent of assets to the fund which is controlled by AMCON and used to help pay down liabilities incurred from acquiring about 12,537 Non-Performing Loans (NPLs) worth N1.7 trillion from 22 financial institutions, following the 2009 banking crisis.
The cumulative AMCON levy of 12 largest Nigerian lenders that have released 2017 audited financial statement increased by 12.22 percent to N131.58 billion from N117.25 billion in 2016, this compares with a 2.22 percent increase between the 2015 and 2016 period.
Regulatory costs as a percent of total operating expenses for the 12 banks stood at 11.54 percent, according to data compiled by BusinessDay.
The banks are Zenith Bank Plc, Access Bank Plc, Fidelity Bank Plc, First City Monument Bank (FCMB) Plc, Guaranty Trust Bank (GTBank) Plc, Stanbic IBTC Holdings Plc, First Bank Nigeria Holdings Plc, Sterling Bank plc, Wema Bank Plc, and United Bank for Africa (UBA) Plc, Diamond Bank Plc, and Union Bank Plc.
“AMCON Charge has been a significant part of bank’s operating expenses. They account for about 8 to 10 percent of Operating expenses,” said Olalekan Olabode, head of research at Vetiva Capital Management
“One of the things that supported assets growth was the devaluation of the currency that bolstered assets denominated assets. We are still going to see the commission around for time because there are assets they have not recovered,” said Olabode.
Tajudeen Ibrahim, head of research at Chapel Hill Denham said that the market shouldn’t expect growth in assets for the rest of 2018 and early 2019 as loans are expected to wane because banks are not lending even as yields on short term government securities have receded.
“You will expect that the commission will come up with a way at which those charges will be paid. Banks will have to sweat out some assets,” said Ibrahim.
Managing Director/Chief Executive Officer, (AMCON) Ahmed Kuru has said that the Central Bank of Nigeria (CBN), has the power to tweak the charges banks currently pay into the resolution fund.
“The AMCON act, allows the CBN to increase the rate and contributions can run even if the sunset clause is activated,” Kuru told BusinessDay.
Drilling into the financial statements of these lenders shows Zenith Bank’s levy increased by 14.22 percent to N21.42 billion in December 2017 from N18.75 billion in 2016.
The charge is 10 percent of total operating expenses of N21.284 billion in the period under review.
Access Bank’s resolution cost increased by 28.31 percent to N15.47 billion in the period under review from N12.06 billion the previous year while ratio of levy to the charge is 8.22 of total operating expenses.
GTBank’s regulatory cost was up 14.76 percent to N13.07 billion in December 2017 from N11.38 billion the previous year, this compares with 7.10 percent increase from last year’s figure.
The increase in levies is in tandem with growth in total assets in the last five years, based on trend observed by BusinessDay.
Total assets of these lenders was N22.24 trillion in 2014, N23.12 trillion in 2015, N26.15 trillion in 2016 and N28.83 trillion in 2017, based on data compiled by BusinessDay.
While analysts see AMCONs existence extending beyond the 10 year period given to it at its inception in 2009 following the crisis that rocked the industry, some shareholders have kicked against such tenure elongation.
“If the National Assembly is going to do it properly, there will be a public hearing where shareholders are going to mobilise to Abuja to challenge this 0.5 percent which AMCON is taking,” said Sunny Nwosu, former National Coordinator, Independent Shareholders Association of Nigeria, ISAN.