BANKS NO LONGER HAVE LIQUIDITY PROBLEM - AMCON

By Babajide Komolafe
Asset Management Corporation of Nigeria (AMCON) said with the 90 per cent purchase of non-performing loans in the banking industry, banks no longer have liquidity problems.

AMCON Managing Director/Chief Executive, Mustapha Chike-Obi stated this last week at the 12th Annual General Meeting of International Chamber of Commerce (ICC) Nigeria.

He said the N1.7 trillion bonds issued by AMCON in exchange for the non-performing loans of banks provides capital and liquidity for the banks

'Those bonds can be repo or discounted at Central Bank of Nigeria (CBN) 100 per cent. If you take those bonds to CBN, it would give you cash. The reason why it does not make sense for any bank to do that is that the bonds serve as capital and liquidity for the bank.

If a bank rushes and takes them to CBN to get cash, what will it do with it? So what banks are doing is that they are holding on to the bonds because they have a good yield.

And when they need cash, or when they need to make a loan, they go and rediscount the bond and get cash to make the loan. The expectation is that if you need a loan growth of 15 per cent in a year for the bank, only 15 per cent of the bonds would be rediscounted because that is what drives it.

The problem for the banks now is not liquidity. There are banks with liquidity ratio in excess of 60 per cent right now. And the problem is that they don't have enough loans to make.

They have come out of the recession still shocked by what happened and so they are still risk averse. And it is our entire job to push them to make more loans and your job to give them more bankable projects.'

He said the corporation would soon  unveil its debt recovery strategy but would first terminate all debt recovery contracts associated with the loans it acquired and then appoint new debt recovery consultants.

'It is the intention of AMCON to formally terminate, within the law, all contracts that were associated with the loans we acquired because we have a six months period. We will now have to appoint those consultants that qualify to be appointed.

The reason for doing that is we want to tell them what our debt collection philosophy is. Because if I am a debt collector for Bank A, and AMCON takes over the loan, I will be very happy because the powers of AMCON makes the job easy.

AMCON has significant powers in the law, so many customers will rush to settle their debt because they don't want to deal with AMCON and its powers.

'So we need to have a new policy for debt recovery and we need to explain all these things to people.'