Toxic debts with AMCON rises 25% in 2016

Bad debts, also known as toxic debts, in the Nigerian financial system, is discovered to have risen from $20 billion to $25 billion between 2014 and 2016,

The development may see Nigerian foreign reserves heading for crisis unless something urgent is done to reverse the trend, according to economists.

Fear is that some institutions, including banks may go under if nothing is done soon.

It would be recalled that the House of Representatives before embarking on the last break in December 2016 had drawn the attention of the Central Bank of Nigeria (CBN) to the danger of allowing Assets Management Corporation of Nigeria (AMCON) to accumulate more of such toxic debts than was envisaged at its inception in 2013.

Read also: Reps summon CBN boss Emefiele over $1bn forex sold by IOCs

An Adhoc Committee on Undue Accumulation of Debts and Alleged Fraudulent Sales chaired by Hon. Albert Adeogun, Chairman of the House Committee on Banks and Other Financial Institution expressed disappointment that contrary to the expectations of the founding fathers of AMCON to put back the banking sector on track by managing their debt portfolio, the reverse has become the case.

Commenting on the issue, an economist, Henry Boyo said removing toxic debts in any economy is a function of having more investors interested in it, but that is yet to be the case with the Nigerian economy.

“Companies that have reported inability to service their loan, let alone paying them outright,” he states, “can hardly secure another one, meaning heading to bankruptcy.”

The CBN is said to have also found itself in difficulty as the proposed 60 per cent recovery of the bad debt, five years after take off of AMCON is yet to be actualised.

The apex bank’s spokesman Isaac Okoroafor said there is an-going move to finding a solution to the crisis.

On the fear that banks may go under over the development, he said: “Nigerian banks are secured under the circumstances, otherwise why creating the asset management body in the first place?”

He however refused to confirm that the current debt portfolio of the Corporation is over N800 billion above the ceiling stipulated by the CBN.

Another report stated that the corporation’s balance sheet has a shortfall of $19 billion, which is now endangering the dwindling national reserves put at $29 billion as at December 2016.

But information obtained from the AMCON’s office said its financial statement for 2016 was not yet audited or approved by the board, but it has no less than $25 billion under bad debt management.

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