The Asset Management Company of Nigeria (AMCON), which was set up by the government to act as a bad bank in acquiring non-performing loans from the nation’s commercial banks, has disclosed it spent about N5.6trillion or $35.5bn in buying bad loans.
AMCON Chief Executive, Mustapha Chike-Obi, said it bought loans worth N4trillion with acquisition costs at more than twice the initial estimates making up for the remainder of the expenditure. This amounted to a net loss of N2.43trillion and total assets of N3.34trillion for the company.
Nigeria, Africa’s top oil producer set up AMCON as part of measures preventing a collapse of the banking sector after lenders suffered deep losses from bad loans to stock speculators and fuel importers in the aftermath of the global financial crisis of 2008. The Central Bank of Nigeria bailed our eight banks with N620bn and fired their chief executive officers.
AMCON issued bonds to finance the purchase of bad debt and took over three banks after regulators deemed them unlikely to meet the deadline for recapitalization. Lenders are mandated to contribute part of their earnings to a fund which will go towards paying for the bonds.
“The key priorities to Amcon now are the liquidation of holding in the nationalized banks and the recovery and restructuring of acquired banks’ assets,” Chike-Obi said.