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AMCON no longer necessary – Pioneer MD - PUNCH
The pioneer Managing Director of Assets Management Corporation of Nigeria, Mustapha Chike-Obi, said that the corporation was no longer useful in the banking industry.
AMCON, established in July 2010 by an act of parliament, was meant to provide stability for the financial system by efficiently resolving the non-performing loan assets of the banks.
Speaking at the BusinessDay Policy Intervention Series with a focus on the banking sector recapitalisation on Friday, Chike-Obi claimed that AMCON had outlived its usefulness and was constituting a major source of expenses on banks’ books.
Chike-Obi, who is the chairman of the Bank Directors’ Association of Nigeria, said, “AMCON was created for an emergency that would have dragged down the banking sector. Without AMCON, the banking system would have collapsed. It was necessary at the time. It is not necessary today and it will not be necessary in the future. AMCON is the longest-running asset corporation in the world. Debts that you have not recovered in 13 years, the chances of recovering them are very slim.
“Today’s second highest expense for banks are the statutory levies, AMCON and NDIC. It will catch up with salaries and expenses in the next two or three years as the highest item. It is very high. Now, you ask yourself, why do we pay NDIC premium when at least the last four bank failures, AMCON bails out the banks at no cost to NDIC?
“I would think that NDIC premiums should be given to AMCON until it is extinguished or when a bank fails, NDIC pays as much as it can and AMCON takes up the balance but as long as AMCON is performing that insurance role for deposits, I don’t see the reason for the duplication of the AMCON and NDIC in terms of collections.”
According to Chike-Obi, the reason banks are not doing as well as they can is that they are paying a tremendous amount on these levies.
“I think Fidelity Bank and we are tier 2, according to (the Managing Director of Afrinvest West Africa, who was the keynote address at the event) Dr Chioke Ike, we are going to pay about N50bn for AMCON and NDIC fees this year. The bigger banks are going to pay more. It is not trivial.
“We would not be like banks in Indonesia or Brazil that don’t pay AMCON and NDIC fees to the magnitude that we pay them. Those are things dragging the banking industry,” he enunciated.
A PUNCH analysis of the annual reports of the banking groups filed with the Nigerian Exchange Group for 2023 revealed that statutory contribution made by nine banks to AMCON increased by 25.81 per cent to N306.06bn from N243.28bn in the previous year.
The banking groups and banks reviewed included FBN Holdings, Access Holdings, Zenith Bank, United Bank for Africa, Stanbic IBTC Holdings, FCMB Group, Guaranty Trust Holding Company, Fidelity Bank and Wema Bank.
AMCON’s contributory cost relates to the contribution towards the fund set up by the Central Bank of Nigeria for the bailout of the banking sector.
The current applicable rate in Nigeria based on the AMCON Act of 2021 is 0.5 per cent of total assets (inclusive of off-balance sheet).
In December, members of the Senate Committee on Banking, Insurance, and Other Financial Institutions, demanded the dissolution of AMCON over the failure to recover N5tn liabilities.
The lawmakers made the demand when the former Managing Director of AMCON, Ahmed Kuru, appeared before it to defend the agency’s budgetary allocation for the 2024 fiscal year.
