By PETER EGWUATU
The Asset Management Corporation of Nigeria, AMCON may have begun to offload some of the shares it acquired from the non-performing loans of banks and other companies as the value of shares listed on the Nigerian stock market have rebounded to the level of 160.2 per cent or N8.5 trillion in five years.
Specifically, the market capitalisation of the Nigerian Stock Exchange, NSE which represents the total value of shares listed on the exchange rose from N5.3 trillion in 2009 to close last week Thursday at N13.8 trillion.
This shows that many companies whose share prices crashed to the lowest in 2009 have climbed up tremendously. In the same vein, another stock market gauge, the All-Share Index , which reflects the price movement of shares rose by 84.9 per cent or 19,178 points from 22, 589 points in 2009 to close last week Thursday at 41,767 points.
AMCON spokesperson, Mr. Kayode Lambo, confirmed the upsurge in the share prices of listed stocks on the NSE to Vanguard, saying: “Yes, we know that the stock market has started bouncing back, so the shares that AMCON acquired by way of buying non-performing loans are being sold or will be sold. AMCON is holding shares in a lot of quoted companies.
The shares were used as collateral for the non-performing loans that AMCON was mandated to purchase and resolve. The shares came to AMCON’s possession as a result of settlements /resolutions.”
When asked the volume of shares with AMCON, Lambo said: “We cannot get you the right figure now but remember that AMCON did not acquire all of them; some were given to AMCON in settlement of debt.”
Continuing, he said: “AMCON acquired non-performing loans, backed by shares of listed companies. The end process is that the corporation takes delivery of the non-performing loans, and the banks, instead of being stuck with illiquid, non-performing assets, have bonds that they will cash as they make new loans, and use the proceeds to fund the new loans.
They can create new portfolio of loans in line with CBN‘s prudential guidelines. And as they make loans, they will be able to fund them.”
On the issue of sinking fund, the spokesperson for AMCON, had reassured banks under its debt recovery administration that contributions to the sinking fund would not go beyond the repayment period of their loans.
Some shareholders have repeatedly claimed that commercial banks’ contributions to the sinking fund had eroded their dividend. The sinking fund was set up to assist AMCON meet its goals and also ensure that government will not bear the cost of financial crisis.
Under the sinking fund arrangement, each bank contributes 0.5 per cent of its total asset and another 0.5 per cent of 33 per cent of their off balance sheet items to the sinking fund.
Mr. Lambo said that banks would not contribute to the sinking fund beyond the 10 years when AMCON assignment would have been completed. He said that the loan (bond) was used to rescue the banks during the financial crisis that affected the financial industry in 2008.
“Contributing to the sinking fund stops immediately the loans are paid back. “The plan is that in 10 years, we believe that everything would have been resolved,” said Lambo. He said that AMCON had already retired N1 trillion in 2013 out of the N3.8 trillion it owed, while it expected to redeem N800 billion in 2014.
On the divestment from the bridge banks, Lambo said that the corporation decided to start with Enterprise Bank and Mainstreet Bank, stressing that Keystone would be sold last.
Reacting on the sale of some shares of AMCON, the Chairman, Progressive Shareholders Association of Nigeria, PSAN, Mr. Boniface Okezie, who spoke the minds of his the group said: “There is need for the corporation to be transparent in its dealings.
This is because the corporation is being run by tax payers’ money. In the first place, if it is true that it has commenced the sale of those shares without the knowledge of the entire investing public, it is wrong.
There should be public notice if any share is to be offloaded by AMCON so that people who are interested in buying them will do so in a transparent manner.”
Continuing, he said: “I keep saying it, there should be accountability in whatever AMCON does especially with regards to acquisition and sale of shares, so that the entire public knows what they spend and realise in their operations.
Most times, it is the banks’ shareholders that bear the brunt of some of their activities such as the sinking fund and what have you. The shareholders are suffering from all those acquisitions they made in the past. It is illegality. Are the so called bridge banks not making it now?”
On the issue of the upsurge in the stock market, Okezie said: “Yes, the market is doing well, the issue is that the retail local investors are not taking opportunity because of the past when the market crashed. The upsurge in those shares is an indication that many of the companies quoted on the NSE are doing well.
So my advice to my fellow shareholders is to forget the past and invest more in the market so that we don’t allow the foreign investors to take all the gains and dictate the direction of the market for us. The market is not bad, even in the past.
The crash that we experienced was as a result of bad management of some companies. But, I still hope that the recent upsurge would be sustained if regulators and operators play the game very well to ensure that malpractices are checked.”
Reacting as well, the National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN, Mr. Oderinde Taiwo said: “First, AMCON operations and conducts are anti-investment since inception. Minority shareholders through various shareholders associations have in various fora criticized the activities of AMCON officials.
“To me, the sale of shares of some of these companies without public awareness is wrong. Even the issue of the nationalized banks is still not settled as cases still in court are unresolved. So if AMCON is selling some of those shares acquired as a result of bad debts, then it should be disclosed that certain volume of shares would be sold on the NSE.
Meanwhile, it will be difficult for AMCON to get foreign investors because of lack of respect for the rule of law. Also, the Federal Government should call AMCON to order.
On the assessment of the stock market, he said: “My assessment of the recent upsurge to over N13 trillion capitalisation is good for our market. I think it will be difficult to sustain this trend since we are approaching election period. However, aggressive education and regulation from the regulators are needed.
Also, stakeholders’ positive contribution is also needed. Lastly, another hindering factor is the fact that 2015 is our election year and experience has shown that politicians do mop fund from all the sectors of the economy including the capital market.
The twin market indicators dipped marginally by 0.05 per cent (5 basis points) to both close on Wednesday last week at 41,789.56 and N13.80 trillion respectively.
Also, investment activity and levels plunged by 36.70 per cent and 49.58 per cent, respectively. Insurance and consumer good stocks were not spared as the NSE Insurance Index and NSE Consumer Good Index dipped by 0.17 per cent and 0.21 perv cent, respectively.
Meanwhile, further analysis of the market shows that the market experienced significant sell-offs in most high cap stocks on Wednesday last week, led by Seplat Petroleum, Nestle and Nigerian Breweries Plc which shed 2.16 per cent, 0.36 per cent and 0.28 per cent, respectively. Also, the market breadth tilted in favour of 26 losers to 18 gainers.
“Barring significant gains by the blue chip stocks, we expect the prevailing market posture to continue due to investors’ current apathy to the market, analysts opined.
According to them: “Whilst we await inflows in form of Federal Account Allocation funds (FAA), rates are expected to take a cue from the marginal rates.
The bond market was bullish across most of the traded maturities. The biggest loser in yield terms was the June 2019 series, shedding about 20 points on the day. We expect demand to persist as both local and offshore interests keep bond prices elevated for the rest of the week.