NDIC, CBN Move To Curtail Non-Performing Loans

By Ikenga Chronicles December 12, 2016
In a bid to acquire non-performing loans (NPLs) of banks, through the establishment of Asset Management Company (AMCON) a collaboration has been set put between the Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN) .
‎ This was made known by the Managing Director/Chief Executive, NDIC, Alhaji Umaru Ibrahim in Lagos while receiving the Committee on Insurance and Actuarial Matters of the House of Representatives on oversight tour of the corporation.
Chairman of the Committee, Hon. Olufemi Fakeye, urged the  NDIC to quickly move to curtail the rising incidence of non-performing loans (NPLs) in the banking industry in the interest of the economy.
The NDIC CEO in his response said steps are already being taken by the CBN and the Corporation to tackle the challenge of NPLs in the banking industry.
He said ” this includes the option of establishing another Asset Management Company similar to the Asset Management Corporation of Nigeria (AMCON), which would be private sector funded and driven.”
He added that it was part of the decisions taken during the last quarterly meeting with the CBN.
His words “The second important decision we took was to study the need to establish what you may call AMCON Two, that is the second round of AMCON, which would be driven by the private sector.”
“This is very important because we know what has happened. There are concerns about using taxpayers’ money to bailout institutions.”
“So, it is in line with global best practice that we go back to the drawing board because our initial concept of AMCON in the early 90s is that it was going to be a joint venture between the private and public sector investors, so as to minimise the risk of using taxpayers’ money to resolve the problem of buying and selling of bad loans.”
“So, we have established a joint committee that would look into this and we hope that in the long run, we should be able to establish a second AMCON that would be private sector driven.”
“Here, other investors can invest in it and if the CBN, NDIC or the Finance Minister can invest, so that going forward, buying and selling of bad loans would be under the control of that entity. That would pave way for the gradual transition or folding up of the present AMCON”
Ibrahim also disclosed that the CBN and NDIC have set up a joint committee on the emergence of unconventional financial products.
He said: “We decided it is time for us to critically study the emergence of some unconventional products that have become prevalent globally in the financial landscape which would radically affect the banking system. Here, I am talking about digital banking.”
“The emergence of Bitcoins, they are going to radically transform the banking space. and the entire financial system space. Bitcoins are used as payment instruments and you can’t trace those who transact in Bitcoins. “
“They buy and transact among themselves and in certain countries, Bitcoins are even converted in cash. Some big banks in the United States have developed their own Bitcoins. Now, this has compelled regulators over there to wake up.”
“These instruments are invisible, so how do you measure the amount of money in the market? When they now tell you about inflation, how do you now try to curtail the amount of money in circulation? So, it is a big wake up call for us in countries where these phenomenon is creeping in slowly.”
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