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While
the financial market awaits the issuance of the first series of bonds
by the Asset Management Corporation of Nigeria (AMCON), the focus is on
how the banking industry will fare after the bad debts are taken off
their books. Financial market operators spoke of a situation where the
regulators still need to keep close watch on the market in order to
prevent a reoccurrence.

The
target date of the first AMCON bond issuance is December 31 or shortly
thereafter, with a N500mn issuance in the first instance.Mike Itegboje,
president of the Chartered Institute of Stockbrokers said the
establishment of AMCON is not a guaranty that a similar crisis will not
beset the banking sector in future. “Let us move forward in this
direction so that it doesn’t happen again,” Mr. Itegboje said.

“Whatever
the CBN (Central Bank of Nigeria) is doing, there is no way we will say
it can never happen again. Some of the banks that were liquidated some
years ago, what lessons have we learnt from them.” He said there may be
need to set up a panel of enquiry in order to know the involvement of
individuals in the banking crisis in order to guard against a
reoccurrence in future. “I pray whatever panel that is set up will not
end up like Oputa Panel report.” He said with the lending and borrowing
aspect of the bad debt management function of AMCON, there is optimism
that the firm will do well.

Non-performing loans

AMCON management last week met with bankers and stockbrokers on the way
to address the current credit crunch in the economy. By the arrangement
reached by the parties, banks are under obligation to hand over non
performing loans (NPL) above five percent of their total loan portfolio
to AMCON. Also, NPL acquired by AMCON, including the contentious margin
facilities from the stock market, on which there are misunderstandings
will be resolved on individual basis. AMCON will also accept unquoted
shares which are products of private placements that have yet to be
listed on the floor of the Nigerian Stock exchange.

Mustafa
Chike-Obi, managing director of AMCON said recently that the
corporation expects to buy up to N2.5 trillion bad loans from eligible
financial institutions and the pricing of the loans will be driven by
the value of the underlying collateral. Mr. Chike-Obi said AMCON will
engage every borrower of an acquired bad loan with the intention of
properly managing the assets and this involves re-performing,
restructuring, forbearance, forgiveness and other resolution options.

Sonnie
Ayere, chief executive officer of Dunn Loren Merrifield, a Lagos based
investment firm, said there is need to build capacity in the industry
in order for ensure that banks play financial intermediation role in
the economy. He said taking the burden off the banks will not
necessarily ensure good management by the banks.

On the effect on the stock market, Victor Ogiemwonyi, managing
director of Partnership Investment, a financial services firm, said
AMCON will be a boost to the market. “The 60 per cent premium for stock
market portfolios that AMCON is offering will be priced into the market
in the coming weeks. AMCON’s intervention will relieve the economy of
debt overhand that is slowing down the market.”