AMCON rejects CBN’s plan to dump Skye Bank on it

There are strong indications that the Central Bank of Nigeria (CBN) has concluded plans to hand over the toxic loans of the distress-prone Skye Bank to the Asset Management Corporation of Nigeria (AMCON), pending its outright sale.

But this is not going down well with the Corporation which already has on its kitty a huge pile of nonperforming loans (NPLs) from dead banks and companies.

This unwillingness is despite the fact that a consortium and two other firms have indicated interest to buy the bank.

AMCON is foot-dragging on taking up the Skye Bank’s liabilities based on its saddled bad-debt management profile, put at over N4.5 trillion.

Skye Bank is currently under a new management team after the apex bank sacked its board and management over frivolously granting loans to its directors and shareholders.

However, AMCON, which posted a 2015 loss of N304.35 billion ($982 million), higher than its 2014 loss of N275.49 billion, is cautious of taking up more of NPLs.

This is as the value of bad loans it had written-off, from distressed banks and other companies keep mounting, at a staggering rate.

Read also: Recession: Banks resort to capital market to shore up base

It was gathered that pressure is building from all official quarters for it to brace up for more bad loans on their way, given the  shrinking economy plunging Africa’s biggest oil producing nation into recession since the slump in oil prices.

However, with AMCON loan books high, nearly half of them in dollars, hammered by a shrinking economy and acute foreign exchange shortage, if nothing is done additional economic crisis may visit the system, said a banker.

The international rating agency, Agusto & Co, says the NPLs in Nigeria’s banking sector has jumped  to 12.5 per cent of total loans this year, which was up from the CBN’s target level of 5 per cent at the end of 2014.

AMCON executive director, Aminu Ismail, said, last year’s loss was also partly due to interest paid on a N3.8 trillion naira ($12.3 billion) bond  to the CBN which it used to acquire the bad loans.

He said NPL ratios jumped to 93 per cent of its total bad loans in 2015, up from 57 per cent a year earlier, as the weak economy impacted debt repayment.

Set up in 2010 to absorb bad loans as part of resolving a financial crisis in Nigerian economy, AMCON bought over N 3.76 trillion NPLs out of which a total of N2.1 trillion had been settled.

Lack of progress in turning things around has made the Corporation stop buying NPLs in the past two years as it is now focused on recoveries to enable it wind-down its activity by 2023 as expected.

Still, the CBN’s shoring up Skye Bank hoping that a willing buyer would be around received a knock when Sterling Bank, at the last moment, declined interest to sustain its interest in buying it.

 

By Emma Eke

 

 

 

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