Lamido Sanusi, Governor of the Central Bank of Nigeria, has taken a tough line with the banks
The past five months since the appointment of Lamido Sanusi as CBN governor were dominated by the apex bank’s whirlwind intervention in nine banks, which saw the chief executive officers of those banks sacked and being prosecuted on sundry charges by the Economic and Financial Crimes Commission (EFCC).
The AMC is Sanusi’s next move as he presses forward after the action described as the “Sanusi Tsunami.”
In an interview with a group of Nigerian journalists at the 13th Standard Bank Africa Forum, which ended in Cape Town, South Africa, last month, Sanusi explained that the AMC initiative is being currently articulated in the apex bank, which will subsequently seek approval for it from the National Assembly.
He said the AMC will serve both the banks and the stock market.
Explaining exactly what the company would be doing, the governor said its focus would first be on the marginal loans given by those banks that were badly hit by the capital market crash, because those are easier to value.
“The Asset Management Company ultimately will be a vehicle for distributing losses,” he said. “The capital market has lost 70% and basically we have a situation today where everybody is trying to minimize the losses. So the banks are saying, ‘You owe us so much. We don’t care what happened to the market. You will have to pay us the money.”
“In other words, the banks are saying they will not take any responsibility for the losses. (And) you have the brokers saying that ‘we don’t owe you anything, we have lost our equity and we don’t see why you should follow us, saying we owe you money even though you have the shares’.”
He said the AMC would provide an avenue for distributing the losses.
“How does it do it? If we price the shares intelligently, and we buy the loans off the books of the banks, we can buy the loans at a price that allows the banks to recover some – but not all – of the losses that they have recognized.”
Sanusi is optimistic that having the loans taken off their backs by the AMC through cash or bonds, the banks’ liquidity will improve immediately. “So you have good liquidity ratios, better asset quality ratios and better capital liquidity ratios and better earnings. In other words you begin to strengthen the balance sheets of the institutions,” he said.
Sanusi pointed out that because the company is not in a hurry to dispose off its assets, it could be able to recover the costs paid if the asset values appreciate.
“The AMC on its part, because it has taken the shares at a small premium and because it is holding those shares for three, four, five six years, is able over time to make up for whatever premium it paid and pay for the cost of whatever bond it issued.”
He explained that the company will distribute those assets to investment managers, who will have the option of taking a variety of portfolios through an investment strategy that will be defined by the AMC, such as selling some of the shares and going into real estate.
He assured that the government would not lose any money on the AMC.
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Source(s): AllAfrica.com
