Thursday 3 January 2013

AMCON’s MISADVENTURE AND A HAPLESS NATION

The Asset Management Corporation of Nigeria (AMCON) is gravely distressed! An examination of its Audited Financial Statements as at 31st December, 2011, revealed that much. With Total Liabilities of N5.69Trillion (Bonds Issued is N4.18Trillion), a Paid-up Share Capital of N10Billion and an Operating Loss of N2.44Trillion, this is an adventure into an abyss! Yet it made out donations totalling N3.8million of which N2.5million went to a high-brow private primary school, Lagos Preparatory School in Ikoyi, Lagos!

What is really the end-game for this Alternative Government of Nigeria whose expenditure rivals the Annual Budget of the Federal Republic of Nigeria?
When Mallam Sanusi Lamido Sanusi became the CBN Governor in June, 2009, he ridiculed Prof. Chukwuma Soludo for allowing about N256.571Billion to be drawn by the distressed banks through the CBN's Extended Discount Window. Today, over N4Trillion has been spent to "save" banks. The "assets" are mostly worthless and the losses of AMCON will only rise. The "Sinking Fund" which is to be set up by the CBN and banks to repay the bonds of AMCON is throwing good money after bad. The worrisome thing is that this is a bottom-less pit especially as the originally envisaged ten-year tenure of AMCON has been abolished so the corporation is now a perpetual going-concern.
In Bank Failure Resolution, the cost of resolution is a major issue that determines the cause of action. This AMCON track is an exorbitant drain on our scarce resources. The Presidency, the National Assembly and the Nigerian people are not scrutinising AMCON and the CBN as they should. Which "investors" had N4.2Trillion to buy AMCON bonds in a distressed financial system? Are these AMCON Bonds CBN "Ways & Means" by another name? The inflationary impact of AMCON's profligate activities is disruptive to the economy. The CBN's Monetary Policy Committee even acknowledged that AMCON exacerbated the "surfeit of liquidity" in the system resulting in the need to increase the Monetary Policy Rate to 12% in 2011.
This particular style of AMCON is a route we never should have taken. The idea of an Asset Management Company has been long in the works. The NDIC under its pioneer MD, Mr. John Ebhodaghe, had long promoted the idea of a corporation to deal with toxic bank assets as a necessary part of bank failure resolution in Nigeria and to create a secondary market for non-performing risk assets. If NDIC had its way, the corporation would have been operational as far back as 1995 or so. The concept was also part of the Soludo 13-Point Agenda for Bank Consolidation in 2004. The AMCON Bill passed by the Senate said nothing about the corporation having “perpetual succession” but the final AMCON Act which was signed into law by the President conferred it with that status; meaning it can exist in perpetuity. That was a red-flag that a hidden agenda was at play which most folks missed.
Why use a N4.2Trillion solution to settle a N257Billion problem?! But for the fact, which was mere speculation before now, that Sanusi had a sectional and religious agenda, all that the CBN needed to do in August 2009 was to sack the MDs of the banks who were indicted by the CBN/NDIC Examiners in the Special Examination Reports for Corporate Governance infractions and insider dealings and prosecute them. The Boards of the eight distressed banks should then have been given about six months to recapitalise their banks or have their banking licences withdrawn. Those that failed to recapitalise or get acquired through their own private arrangements would then be liquidated by the NDIC. The NDIC has largely lived up to its statutory mandate in that regard in the past and would have risen to the occasion as always. Moreover, if liquidation was to be totally avoided, Section 38 of the NDIC Act of 2007 allows it arrange that the distressed banks be restructured into Bridge Banks for a two year period and another three year period if necessary, without having to inject huge capital funds, while it looks for new investors to buy the institutions. All the NDIC would then have to do is provide short term funds to the Bridge Banks by way of Accommodation Bills (which it did for a bank like FCMB in the past) as working capital.
AMCON has subverted and usurped the NDIC's powers in a profligate jamboree that has left thousands of bank staff job-less, innocent shareholders disenfranchised and the nation saddled with huge losses in trillions of Naira which the CBN and banks are expected to clean up in an unspecified future date through a so-called "Sinking Fund". Evidently, we are much worse off today than we were in 2009 and the inevitable death knell for the financial system has merely been deferred.
 
GOD BLESS NIGERIA!

Tuesday 1 January 2013

AMCON's MISADVENTURE

Has anybody else bothered to examine the Audited Financial Statements of the Asset Management Corporation of Nigeria (AMCON) for the year ended 31st December, 2011? It's available with this link: http://amcon.com.ng/documents/AMCON_Consolidated_Financial_Full.aspx

AMCON is gravely distressed! With Total Liabilities of N5.69Trillion (Bonds Issued is N4.18Trillion), a Paid-up Share Capital of N10Billion and an Operating Loss of N2.44Trillion, this is an adventure into an abyss! Yet it made out donations totalling N3.8million of which N2.5million went to a high-brow private primary school, Lagos Preparatory School in Ikoyi, Lagos!

What is really the end-game for this Alternative Government of Nigeria whose expenditure rivals the Annual Budget of the Federal Republic of Nigeria?