Big profit: Increase banks levy to AMCON – Akabueze

The Director General of the Budget Office of the Federation, Ben Akabueze has  suggested that the Asset Management Corporation of Nigeria (AMCON) should increase the amount of statutory contribution made by banks. He made the call as a guest on Arise TV yesterday. Banks are required to contribute an equivalent of 0.5% of their total […]

The Director General of the Budget Office of the Federation, Ben Akabueze has  suggested that the Asset Management Corporation of Nigeria (AMCON) should increase the amount of statutory contribution made by banks.

He made the call as a guest on Arise TV yesterday.

Banks are required to contribute an equivalent of 0.5% of their total assets plus 0.5% of all contingent assets as of the preceding year-end to AMCON sinking fund with reports suggesting  that only N1.6 trillion has been recovered between 2017 and 2021, out of over N5 trillion in toxic assets.

Akabueze said: “Banks that are making mouth-watering profits nowadays should be made to contribute more significantly to working down these assets. It does not look equitable that the banks will dump their toxic assets on AMCON which will now become a public burden and now they are declaring great profits and declaring dividends for their shareholders.”

The DG who responded to claims that AMCON toxic assets are not reduced efficiently after several years of being set up said,  “There are debates and discussions over whether AMCON overpaid for the assets or not given how toxic they were.

“Yes, this is a matter of serious concern to us on the fiscal side, because if AMCON does not work down these assets and pay down the amount that was invested in securing the assets that burden will eventually devolve on the treasury and become part of the national debt that all of us have to pay.”

He expressed concern over the model put in place by the act setting up AMCON that requires banks to set aside funds to repay the loans. 

“By the design, the resources to work down the obligations would partly come from contributions from the bank and I think that AMCON should at this point consider raising the level of the contributions that the banks make, even on a risk asset-weighted basis, so that banks that contributed significantly to the pool of assets….” 

Banks were initially mandated to contribute 0.3% of total assets to the sinking fund. This was further increased to 0.5% of total assets in 2013 (and 0.33% of contingent liabilities).