Nigeria Content Online

The International
Monetary Fund (IMF) wants full transparency and accountability in the
operations of the Asset Management Corporation of Nigeria (AMCON). In
its latest assessment of Nigeria, released on Wednesday, the IMF gave a
tacit approval to interventions in the banking industry, but expects
AMCON to establish clear criteria for eligible assets.

The IMF statement,
which was issued by its mission chief for Nigeria, Scott Rogers, states
that, “Recapitalizing the insolvent banks and returning them to private
hands as quickly as possible is critical,” the report stated, while
advocating accountability in AMCON operations and financial results.

AMCON was
established by the Central Bank of Nigeria (CBN) and the ministry of
finance, with the aim of absorbing bad loans in the books of banks.

The IMF assessment
report was released after a meeting with Olusegun Aganga, finance
minister; Lamido Sanusi, Central Bank governor; Shamsudeen Usman,
minister of national planning; as well as other senior government
officials and representatives of the private sector.

Transparency is crucial

Victor Ogiemwonyi,
managing director, Partnership Investment, an investment firm, said the
asset corporation needs to be transparent in order to sustain the
confidence of the market.

“They have to be. They know it is the most crucial thing for them to do,” Mr. Ogiemwonyi said.

In realisation of the import, the corporation has declared its criteria for accepting assets that will be taken over.

Razia Khan,
regional head of research, Africa Global Research, Standard Chartered,
London, said high interbank rates was in anticipation of AMCON.

“Interbank rates
are likely to remain elevated, a much-needed safeguard to ensure that
liquidity growth does not get out of hand once the AMCON’s activities
get underway,” Ms.Khan said.

The IMF team, while
supporting the recent increase in the monetary policy rate, recommended
that the CBN conducts monetary policy with a view to reducing inflation
to a single-digit level. According to the IMF, slower growth in credit
is not unexpected in the aftermath of the unsustainable credit growth
driven by equity-related lending.

“Efforts to boost
lending to small businesses should be promoted through targeted
reforms, such as an effective credit risk bureau, better collateral
execution and bankruptcy procedures, and improved land tenure system,”
it said.

The IMF added that
Nigeria needs to make better use of Open Market Operations (OMO) in
order to make its policy rate more effective. Open market operations
refer to the buying and selling of government securities in the open
market, in order to expand or contract the amount of money in the
banking system.

“Looking forward,
the IMF team emphasised the importance of developing a consistent
macroeconomic policy framework, with the fiscal and monetary
authorities working closely together to help achieve stability and
growth,” it further said.

Prevailing
stagnation of aggregate credit to private sector, according to IMF, is
expected, especially in the aftermath of the unsustainable credit
growth driven by equity-related lending.

“Efforts to boost lending to small businesses should be promoted
through targeted reforms, such as an effective credit risk bureau,
better collateral execution and bankruptcy procedures, and improved
land tenure system.”