Nigeria’s AMCON to Lease Seized Property to Plug Funding Gap

LAGOS, Nigeria, Capital Markets in Africa: The Nigerian state-owned agency set up six years ago to take on bad debts and rescue the nation’s banking industry from collapse may lease out properties seized from companies that are failing to repay loans as it grapples with its own cash crunch.

The Asset Management Corp. of Nigeria, or AMCON, may introduce the “real-estate investment scheme” by the end of the year to raise money to meet its bond repayments, Chief Executive Officer Ahmed Kuru said in an interview last week in Lagos, Nigeria’s commercial hub. It plans to sell the properties when the economy improves and the assets can attract fair value, he said.

The agency is confiscating more assets than its receiving from its recovery efforts as businesses battle to sell products and generate cash, Kuru said. Companies that owe money to AMCON are struggling to meet their debts as Africa’s largest economy and one of its biggest oil producers head for a recession because of a slump in crude prices and a 15-month currency peg to the dollar that crippled foreign-exchange supplies.

AMCON has no plans for another rescue package for banks and is focused on how it will repay 5.2 trillion naira ($16.5 billion) of outstanding bonds over the next nine years, he said. The agency purchased about 14,000 non-performing loans at a cost of 3.9 trillion naira in a government-led bailout of 10 companies following the 2009 banking crisis.

‘Second Phase’ 
A levy that sees banks pay 0.5 percent of their assets annually generates as much as 190 billion naira for AMCON and is helping the agency fill funding gaps, Kuru said. The shortfall widens as the downturn in the economy causes the price of assets to fall below their book value, making sales difficult, Kuru said.

“We are in the second phase, which is the redemption of our debts, not bailing out banks,” Kuru said. “We are not in the perpetual business of bailing out banks.’’

Nigerian regulators last month replaced the management and board of Skye Bank Plc and provided the nation’s 10th-largest lender with a loan to bolster capital levels that had dropped below requirements. There are “a few” lenders that are probably not meeting prudential ratios in terms of liquidity, or bad loans or capital, Tokunbo Martins, the Central Bank of Nigeria’s director of banking supervision, said last month.

The sale of Keystone Bank Ltd., the biggest of three banks nationalized after the 2009 crisis, is in the “final stage” and it will probably be sold this quarter, Kuru said. Sterling Bank Plc said last month it withdrew a bid to buy the lender, which has assets of 318 billion naira and two international units, over price negotiations.

“Our activity here is directly linked to the economy,” Kuru said. “The combination of the economy picking up for the banks and also for the obligors’’ will help AMCON meet its objectives and wind down in 2023 as planned, he said.

Source: Bloomberg Business News