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Tag: AMCON

  • AMCON’s N7.6tr lifeline for banks

    AMCON’s N7.6tr lifeline for banks

    The Asset Management Corporation of Nigeria(AMCON), through the Banking Sector Resolution Cost Fund (Sinking Fund), has stabilised the banking sector with N7.6 trillion, a survey by Financial Derivatives Company (FDC) Limited has shown.

    The report titled: “AMCON: Leading Stabiliser Among Peer Countries”, released by FDC said the aid, the first in the series of AMCON bonds for the exercises, have been redeemed without any systemic disruption.

    Its Managing Director, Bismarck Rewane, said the expenditure also included a carrying-cost for the banks.

    “The AMCON model of financial stabilisation involves a sinking fund set up by the banks to underwrite the funding cost of the detoxification of the system-wide risk asset portfolio. The total amount of the exercise, including carrying cost is estimated at $47.5 billion (N7.6 trillion). The first in the series of bonds have now been redeemed without any systemic disruption,” he said.

    Rewane said the size of the banking crisis relative to the economy showed that 21 per cent of nominal Gross Domestic Product (GDP), 35.8 per cent of total banking assets and 71.6 per cent of total banking deposits were all at risk.

    He said banking systemic crisis in the country was historically a post-devaluation phenomenon, adding that the naira remained stable for approximately six years before a drastic adjustment.

    “The consequence of significant currency depreciation in a country with a high propensity to import cannot be overemphasised. The overvalued exchange rate is the most important factor price in Nigeria and source of elite subsidy.

    “Thus, whenever there is devaluation, it almost leads to a sharp reduction in the exchange rate subsidy while magnifying the cross border risk impact on the risk asset portfolio of banks,” he said.

    He explained that in the past, when banks failed, the Nigeria Deposit Insurance Corporation (NDIC) paid depositors after many years up to the maximum of its guarantee. The larger depositors, he said, lose their fortunes and savings leading to a flight to quality and more banks, especially new ones become fragile and pushed closer to the borderline.

    He explained that the 2009 banking crisis was unique in that bank managements were sacked and the Central Bank of Nigeria (CBN) put in place interim management teams.

    “The AMCON option was post the interim management process. Therefore, AMCON as an institution, was set up with a limited life (cycle) as a tactical response to self and externally induced crisis. Therefore, AMCON will need to be a strategic institution that will serve the purpose of stabilising the banking industry through its peaks and troughs,” he said.

    The report reviewed the operations of bad banks in five countries that cut across four continents globally. They include the United States, Sweden, Ireland, Malaysia and Nigeria.

    He said the countries were chosen based on their similarities on the magnitude of the crisis, the spread, and duration of the crisis, among others. “Based on this evaluation grid, AMCON was tied in the first place with Malaysia, Sweden was third, the United States came in fourth and Ireland fifth,” he said.

    He said the total deposit premium of NDIC to date is N425.2 billion, adding that the bulk of this would have been disbursed if not for the AMCON exercise.

    Rewane said some believe AMCON’s existence poses a moral hazard and, therefore, suggested it should close its operation. He, however, said such thought, including the International Monetary Fund’s (IMF), fail to understand that the aggregate corporate, mortgage and government debt was still very low compared to its GDP at 19.4 per cent.

    He said AMCON should be institutionalised as a financial system shock absorbing detoxicant while the economy continues to undergo fundamental shifts to its structure.

    It said among the countries reviewed, cutting across four continents, AMCON ranked third, ahead of Republic of Ireland and Sweden. The study also showed that AMCON’s dual role of recapitalising insolvent banks and asset detoxicant, duration of the exercise may exceed the date originally anticipated.

  • Ikuforiji’s trial stalled

    Ikuforiji’s trial stalled

    The money laundering case against Lagos State House of Assembly Speaker Adeyemi Ikuforiji before a Federal High Court in Lagos was stalled yesterday, as the judge was attending a seminar organised by the Assets Management Corporation of Nigeria (AMCON).

    At the resumed hearing before Justice Ibrahim Buba, prosecuting counsel Godwin Obla (SAN) said he was aware of the seminar and consented to an adjournment.

    Without objecting, defence counsel Wole Olanipekun (SAN) urged the prosecution to produce his remaining witnesses on the next date.

    Olanipekun said: “I do not know how many witnesses my learned friend has left, but if he will produce them on the next adjourned date, we will not mind being the tenant of the court.”

    Justice Buba adjourned the case till today, urging the prosecution to produce its witnesses.

    Ikuforiji and his personal assistant, Oyebode Atoyebi, were charged by the Economic and Financial Crimes Commission (EFCC) on a 54-count of money laundering, to which they pleaded not guilty.

    They were granted N1 billion bail each with two sureties each.

    EFCC alleges that the duo, between April, 2010 and July, 2011, accepted N273.3 million from the Lagos Assembly without the money going through a financial institution.

    EFCC alleges that Ikuforiji misappropriated N500 million of the Assembly’s funds.

  • AMCON to off-set N1tr debt in October

    AMCON to off-set N1tr debt in October

    The Managing Director of the Asset Management Corporation of Nigeria (AMCON), Mustapha Chike-Obi, yesterday said the Corporation plans to pay-off additional N1trillion of its debts by October.

    Chike-Obi spoke at a one-day public hearing on the AMCON Act, 2010 (Amendment) Bill , 2014 organised by the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja.

    He also explained how the agency applied N5.676 trillion it raised from government bonds in 2010, adding that the agency had recovered over 50 per cent of the non-performing loans it acquired at inception.

    Chike-Obi said: “Today, we have recovered over 50 per cent of the non-performing loans we acquired not the 15 per cent that has been thrown around in the press recently.

    “I want to say that these were debts that the banks had given up on. Some of those debts were seven to 10 years old.

    “Additionally, in December 2013, because of the huge success in restructuring and recovering debts, we have been able to pay-off N1trillion of our debts well ahead of schedule.

    “We also plan to pay-off an additional N1trillion of debts in October 2014 which will reduce AMCON’s indebtedness by 30 per cent in the first four years of operation.”

    He told the lawmakers that the N5.676 trillion raised from government bonds was used to purchase Eligible Bank Assets (EBAs), recapitalisation of Enterprise, Keystone and Mainstreet Banks and injection of capital into five intervened banks.

    He said: “When AMCON was created in 2010, the immediate action we undertook was to take over Non-Performing Loans (NPLs) from Eligible Financial Institutions (EFIs) and provide financial accommodation to banks by issuing zero coupon bonds worth N4.042 trillion accruing to N5.676 trillion over three years.

    “The bonds were used for the purchase of EBAs worth N3.67 trillion at a cost of N1.7 trillion (2010 – 2011);

    “Issuance of N861.2 billion zero coupon bonds to recapitalise Enterprise Bank, Keystone Bank and Mainstreet Bank to full regulatory capital adequacy. AMCON through this action owns 100 per cent of these banks;

    “Injection of capital of about N1.47 trillion into five intervened banks to bring the negative capital to zero. The banks are FinBank, Equitorial Trust Bank, Oceanic Bank Plc, Intercontinental Bank Plc and Union Bank Plc. Of the total balance, operating costs have accounted for less than one per cent.”

    He said the intervention immediately saved the depositors of the banks from losing their funds as well as prevented the systemic collapse of the affected banks through the alternative of liquidation by the Nigerian Deposit Insurance Corporation (NDIC).

    According to him, it also saved thousands of jobs across the banks as well as its resultant effect on the population who are dependent on the employees in this sector and other affected industries in which AMCON intervened.

    While declaring the event opened, Senate President David Mark who was represented by Senate Leader Victor Ndoma-Egba, noted that AMCON was established to serve as a Special Purpose Vehicle (SPV) for purchasing the NPLs from Deposit Money Banks (DMBs) in Nigeria and recapitalising the intervened banks through freeing up their balance sheets and providing liquidity to them to create new risk assets.

    Mark added that it was set up to also reduce the debt overhang of the banks by facilitating their ability to extend credit.

  • AMCON to off-set N1tr debt October

    AMCON to off-set N1tr debt October

    The Managing Director of the Asset Management Corporation of Nigeria (AMCON), Dr. Mustapha Chike-Obi, on Monday said the corporation plans to pay off additional N1trillion of its debts by October.

    Chike-Obi spoke at a one-day public hearing on the AMCON Act, 2010 (Amendment) Bill, 2014 organized by the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja.

    He also explained how the agency applied the sum of N5.676 trillion it raised from government bonds in 2010.

    He added that the agency had recovered over 50 per cent of the non-performing loans it acquired at inception.

    Chike-Obi said, “Today, we have recovered over 50 per cent of the non performing loans we acquired and not the 15 per cent that has been thrown around in the press recently.

    “I want to say that these were debts that the banks had given up on. Some of those debts were seven to 10 years old.

    “Additionally, in December 2013, because of the huge success in restructuring and recovering debts, we have been able to pay off N1trillion of our debts well ahead of schedule.

    “We also plan to pay off an additional N1trillion of debts in October 2014 which will reduce AMCON’s indebtedness by 30 per cent in the first four years of operation.”

    He told the lawmakers that the N5.676 trillion was used to purchase Eligible Bank Assets (EBAs), recapitalization of Enterprise, Keystone and Mainstreet Banks and injection of capital into five intervened banks.

     

     

  • Chike-Obi: AMCON won’t invest N500b Sinking Fund

    Chike-Obi: AMCON won’t invest N500b Sinking Fund

    The Banking Sector Resolution Cost Fund (Sinking Fund) standing at about N500 billion is being kept with the Central Bank of Nigeria (CBN), Chief Executive Officer of the Asset Management Corporation of Nigeria (AMCON) Mustafa Chike-Obi has said.

    He told The Nation that there is no possibility of investing the fund because it was established solely to pay down AMCON bonds.

    Banks contribute 0.5 per cent of their total assets to the Sinking Fund, in line with the regulatory requirement setting up the corporation. Last year, the fee was increased from 0.3 per cent to 0.5 per cent.

    Chike-Obi, who faulted shareholders and stakeholders for querying the contribution, said banks had benefited so much from it since it was set up.

    “Let me say this to you, show me any bank in Nigeria that made more money in 2009 to 2010 than they are making now, even with the 50 basis points. If there is no AMCON, most of those banks will not be in existence today. So any shareholder that is complaining, it’s almost like somebody goes to the hospital and you cure him, and the doctor said, here is your bill, and he says, why are you asking me to pay now that I am healthy?

    “These banks, most of them would have died, the shareholders would have lost everything. We have banks making over N100 billion profits today, no bank ever dreamt of it before AMCON was created,” he said.

    Chike-Obi said he doubted if any bank would complain about the fee. “I don’t even think the banks are complaining. I think it is fringe people, shareholder activists that want to eat their cake and have it. Banks today are better off because of AMCON, even with this fee,” he said, arguing that the alternative was to let the banks fail, and the same shareholders will complain that we let the banks fail.

    “I am not sympathetic to any bank that says the 50 basis point is too much. I want to see the bank that says it was making more money in 2009/2010 than it is making today. Tell me that bank,” he added.

    He said it was important to ensure that the banks that created the problems solve them through their contributions to the Sinking Fund. “What we are doing is giving them time to pay over a long period of time, instead of asking that they pay immediately and create another bigger problem.”

    Chike-Obi said: “As soon as AMCON bonds are fully repaid, there will no longer be a Sinking Fund. It is not there to build bridges or anything else. It is designed for AMCON bonds, only,” adding that the Corporation plans to improve on its pace of loan recovery in 2014 as well as ensure that it retires another N1 trillion bonds within the year.

    On Monday, AMCON retired N1 trillion, out of the N5.7 trillion of its bonds held by investors. About N3.6 trillion of the bonds are being held by the CBN. The bonds were issued to defray the cost of long years of insider loan abuses, bad loans and declaration of false profits by banks which took the average non-performing loans (NPLs) for the industry to as high as 35 per cent.

    However, analysts have insisted that the AMCON bonds related liquidity increase could undermine the naira and add pressure on the CBN to raise Monetary Policy Rate (MPR) this year.

    CurrencyAnalyst at Ecobank Nigeria, Olakunle Ezun, said the MPR needed to rise to counter higher spending that would stoke inflation in the lead up to 2015 election. MPR is the benchmark rate by which the CBN determines interest rate, while Cash Reserve Requirement (CRR) is a portion of banks’ deposits kept by banks with the apex bank. The CBN has kept its benchmark rate unchanged since October 2011 to help stabilise the naira and keep inflation under control.

    But Chike-Obi said the bonds will not have adverse impact on the economy. “I think one, the money has been sitting with AMCON for a while, so, I don’t think we will use it to buy treasury bills, and I expect that the recipients of this money will invest it. I don’t think there will be much of monetary impact,” he said.

    He, however, said that redeeming the bonds has boosted people’s confidence on the Corporation. “I think it sent a very positive message to Nigerians and other people across the world that we are serious with what we are doing, and that any money we get will be used to retire our liabilities, and will not be diverted. This is probably the first time, a Nigerian institution, has returned this amount of money, and reduces its liabilities, voluntarily and willingly,” he said.

     

  • Financial services firm refutes fraud allegation

    Financial services firm refutes fraud allegation

    FutureView Financial Services Limited has refuted reports that the company and two of its directors were arraigned or docked over the theft of N1 billion belonging to the defunct Oceanic Bank International Plc now Ecobank Nigeria Plc.

    In a statement, solicitors to firm, Osaretin Giwa-Osagie of Prime Chambers, said there was no iota of truth in the reports that its client FutureView, its Managing Director – Mrs. Elizabeth Ebi, and Executive Director, Mr. Diamond Uju were arraigned or docked at a Lagos High Court over the theft of any sum of money from the bank.

    “The news reports were an obvious distortion of the facts of a legitimate transaction between a bank and its customer,” Giwa-Osagie said.

    The statement explained that the transaction was the subject matter of a suit at the Lagos High Court between FutureView Financial Services Limited and Ecobank to which all issues in the suit between both parties have been resolved upon the intervention of the Asset Management Corporation of Nigeria (AMCON).

    “The civil suit was struck out by the Honorable Justice M.O Obadina on the 10th of October 2013,”the law firm said.

    He further disclosed that solicitors to Ecobank (Morayo Lebi & Co), who initiated the civil suit and also petitioned the Economic and Financial Crimes Commission had by a letter dated 17th July 2013, instructed the commission to discontinue all actions on the matter.

  • AMCON redeems N1tn bond Dec 30

    AMCON redeems N1tn bond Dec 30

    The Asset Management Company of Nigeria (AMCON) will redeem N1 trillion series one, two, three and four bonds held by institutions outside the central bank on December 30, 2013.

    To ensure that nothing untoward happens to the money, the Central Bank of Nigeria (CBN) is already in possession of the fund preparatory to redemption.

    Addressing journalists in Abuja on Friday at the agreement signing ceremony between CBN and AMCON for the bonds’ redemption, the Governor of the Central Bank, Mallam Sanusi Lamido Sanusi, disclosed further that by October next year, and additional N1 trillion bond for series five would be redeemed by AMCON.

    Sanusi stated that redemption of the N1 trillion bonds became necessary after the N5.7 trillion bonds issued had enabled AMCON to improve the liquidity of troubled banks.

    According to Sanusi, “Some of the money will come from the sale of the underlying assets by AMCON and the N5.7 trillion includes interest component, the amount AMCON owes of N3.8 trillion. We are at a point where AMCON’s balance sheet has enabled them to raise enough money to pay for this bond.”

    The CBN governor added that when both tranches of redemption are completed by October next year, “the only creditor to AMCON will be the CBN. No one will hold AMCON bond. So this will now be AMCON owing the central bank and this is credit positive for this economy.”

    Also commenting on the planned redemption of the bonds, the Managing Director of AMCON, Mr Mustafa Chike-Obi, said “the first step of reducing its (AMCON) obligations from N5.7 trillion to N3.8 trillion, which is 30 per cent reduction, will continue so as to reduce our indebtedness every year, so that by the year 2023, AMCON is even and there is no burden on the Federal Government of Nigeria.”

    He noted that AMCON still has a lot of debts to recover, adding that AMCON will continue to dispose off assets to enable it redeem its obligations.

  • AMCON redeems N1tn bond Dec 30

    AMCON redeems N1tn bond Dec 30

    The Asset Management Company of Nigeria (AMCON) will redeem N1 trillion series one, two, three and four bonds held by institutions outside the central bank on December 30, 2013.

    To ensure that nothing untoward happens to the money, the Central Bank of Nigeria (CBN) is already in possession of the fund preparatory to redemption.

    Addressing journalists in Abuja on Friday at the agreement signing ceremony between CBN and AMCON for the bonds’ redemption, the Governor of the Central Bank, Mallam Sanusi Lamido Sanusi, disclosed further that by October next year, and additional N1 trillion bond for series five would be redeemed by AMCON.

    Sanusi stated that redemption of the N1 trillion bonds became necessary after the N5.7 trillion bonds issued had enabled AMCON to improve the liquidity of troubled banks.

    According to Sanusi, “Some of the money will come from the sale of the underlying assets by AMCON and the N5.7 trillion includes interest component, the amount AMCON owes of N3.8 trillion. We are at a point where AMCON’s balance sheet has enabled them to raise enough money to pay for this bond.”

    The CBN governor added that when both tranches of redemption are completed by October next year, “the only creditor to AMCON will be the CBN. No one will hold AMCON bond. So this will now be AMCON owing the central bank and this is credit positive for this economy.”

    Also commenting on the planned redemption of the bonds, the Managing Director of AMCON, Mr Mustafa Chike-Obi, said “the first step of reducing its (AMCON) obligations from N5.7 trillion to N3.8 trillion, which is 30 per cent reduction, will continue so as to reduce our indebtedness every year, so that by the year 2023, AMCON is even and there is no burden on the Federal Government of Nigeria.”

    He noted that AMCON still has a lot of debts to recover, adding that AMCON will continue to dispose off assets to enable it redeem its obligations.

  • AMCON redeems N1tr bond December 30

    AMCON redeems N1tr bond December 30

    The Asset Management Company of Nigeria (AMCON) will redeem N1 trillion series one, two, three and four bonds held by institutions outside the central bank on December 30.

    To ensure that nothing untoward happens to the money, the Central Bank if Nigeria is already in possession of the fund preparatory to redemption.

    Addressing journalists in Abuja on Friday at the agreement signing ceremony between CBN and AMCON, for the bonds redemption, the CBN Governor, Mallam Sanusi Lamido Sanusi ,said by October next year, an additional N1 trillion bond for series five would be redeemed by AMCON.

    Sanusi stated that redemption of the N1 trillion bonds became necessary after the N5.7 trillion bonds issued had enabled AMCON to improve the  troubled banks’ liquidity.

    He said, “Some of the money will come from the sale of the underlying assets by AMCON and the N5.7 trillion includes interest component, the amount AMCON owes of N3.8 trillion. We are at a point where AMCON balance sheet has enabled them to raise enough money to pay for this bond.”

    The CBN governor added that when both tranches of redemption are completed by October next year, “the only creditor to AMCON will be the apex bank.

    “No one will hold AMCON bond. So this will now be AMCON owing the central bank and this is positive for this economy,” Sanusi stated.

     

     

  • N1.7tr AMCON bonds may trigger interest rate review

    The Asset Management Coporation of Nigeria (AMCON) related liquidity increase can undermine the naira and mount pressure on the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate (MPR) next year, a Currencies Analyst at Ecobank Nigeria, Olakunle Ezun, has said.

    He said the MPR must rise to counter higher spending that would stoke inflation in lead up to 2015 election. MPR is the benchmark rate by which the CBN determines interest rate, while Cash Reserve Requirement (CRR) is a portion of banks’deposits kept by banks with the apex bank.

    The CBN has kept its benchmark rate unchanged since October 2011 to help stabilise the naira and keep inflation under control.

    In a quarterly strategic report on Nigeria released at the weekend, he said the first tranche of AMCON bonds totalling about N1.7 trillion, which constitute about eight per cent of total money supply (M2) will mature and be redeemed on December 31.

    Despite this occurrence, he said a significant increase in M2 is unlikely, as AMCON undertook a partial redemption when yields fell in the first quarter of this year, adding that AMCON tranches II, III, and IV, totalling about N1.5 trillion, would mature next year.

    He said M2 supply growth continues to slow reflecting sustained tight monetary policy, adding that credit to the government remains strongly negative, reflecting sovereign’s low borrowing requirement.

    “CBN will aim to maintain tight M2 environment in order to help contain inflation,” he said.

    Ezun explained that when this happens, AMCON would likely offer a N1.5 trillion of special T-bills to the investors, but bondholders will be reluctant to swap due to likely lower T-Bill yields.

    “As AMCON will likely push through the swap, over the short-term, there will likely be no increase in liquidity; but long-term, liquidity will rise, assuming T-bill holders steadily liquidate their holdings,” he said.

    Ezun said a further fall in oil production (oil export revenues account for 98 per cent of export revenues) will add pressure on foreign exchange reserves, which in turn undermines the naira’s strength.

    According to AMCON’s Chief Executive Officer, Mustafa Chike-Obi, the corporation’s total outstanding debt stands at N5.7 trillion, N3.6 trillion of which is held as bond by the CBN.

    Chike-Obi said holders of the N1.7 trillion bonds had on November 19, disclosed whether they would accept cash or Treasury-Bills in place of the bonds, on maturity.