HE Central Bank of Nigeria (CBN) and 15 commercial banks have injected N228.28 billion into the Asset Management Corporation of Nigeria (AMCON) in 12 months, a CBN Financial Stability Report (FSR) on the intervention has shown.
Deposit Money Banks (DMBs) contribute 0.5 per cent of their total assets as at the date of their audited financial statements to the Banking Sector Resolution Cost Trust Fund (BSRCTF), also known as the AMCON Sinking Fund.
Besides, the apex bank has contributed N50 billion to the Sinking Fund, which is spread across 10 years.
The report was endorsed by CBN Governor Godwin Emefiele. It said the investment of N898.45 billion in Polaris Bank Limited (defunct Skye Bank Plc) raised the corporation’s liabilities to N5.43 trillion as at June last year.
AMCON is an instrument created by the Federal Government to bolster ailing banks through the injection of capital in consideration for equity.
Going by the Act establishing it, AMCON has a mandate to recover bad debts owed by institutions – private or public – on behalf of the Federal Government.
The rising bad loans and, the need to save the banking industry from imminent collapse prompted the Federal Government to set up the AMCON in 2010 with a 10-year mandate.
The AMCON Act 2019 (Amended) gives the corporation more powers to recover bad debts from obligors.
Although the report did not name the contributing banks to the Sinking Fund, the 15 commercial banks in Nigeria have been contributors to the Fund in previous analysis.
It said the annual on-site routine examination of the AMCON was also conducted by the CBN during the review period.
“The carrying value of AMCON’s liabilities increased from N4.53 trillion at end-June 2018 to N5.43 trillion at end-December 2018, arising from the Corporation’s investment of N898.45 billion in Polaris Bank Ltd.,” the report said.
It said the carrying value of AMCON assets net of impairment increased from N731.55 billion to N769.87 billion within the same period.
“AMCON’s liabilities N5.43 trillion was projected to be covered by the Banking Sector Resolution Cost Trust Fund (BSRCTF) and the corporation’s internal credit recoveries and asset sales. Contributions to the BSRCTF by the CBN and 15 participating banks for year 2018 was valued N228.28 billion,” it said.
The recoveries generated by AMCON as well as the contributions to the BSRCTF were used to repay the corporation’s debt obligations, which fell due in December 2018.
“The corporation made cash recoveries of N89.97 billion for the 2018 financial year from asset sales and credit repayments, bringing its total recoveries from inception to end-December 2018 to N759.05 billion, consisting of cash, N366.85 billion; shares forfeiture, N128.47 billion; and property forfeiture, N263.73 billion,” it added.
On January 1, 2011, the CBN signed an agreement with banks to establish the AMCON Sinking Fund. The initial agreement required the CBN to contribute N50 billion and the banks an equivalent of 0.3 per cent of their total assets as at the date of their audited financial statements, annually for 10 years.
However, the contribution, a non-refundable levy on all banks in Nigeria, was increased to 0.5 per cent in 2013. Shareholders have criticised the Sinking Fund, saying that they were short-changed and urged the Federal Government to wind down the corporation ahead of the 10-year sunset period.
