The Asset Management Corporation of Nigeria (AMCON) has announced its 2023 full-year results, reporting a profit of N108.4 billion, a significant increase from N34.7 billion in 2022.
This profit surge was largely driven by a substantial reduction in operating expenses, which dropped from N138.6 billion to N44.9 billion.
However, AMCON remains heavily dependent on income from the Banking Sector Resolution Cost Trust Fund, an annual contribution from commercial banks, which brought in N366.9 billion for the year. Nigerian banks are required to contribute 0.5% of their total assets annually to this fund.
Despite the improvement in profitability, AMCON still faces a daunting challenge with N4.6 trillion in negative shareholders’ equity, indicating it continues to be technically insolvent.
Key Income Highlights
- Net Interest Loss: N265.9 billion vs N217.2 billion (+22.4%)
- Credit Loss (Expense)/Reversal on Financial Assets: -N81.0 billion vs N119.2 billion (-168.0%)
- Net Operating Profit: N153.4 billion vs N174.1 billion (-11.9%)
- Income from the Banking Sector Resolution Cost Trust Fund: N367.0 billion vs N410.2 billion (-10.5%)
- Personnel Expenses: -N14.2 billion vs -N34.1 billion (-58.3%)
- Other Operating Expenses: -N29.6 billion vs -N93.4 billion (-68.3%)
- Profit for the year: N108.4 billion vs N34.7 billion (+212.3%AMCON
What AMCON is saying
AMCON acquired Eligible Bank Assets (EBAs) of various Eligible Financial Institutions when it came into being in 2010.
According to the corporation, it recorded growth in fair valuation gains on Eligible Bank Assets (EBAs) from a loss of N187.9 billion in 2022 to N40.9 billion in 2023.
It also stated that Its total liabilities dropped from N6.282 trillion in 2022 to N5.739 trillion in 2023 due to repayments of N500 billion Central Bank of Nigeria loan.
- AMCON also stated that it also achieved “89% of its revenue budget, with recovery of N125.2 billion comprising N81.65 billion from collections from obligors, N17.8 billion, share sales, N15.5 billion reinvestment income, N6 billion proceed from property sale, N3.8 billion dividend income and N0.5 billion from rental income.”
AMCON also stated that its “equity portfolio recorded 82% in 2023 to N43 billion against N7.9 billion in 2022.”
Shareholder Funds wiped out
Despite the rise in profits, AMCON still faces a negative shareholders fund as a result of years of losses which has accumulated to about N4.6 trillion.
The company is able to remain afloat with the held of creditors which it owes about N4.4 trillion down from N4.9 trillion a year earlier.
The Central Bank of Nigeria is one of AMCON’s majority creditor and has been the lifeline of the corporation for years.
Just last December, the Chairman Senate Committee on Banking, Insurance and other Financial Institutions frowned at the huge interest rates that AMCON pays to the Central Bank of Nigeria (CBN) stating if that is allowed to continue would practically make it impossible for the much-touted AMCON sunset to be realised.
- According to the chairman of the committee, Senator Adetokunbo Abiru, AMCON interest payment of 6% to the CBN ‘was not a healthy practice” considering that AMCON’s current exposure stands at about N4.7trillion.
- AMCON currently has a total asset of about N1 trillion suggesting most of the assets carried over since it was established over 15 years ago are now worth way less than its debts.
- For example, the company reported that the book value of its investment properties have gone from N87 billion to N53.7 billion.Bulk of its assets are in financial assets held at about N740 billion.
When AMCON was setup in 2010 it purchased 12,743 NPLs or EBAs worth N3.797 trillion from 22 Eligible Financial Institutions (EFIs) for a purchase price of N1.8 trillion. The purchased loans were covered by various collaterals some of which AMCON had to fight in court with obligors.
AMCON Struggles
Despite taking over bad loans, AMCON said it has injected a total sum of N2.2 trillion into ten Banks – Bridged and Owned Banks (intervened banks) – bringing Net Book Value (NAV) to Zero.
- According to the corporation, the N2.2trillion “was not backed by any collateral, which made recovery extremely difficult” despite capitalizing three failed banks and providing financial accommodation to five others.
- At a Senate hearing last December, former AMCON former Managing Director/Chief Executive Officer, Mr Ahmed Lawan Kuru, stated that the Corporation was grappling with the N4.65 trillion debt to the CBN which is due this year.
- He stated that AMCON was expected to cover 30% of this debt, with the remainder funded by the Banking Sector Resolution Cost Fund (BSRCF).
- To fund this debt they had assumed that 20% annual growth in the banking sector and 0.5% asset contributions from banks, both of which did not materialize. Instead, banking sector assets grew at just 8.4% annually from 2013 to 2017, and contributions to the BSRCF fell short by N0.32 trillion, totaling N1.13 trillion against the expected N1.45 trillion.
- Recovery rates were also lower than expected, with recapitalized and intervened banks yielding only 23% and 10%, respectively. AMCON bonds refinanced at 6% by the CBN further strained finances.
The shortfall is projected to reach N1.7 trillion by 2024, undermining the Sinking Fund’s role in covering 70% of AMCON’s obligations. Kuru then urged the Senate to engage with the judiciary, CBN, and the Finance Ministry to address these challenges and support AMCON’s debt repayment efforts.
New AMCON MD/CEO Mr Gbenga Alade, along with Mr Adeshola Lamidi, the Executive Director, Resolution/Enforcement recently paid a business visit to the Honourable Minister in Abuja where this matter have been been discussed.