BE WARY OF FINANCE MINISTRY, MARK WARNS SANUSI
Be wary of finance ministry, Mark warns Sanusi
By Emmanuel Ogala
March 19, 2010 04:51AM
David Mark (R) tells Central Bank Governor Lamido Sanusi to 'make sure politics does not enter the system'.
David Mark, the president of the Senate, has urged the Central Bank of Nigeria to insulate the proposed Asset Management Corporation of Nigeria from the bureaucracy of the Ministry of Finance.
The Senate President advised the CBN governor, Sanusi Lamido Sanusi, during the public hearing on the proposed company in Abuja on Thursday.
“Ministry of Finance is a bureaucratic set up; if they get too involved, AMCON will be brought down,” Mr. Mark warned.
“You are the godfather of AMCON and you must make sure it works independently. Make sure politics does not enter the system; let square pegs be put in square holes.”
The Senate President's warning, however, does not take cognisance of the equal stakes in the share capital of both CBN and the Finance Ministry in the proposed AMCON.
As proposed, AMCON will have a share capital of N10 billion that is to be owned equally by CBN and the Finance Ministry.
The proposed AMCON is aimed at assisting banks to efficiently manage and dispose off toxic bank assets, improve the liquidity of Nigerian banks' balance sheet, and create a conducive environment for the resumption of lending activities in the banks.
According to Nkechi Nwaogu (PDP Abia State), the chairperson of Senate committee on banking, “AMCON is a step forward in line with the banking sector reforms and will certainly help restore confidence in the economy, and encourage investment activities in the capital market and other related sectors of the economy.”
She said that the distress resolution and recapitalisation of the affected banks will require about N1 trillion, but AMCON will hopefully be able to recover about 50 per cent of the amount within a period of 10 years.
AMCON is a breakthrough
“The establishment of AMCON will surely be a breakthrough towards providing a virile banking sector,” she added.
The Senate President however, fretted about the 10 years life span of the proposed corporation. “Why 10 years, will it be enough to solve the problem? Why not five years or even 15 years? Why are we setting up a limited liability company for a limited number of years?” he asked.
He also raised questions about availability of domestic expertise to manage the non-performing loans and a market for the toxic assets AMCON will acquire, and wondered if the problem on ground is enough for the country to establish an AMCON.
The governor of Central Bank, Sanusi Lamido, in his response however, said he has carried out adequate consultations on the proposed corporation and he is certain that the powers and functions of the company will achieve the desired result within the stipulated period of time.
Arunma Oteh, the Director General of Securities and Exchange Commission, who was at the public hearing, commended the CBN for the initiative to establish AMCON.
Ms. Oteh said that the corporation's objective to assist eligible financial institutions efficiently dispose of eligible bank assets will help revamp the capital market.
“We are of the view that while AMCON is not a panacea for the full recovery of the market, it will provide a vital push for its recovery,” Ms. Oteh said.
“Removing capital market related non-performing assets off the books of banks would reduce pressure by banks on operators, as such assets would now be owned by AMCON which hopefully, would neither be in a hurry to dispose off the assets nor mount repayment pressure on operators.
“While the AMCON itself may not be able to prevent future occurrence of financial crisis, it is a structured mechanism for minimising resultant swings and market volatility.”