Wednesday, July 28, 2010

AMCON as a Fillip to Nigeria’s Economy

The signing into law of the Asset Management Corporation of Nigeria (AMCON) law by President Goodluck Jonathan on Monday, 19 July 2010 is long overdue. The bill which was recently passed by the two chambers of the National Assembly was initially part of the Prof. Chukwuma Soludo’s 13 point banking reform agenda way back July 2004. However, the bill was stalled in the parliament until the incumbent Governor of Central Bank of Nigeria, Sanusi Lamido Sanusi re-introduced it at the National Assembly as part of the current banking reform measure which he kick-started in July 2009. The law, to my mind is highly desirable going by the several advantages that will likely accrue to our banking nay financial sector and concomitantly the nation’s economy. Some of the envisaged benefits of the bill as highlighted by the president during the signing ceremony are that:

The new law will ensure the stability of Nigeria’s financial sector and stimulate national economic recovery. AMCON, according to the President, will help to stimulate the recovery of Nigeria’s financial system from recent crisis by boosting the liquidity of troubled banks through buying their non-performing loans, helping in the recapitalisation of banks in which the Central Bank was forced to intervene, and increasing access to restructuring or refinancing opportunities for borrowers.
The law will also help in boosting confidence in the banks’ balance sheets and Nigeria’s credit and risk ratings, restore confidence in Nigeria’s capital markets, and prevent continued job losses in the country’s banking industry as well as safeguard the interests of depositors, creditors and others in Nigeria’s financial system. The Central Bank of Nigeria said it proposed the establishment of the AMCON as a way of freeing the banks of toxic loans estimated at N1.5 trillion and to enable them resume lending to the economy. CBN governor observed that it is a commitment to cleaning up bank balance sheet and restoring confidence in the capital market thereby setting the country on the path of growth. With all the aforementioned benefits, one cannot but commend the initiative of Central Bank in this regard.

The stage is now set for the full operations of the new corporation as the relevant authorities move to establish the Board and the management team. This is the crux of the matter. Nigerians are never bereft of noble ideas such as this; our major challenge has been that of faithful implementation. As CBN and Federal Ministry of Finance commence the setting up of the structures that will drive the process, there is need for them to recruit the best hands for the job. Not political jobbers and professional politicians who will see their appointment into the board or management team of AMCON as a reward for their loyalty to the president or his political party. There must be milestones and timelines set for the management team of AMCON as well as open and periodic performance review so that the public will know if the set objectives for the establishment of the corporation are being achieved. With the proposed buying off of the toxic assets of the banks, it is hoped that the current credit squeeze in the financial sector will give way to easy access to loan-able funds by the banks to the critical sector of the economy. Beyond these measures however, CBN and other regulatory authorities must keep track of activities of the banks and the financial sector of the economy to ensure that corporate governance and proper risk management are not compromised particularly in granting credit facilities to customers and investors.