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Author Central Bank of Nigeria explains stakeholding in N5.7 trillion  (Read 750 times)

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Offline one9ja

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CBN explains stakeholding in N5.7 trillion AMCON bond

THE Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, said that out of the N5.7 trillion bonds, the apex bank is holding N3.6 trillion, under the Special Class bond, which it used as a risk mitigation strategy.

Sanusi made the disclosure in Lagos, at the first National Risk Management conference, with the theme: “Our Ever-Changing Risk Context: New Channels, New Risks.”

Sanusi explained that AMCON, as an agency under the regulation of CBN, did not just purchase non-performing loans, but that it was a measure to fill in the hole that existed because of theft and recklessness in the financial system, leaving a negative networth in many financial institutions.

“The unique thing we did, in recognition of the hole that was created was to have a structure that prevented the loan taken by AMCON from being borne by government and taxpayers and agreed with the banking industry that they will put in the money over 10 years.

“Today, AMCON has bonds with a face value of N5.7 trillion, with CBN holding N3.6 trillion value. This was not the original intent, but also part of the risk management.

“Many banks that got early bonds, did so when interest rate was seven per cent and by the time we completed the capitalization of the other banks, interest rate has moved up with about 500 to 600 basis points. This would have been huge erosion of the capital of those banks and that would have just thrown these banks back to where they were.

“So, CBN swapped the AMCOM bonds for Open Market Operations bills and other instruments that will not carry those market risks and we had N3.6 trillion out of N5.7 trillion. AMCON is expected to pay back N1.7 trillion by December this year or at least refinance it and N4 trillion next year,” he said.

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