The Asset Management Corporation of Nigeria (AMCON) has said its debt to the Central Bank of Nigeria (CBN) has risen to N5.5 trillion.
Its Managing Director, Mr. Ahmed Kuru said out of 12, 000 accounts, the Corporation has structured more than 3, 000 and has been able to get over 1, 000 obligors out of the positions it was before. He said AMCON borrows from the CBN and sells in bond to the apex bank.
Kuru said it was assumed that the banking sector was to grow at 20 per cent year-in-year out and that the economy would pick up, saying unfortunately, the economy did not pick up and AMCON was not in the position to settle the bond holders.
Kuru who spoke during the Nigerian-American Chamber of Commerce (NACC), on: Financial Systems Stability in Nigeria: AMCON’s Role and Scorecard as theme in Lagos, said the Corporation’s role in terms of financial stability was almost over, but for the company to intervene, it should be able to recover the stated sum.
“The next step is for us to recover these loans and this is the challenge,” he said, adding that there were 350 obligors out of the 12, 000 accounts for more than 80 per cent of the N5.5 trillion.
“That’s why it is very sad with lots of emphasis and for us at AMCON, they must pay back these monies,” he said.
Kuru said the Corporation has so far disbursed about N320 billion to support businesses directly after purchasing those loans from the commercial banks. He however regretted the low performance level of these facilities.
He said the major challenge with almost all the businesses in the country today was the lack of good leadership and management, adding that lack of infrastructure and high interest rate had contributed in no small measures to business failure in the country.
“The quickest way for a bank to go bad is the state of the credit, once the NPL (non performing loan) has gone off certain threshold, it means that the banks are using depositors’ money to run their operations,” he said.
He recalled that during the global financial crisis of 2009, NPLs rose to almost an excess of N2.6 trillion while the national budget was less than N1 trillion. He added that the banks that were bad accounted for almost 80 per cent of the total NPL in the industry at that time.
Kuru said the ratio of the NPL to the total loan was more than 60 per cent besides the regulatory threshold which was supposed to be five per cent, saying because of this, most banks were unable to borrow leading to iliquidity to support operations.
He said AMCON purchased more than 12, 000 loans from 23 paying N1.7 trillion to purchase loans worth N3.3 trillion. The company also provided N2.2 trillion to eight banks as financial accommodation to bring their net book value to zero.
Kuru said: “By intervening in eight banks, and by purchasing the loans which we paid those eight banks an average of N3.3 trillion, AMCON has saved depositors’ money worth N1 trillion. “We have saved jobs in excess of 15, 000 in the banking sector and we have also provided liquidity for those banks because they were not in the position to lend money. When we purchased those loans, we were able to ensure that the NPL ratio in the industry was less than five per cent which also meant that all the banks then were NPL compliant.
“We did not appropriate money from the Federal Government to appropriate the loan, monies were raised from the market, believing that within the period of 10 years, we would be able to pay back the loan to bond holders, but unfortunately, some of the assumptions did not work out the way it was planned.