Business
Bank chiefs cry out over “Unfair and Endless” AMCON charges
Top Nigerian bank executives have launched a scathing criticism of the Asset Management Corporation of Nigeria (AMCON), accusing it of overstaying its welcome and unfairly burdening banks with charges that threaten financial innovation and growth in the sector.
Speaking at a Central Bank of Nigeria (CBN) seminar for Finance Correspondents & Business Editors Association of Nigeria titled “Banking Recapitalisation Towards a Trillion Dollar Economy” held at Ibeto Hotel, Abuja recently, the Group Managing Director of United Bank for Africa (UBA), Oliver Alawuba, expressed deep frustration over what he described as a growing pile of regulatory levies that are “choking” the banking sector.
“The AMCON charges that are dealing with us, the NDIC premium that is dealing with us – it’s too much,” Alawuba said bluntly. “If regulators want the banks to do more for the economy, they need to ease this burden. Right now, we’re funding systems we barely benefit from.”
Alawuba also took pride in the banking industry’s contribution to Nigeria’s governance, noting that many of the current state governors are former bankers. “And the truth is, they’re outperforming their non-banker counterparts. That tells you the kind of discipline and innovation this industry brings.”
But it was the Group Managing Director of Guaranty Trust Holding Company (GTCO), Segun Agbaje, who had earlier delivered the most pointed criticism, questioning the very legitimacy of AMCON’s continued existence and calling for a fundamental restructuring of the levies imposed on banks.
“Let’s be honest: AMCON was supposed to be a 10-year emergency solution. It has overstayed its mandate,” Agbaje declared. “We’re being taxed year after year for a problem we didn’t create. Nobody has explained why this is still going on.”
Agbaje revealed that GTCO took only N20 billion from AMCON – a relatively small sum compared to the contributions it has made to the sinking fund over the years. “We were never one of the major beneficiaries,” he said. “So why are we paying the same or more than banks that were bailed out with hundreds of billions? This model is broken and unfair.”
“If AMCON is going to survive beyond its original lifespan, then let those who benefitted most carry the burden,” he added. “We should not be forced to keep subsidizing inefficiency and silence from regulators.”
Industry insiders say tensions have been brewing for years over AMCON’s continued funding model, which many now see as outdated, opaque, and disproportionately punitive to banks that remained financially sound during the crisis.
As calls grow louder for transparency and reform, the ball now appears firmly in the CBN’s court to address what some are calling the “silent taxation” of Nigeria’s banking sector.
The Asset Management Corporation of Nigeria (AMCON) was established in July 2010, following the signing of the AMCON Act into law by then-President Goodluck Jonathan. Its primary mandate was to restore stability and confidence in Nigeria’s financial system by addressing the non-performing loan (NPL) crisis that affected commercial banks at that time. The initial plan was for AMCON to operate for a 10-year period.
AMCON was designed as a strategic intervention agency to stabilize the banking sector by acquiring toxic assets (NPLs) and providing liquidity to distressed financial institutions. The Corporation successfully purchased over 12,000 NPLs valued at N3.7 trillion and injected N2.2 trillion in financial support to avert systemic collapse.
In sectors like aviation and manufacturing, AMCON indeed made significant contributions; however, it has encountered considerable challenges, especially regarding its financial sustainability. By December 31, 2018, AMCON’s interventions were primarily financed through debt obligations totalling N4.65 trillion, which needed to be repaid through internal revenues and external sources, including the Central Bank of Nigeria (CBN).
Originally envisioned as a loss-minimization vehicle, AMCON was expected to repay only 30% of its debt, while the Banking Sector Resolution Cost Fund (BSRCF) would cover the remaining 70%. The fund was based on several key assumptions:
– The banking sector would grow at a rate of 20% per annum.
– Deposit Money Banks (DMBs) would contribute 0.5% of their total assets annually to the BSRCF.
– The CBN would contribute N50 billion annually to the fund.
However, these projections did not materialize as anticipated. From 2013 to 2017, the bank sector’s asset growth averaged only 8.4% per annum, significantly lower than the projected 20%. Additionally, not all DMBs fulfilled their contribution obligations.
Consequently, the actual total accumulated in the Sinking Fund during that five-year period stood at N1.13 trillion, which was below the targeted N1.45 trillion. Recovery efforts on recapitalized and intervened banks resulted in only 23% and 10% recovery rates, respectively, further limiting available funds.
Furthermore, AMCON bonds were refinanced by the CBN at an interest rate of 6%, considerably higher than the rates on other intervention funds. This revenue shortfall from both internal and external sources diminished the Corporation’s ability to reinvest profitably.
Looking forward, projections between 2018 and 2024, assuming the ongoing compound annual growth rate of 8.4%, suggest a variance of N1.56 trillion between the expected and actual contributions. Due to these persistent shortfalls in contributions and the lower-than-expected growth in the banking sector, the cumulative shortfall in the Sinking Fund has now reached N1.7 trillion. The Sinking Fund, initially meant to cover 70% of AMCON’s debt obligations, continues to pose challenges for the Corporation in fulfilling its financial commitments.
