*As investors, IMF call for wind-up
*Experts recommend bad debt write-off
Banks’ payments to the Asset Management Corporation of Nigeria (AMCON) Sinking Fund have continued to swell despite the position of the shareholders and the International Monetary Fund, IMF, that it should be scrapped.
Financial Vanguard findings on the Fund’s update show a 22.6 percent rise to N269.35 billion in the nine months to September 30, 2022 from N219.51 billion in the corresponding period in 2021.
But banks’ sources put the figure at more than N300 billion with payments from small banks.
This is coming amidst a renewed call for winding up of the AMCON otherwise known as ‘bad bank’ by different stakeholders in the financial market.
The International Monetary Fund (IMF) had in its Staff Concluding Statement of the 2022 Article IV Mission advised the authorities in Nigeria to “resolve weak smaller banks and proceed with the winding down of the public Asset Management Company (AMCON) by end-2023.”
This is in addition to the repeated calls by the shareholders of the banks to the federal government to wind-up the ‘bad bank’ on the claims that it has outlived its purpose.
The banks covered in the review are United Bank for Africa (UBA) Plc, Union Bank of Nigeria (UBN) Plc, Zenith Bank Plc, GTBank Plc, First Bank, Fidelity Bank Plc, Access Bank, Sterling Bank Plc and Unity Bank Plc.
Others are Wema Bank Plc, Stanbic IBTC Holdings Plc and Jaiz Bank Plc.
AMCON levy
The levy represents banks’ contribution to a fund established by the AMCON Act to help AMCON in generating funds to extinguish its liability following the mop up of toxic assets held by banks in the aftermath of the 2008/2009 meltdown.
By the AMCON Act establishing the Sinking Fund, the banks are required to contribute an equivalent of 0.5% of their total assets plus 0.5% of all contingent assets as at the preceding year end to AMCON’s sinking fund in line with existing guidelines.
The Act became effective on January 1, 2013
The contribution, according to the Act, is for a period of 10 years from the effective date of 1 January 2013. It is non-refundable and does not represent any ownership interest.
This levy also represents the cost the banks incurred on assets expensed in line with the bank’s’ capitalisation policy, cost incurred on repair, maintenance and other running costs on property, plant and equipment.
AMCON levy per bank
Financial Vanguard’s findings from banks’ financial records showed that the bulk of the payments into the Fund came from Tier-1 banks with First Bank leading the pack at N59.3 billion, followed by Access Bank which recorded N52.73 billion, and Zenith Bank with N44.01 billion.
UBA’s payment was N31.2 billion while GTBank paid N23.29 billion.
Further findings show that Fidelity Bank Plc recorded the highest growth rate in amount committed to ‘bad bank’ as its figure rose by 59 percent to N18.28 billion from N11.5 billion in the corresponding period in 2021.
This was followed by Unity Bank, which recorded a 29.7 per cent increase to N3.45 billion from N2.66 billion; First Bank ranked third with 29.2 per cent increase to N59.3 billion from N45.9 billion in 2021; Access Bank recorded a 27.02 per cent increase to N52.73 billion from N41.51 billion in 2021; Union Bank’s contribution grew by 24.5 per cent to N10.78 billion from N8.66 billion, while Sterling Bank’s contribution rose by 24.2 per cent to N6.88 billion from N5.54 billion in 2021.
Others are Wema Bank with a 23.5 per cent increase in levy payment to N4.83 billion from N3.91 billion in 2021. Zenith Bank saw a 16.1 percent increase to N44.01 billion from N37.92 billion in the corresponding period in 2021; UBA’s payment was up 15.1 percent to N31.2 billion from N27.1 billion; Stanbic IBTC Holdings Plc recorded 13 percent payment increase to N14.6 billion from N12.92 billion, and GTBank Plc that posted a 6.4 percent increase to N23.29 billion from N21.89 billion in 2021.
Shareholders’ complaint
Meanwhile, the shareholders of the banks have frowned at the continued payment to the AMCON, saying that shareholders are shortchanged in the process as the distributable income available to the investors is eroded.
They insisted it was time the federal government wind-up the ‘bad bank’ and save the banks from significant erosion of their bottomline.
Speaking against this backdrop, Moses Igbrude, President, Issuers and Investors Alternative Dispute Resolution Initiative (IIADRI) stated: “AMCON should be wind-down; it has served its useful purpose. What it cannot do for 10 years, it will not do if given eternity to do it.
“In other jurisdictions where similar vehicles were set up, those vehicles have done what they were set up to do and were decommissioned, so why keep ours if not to perpetuate fleecing of the shareholders.
‘‘One cannot use good money to pursue bad money. If the federal government wants to keep AMCON, let the government fund it. They should stop levying the healthy banks. Shareholders have paid and suffered enough.
“The vehicle called AMCON cannot stay perpetually; it was set-up for a definite purpose and time; keeping it further means some interested parties are involved and are gaining from it.
‘‘So, all Nigerians should kick against the continuous stay of AMCON.”
Also commenting, Patrick Ajudua, National Chairman, New Dimension Shareholders Association (NDSA) said ‘‘It’s not a surprise that revenue to AMCON from levy/charges increased by over 22 percent.
“To us, AMCON has outlived its purpose and therefore, the charges have been contributing to decline in the bottomline of the banks, which is also affecting dividend payout to shareholders.
“The way forward is to challenge the illegality of those payments made to AMCON in court as they have outlived their purpose of existence.”
Experts urge govt to write-off bad loans
David Adonri, Vice Chairman, Highcap Securities, commenting, said although the time limit set for AMCON to complete its task has long elapsed, the liability remains outstanding.
He stated: “At the last count, it was about N6 trillion. If this liability can be settled, further existence of AMCON will become unnecessary.”
According to him, most of those loans still reflecting on the books of AMCON are for dead projects, arguing that they should actually be considered lost.
He said there is the need for many of those bad loans to be written off, while AMCON concentrates its efforts on the performing loans or those that have the capacity to perform.
“Most of those loans are actually lost. They are not recoverable. It is imperative on AMCON to be realistic and stop quoting the original figures as the outstanding loans,” he added.
(VANGUARD)
