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CBN floats firm to buy banks’ liabilities
• Says number of post-consolidation banks may exceed
12
By Esan Sunday
Senior Finance
Correspondent
Any time from
now, the Central Bank of Nigeria (CBN) will send to the National Assembly a
bill on the establishment of an Asset Management Company (AMC) that will enable
banks sell their non-performing portfolio, bad debts and bad assets to it at a
discount to facilitate the consolidation exercise.
The company will
initially be funded by both the CBN and the Nigerian Deposit Insurance
Corporation (NDIC), it will later be privatised to give other organisations and
individuals the opportunity to invest in it.
CBN Director of
Banking Supervision Ignatius Imala disclosed this on Tuesday at the end of the
Bankers Committee meeting. He said the AMC would improve the banks’
operations post-consolidation.
In his first
address to the bank chiefs, CBN Governor Charles Soludo had said his
administration would establish an AMC as an important part of efforts to stave
off distress in banks.
Imala said On
Tuesday: “Asset Management Company will play a key role in the
development of the banks after consolidation. Even before now, merchant banks
have had what we call debt factoring. It is a service rendered by investment
bankers and the way they do it is that if you have a N100 million debt in your
books and you cannot wait for when you will be able to recover it, you can get
somebody to buy it at a discount. The person pays you about N50 million or N30
million, depending on how the debt is accessed. So, the AMC will also make
money out of it”.
While warning
banks not to see the company as a dumping ground for bad assets, he assured
that it would be very professional in its operations.
He debunked
insinuations that only 12 banks would remain at the end of the consolidation
exercise, saying President Olusegun Obasanjo must have been misquoted on the
issue, as Soludo has said he does not know how many banks will survive.
Ten groups have
made their intention to merge known to the CBN so far.
Oceanic Bank
Chief Executive Cecilia Ibru, who chairs the Bankers Committee sub committee on
Small and Medium Industries Equity Investment Scheme (SMIEIS), stated that the
panel has recommended that 10 per cent of SMIEIS’ funds set aside for the
development of the real sector be used to upgrade real estate.
As of July, total
funds reserved by 82 banks under the scheme was N24.1 billion, out of which
N9.4 billion has been invested.
The real sector recorded investment of N6.5 billion (69.46
per cent) in 123 projects, service-related enterprises had N2.8 billion (30.54
per cent) in 53 projects.
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