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It has been three weeks since the board of the Asset Management Corporation of Nigeria (AMCON) was inaugurated. Since then, much of its activities have been shrouded in confidentiality. Apart from ongoing covert plans to recruit management staff which was not publicly advertised, the financial district for which the corporation is expected to provide succour, is in the dark as to the strategy for roll out. Since the inauguration, investors in the Nigerian capital market have lost a whopping N132 billion, while the market performance indices has reached its lowest level in six months.

AMCON portends good

Finance minister, Olusegun Aganga insists that the AMCON portends good for the economy. According to him, the aim is to remove obstacles in the banking sector and bring it to closure. “So that the financial sector and the economy can start moving again and there is liquidity in the market,” he told journalists at a briefing in Lagos last month.

Governor of the Central Bank of Nigeria (CBN), Lamido Sanusi, is worried about the reluctance of banks to lend to the real sector. “Bank lending has not been growing as fast as we would like it to grow. Bank lending is a major worry because we would like to get more money into the real economy,” he told Reuters.

A major source of concern has been how the project will be funded. Mr. Aganga said he is taken a cue from other parts of the world where it has been done. “In other parts of the world where this has been done, the banking sector which you are helping contributes to the cost. The banks, the Central Bank and the ministry of finance have to agree. Banks will generate about N1 trillion towards the cost of AMCON. I want to do this at minimal cost to government,” he said.

Beyond funding

However, beyond the issue of funding, the apprehension among financial sector operators is how the toxic asset to be taken over will be priced. Emmanuel Moore, chief economist and head, Market Risk Management, Access Bank Plc said at a forum in Lagos at the beginning of the year that the pricing of the assets needs to be sorted out before AMCON begins operation. “They can adopt fair value accounting or mark to book value in which case the assets will be marked at current market value,” he said. He said if the assets are priced low, the banks may not be willing to sell to the AMCON and if priced too high, the banks may be unnecessarily rewarding the shareholders. “So this is going to be the most contentious issue,” said Mr. Moore.

Delay in AMCOM operations

More importantly, many see the delay in the take-off of AMCON as eroding the value of the banks it is supposed to rescue. Unity Bank and Wema Bank initially tied their recapitalisation plans to success of AMCON but are now looking beyond it in order to meet the September 30 recapitalisation deadline set by the CBN. Wema Bank company secretary, Oluwole Ajimisinmi said the N10 billion which the bank requires for its regional banking license is not solely hinged on AMCON. “We are raising N9 billion via a special placing offer which has been approved by the Nigerian Stock Exchange. We already have commitments equal to the amount on offer,” he stated via text message. Ndu Eke of the corporate communications department of Unity Bank said the existence of AMCON would give a boost to its recapitalization effort. “Our rights issue was successful from which we raised over N23 billion. Our success is not hinged on AMCON but it is going to be a boost.” He said the bank was well on its way to maintaining its national banking license.

Many operators are of the opinion that the longer the CBN and shareholders of the eight banks take to agree to sell the banks, the less attractive they become. This sentiment is shared by Dianna Games, the honorary chief executive officer of the South Africa-Nigeria Chamber of Commerce, who believes that the delays were affecting the performance of the Nigerian Stock Exchange (NSE).

“Problems at the NSE, and the possibility that due diligence of the ailing banks may show a worse situation than originally thought, may have eroded investor confidence,” Games was quoted as saying by Times Live, a South Africa based online publication.

No compromise

However, there are no indications that the CBN will reach a compromise with the banks’ shareholders any time soon. The minority shareholders still insist that the regulator has no moral standing to seek investors for institutions it does not own. According to them, the CBN should allow the existing shareholders recapitalize the banks while it supervises the process. On the other hand, the regulator maintains that the N620 billion which it injected into the rescued banks gives it no option that to hand the institutions over to new core investors, or in the alternative, hand the banks over to the Nigeria Deposit Insurance Corporation (NDIC) for liquidation.

Boniface Okezie, president of one of the shareholder groups said the insistence by the CBN to hand the banks over to a new group of owners was in the manner of riding roughshod over other interests.

“What we are saying is that the management appointed by CBN cannot midwife the handover of the banks. Up till now, the Central Bank has not told us how much is required to recapitalise each bank,” he said. According to him, aggrieved shareholders have sought legal protection by obtaining caveat from courts in Lagos, Abuja, and Ibadan restraining any investor from investing in any of the rescued institutions. Meanwhile, the search by the CBN for new core investors for the rescued banks continues.