…AMCON Levy Accounts For 18% Of Combined Operational Expenses
…Concerns Mount Over Rising Financial Burden On Banks
…AMCON Has Outlived Its Usefulness, Says Okezie
Five major publicly-listed Nigerian banks, including Access Holdings Plc, Zenith Bank Plc, FBN Holdings Plc, Guaranty Trust Holding Company Plc (GTCO), and Stanbic IBTC Holdings Plc, collectively paid N346.37bn as banking sector resolution costs to the Asset Management Corporation of Nigeria (AMCON) in the first nine months of 2024.
This represents a staggering 58.93 per cent increase from the N217.87bn paid during the same period in 2023, according to unaudited financial reports compiled by NewsNGR.
The levy accounted for 17.99 per cent of the combined operational expenses of the banks, which totalled N1.925trn during the period.
The banking sector resolution cost, known as the AMCON levy, is mandated under the AMCON Act of 2015. It is calculated as 0.5 per cent of a bank’s total assets and off-balance sheet items.
The levy serves as a critical funding source for AMCON, established in 2010 to stabilize Nigeria’s banking sector by resolving non-performing loan (NPL) portfolios and preventing systemic collapse.
Initially set at 0.3 per cent of total assets, the levy was increased to 0.5 per cent in 2013, alongside a 0.3 per cent charge on contingent liabilities.
AMCON’s funding is further supplemented by loan recoveries, contributions from the Central Bank of Nigeria (CBN), sales of pledged assets, and the sinking fund contributed by commercial banks.
The breakdown of the reports compiled by NewsNGR showed that Access Holdings paid the highest amount of N112.22bn to AMCON in the third quarter. This is a 63 per cent increase from the N68.805bn reported in 2023.
This is followed by Zenith Bank, which paid N92.201bn to AMCON in the review period representing 60.66 per cent growth from N57.39bn declared in 2023.
FBN Holdings paid N78.796bn in the third quarter of 2024 from N48.86bn in the comparable period of 2023, representing a growth of 61.26 per cent.
Similarly, GTCO reported an N36.66bn payment to AMCON in the nine months, a 33.62 per cent increase from N27.43bn posted in 2023 while Stanbic IBTC trailed with a payment of N26.28bn in the reviewed period from N15.39bn in 2023, accounting for 70.88 per cent growth.
The rising AMCON levies have sparked concerns among shareholders and financial analysts about their impact on banks’ profitability and ability to reinvest in growth.
National Coordinator of the Progressive Shareholders Association of Nigeria, Boniface Okezie criticized the continued imposition of the levy.
“AMCON has outlived its usefulness and is becoming a financial burden on well-performing banks. These funds could be better utilized for operational investments or returned to shareholders as dividends,” he said.
Okezie also highlighted the inequality of the levy, noting that many of the toxic assets managed by AMCON were not created by the banks currently contributing to the fund.
“There needs to be a critical review of these contributions. Either the payments are reduced, or they are halted entirely,” he added.
Okezie argued that AMCON has largely achieved its initial purpose of rescuing distressed banks and managing bad debts, hence there is no longer a need for such significant contributions.
According to him, these funds could instead be reinvested into the banks’ operations or distributed to shareholders as dividends.
“I think AMCON has outlived its purposefulness and needs to stop existing because they are not helping the growth of the banks”.
Furthermore, he said that shareholders feel that the payments are an unfair burden on well-performing banks, especially given that the majority of the toxic assets handled by AMCON were not created by the banks currently contributing to the fund.
There has to be a critical review of the structure and necessity of these contributions, either there has to be a reduction or complete halt of these payments”, Okezie stated.
Also, the National Coordinator, Independent Shareholders Association of Nigeria,
Mr Sunny Nwosu said that the shareholders were groaning under poor dividends and low capital appreciation while AMCON was collecting 0.5 per cent of the banks’ total assets annually.
He said that this had made most of the banks that contributed to AMCON unable to declare dividends during the period under review.
Nwosu also said that the banking sector was over-regulated and called for a review of the various policies introduced by the CBN in the interest of the economy.
In defence of the levy, AMCON had argued that its mandate remains critical to ensuring financial stability in Nigeria’s banking sector. The corporation has pointed to ongoing risks and the necessity of recovering outstanding bad debts as justification for continued contributions.
AMCON’s broader authority, granted under the 2019 amended Act, includes aggressively pursuing obligors and assisting financial institutions in disposing of bad assets. According to AMCON, discontinuing the levy prematurely could undermine these efforts and expose the sector to vulnerabilities.
The Corporation had been under pressure recently to recover the toxic loans inherited from banks that were liquidated estimated at over N5tn.
With the recovery of about N1.96tn, it means that the Corporation is still indebted with about N3tn.
Of the total recovery, cash represents 43 per cent (N842.8bn), the sale of bridged banks 13 per cent (N254.8bn) sale of proprietary shares 11 per cent (N215.6bn), clawback and repurchases nine per cent (N176.4) sale of property assets & rentals nine per cent (N176.4bn), investment income seven per cent(N137.2bn). In comparison, others represent about seven per cent (N137.2bn).
The nation’s banking sector ran into a financial crisis in 2008 and 2009 – a problem partly triggered by the global financial crisis.
AMCON’s seed investment was secured from the capital market through the Central Bank of Nigeria. Subsequently, its operations were funded with levies imposed on commercial banks.
Experts have said that with the performances of companies indebted to AMCON falling below par, even as they struggle to find their feet amid endless litigations, the corporation may lose some of the money spent repurchasing toxic assets from troubled banks and other entities.
This comes as the values of the companies taken over by the corporation have been eroded by challenges, ranging from poor management to a harsh economic environment.
According to experts, some of the companies have become a burden to AMCON with the possibility of turning them into profitable ventures becoming increasingly difficult.