By Olisa Egbunike, News Agency of Nigeria

The Asset Management Corporation of Nigeria(AMCON) has now been operational in the country for about two years as one of the Federal Government’s decisive responses to the last global financial meltdown. By the expectations of the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) and the Federal Ministry of Finance in particular, AMCON held the prospects to redeem the nation’s troubled banking sector as well as restore confidence into the capital market.

By its enabling act, the state-owned AMCON is empowered to buy off banks’ bad debts, especially when they exceeded five percent of the banks’ “non-performing loans” or posed a serious risk to the banking system. In specific terms, all what banks with such loans needed to do was to seek permission from CBN to authorise AMCON to acquire their bad debts.

Financial analysts recall that between 2008 and 2009, the CBN came down hard on some banks that were debt ridden, sacking some of their chief executive officers and replacing them with interim management boards.

In the immediate aftermath of their sacking, AMCON had also rolled out bail packages for the troubled banks to the tune of N620 billion, while it bought over their bad debts in a two-phase purchase to the value of three trillion naira.

The underlying value of bad debts bought by AMCON in its two-phase purchases as at April 7, amounted to about three trillion naira, the company’s Executive Director, Foluke Dosumu had said AMCON’s bailout package was not a unique phenomenon peculiar to Nigeria alone as a developed economy like the U.S. for instance, bailed out its troubled financial institution during the meltdown in its economy with about N500 billion dollars. The U.S. Treasury Department also bought off as much as $1 trillion troubled mortgages and related assets from financial institutions.

Financial analysts, however, note that unlike the U.S. banking sector intervention which offered generous subsidies in the form of low-interest loans that persuaded investors to form partnerships with government in buying off the bad debts, Nigeria’s bailout efforts has somehow deepened the country’s economic woes.

They also note that it was just a fortnight ago that marked the second year of Nigeria’s bailout deal. In retrospect, however, it seems that investors’ woes have now been compounded by the latest nationalization of three out of the eight troubled banks.

The three nationalized banks are Afribank Plc (now renamed Mainstreet Bank Limited), Bank PHB Plc (now Keystone Bank Limited) and Spring Bank Plc (now Enterprise Bank Limited). Official statistics has indicated that shareholders in the affected banks lost about N591billion worth of shares in the crisis, while the Nigerian tax payers, represented by AMCON lost about N226 billion in its released bailout funds.

Dr Mustapha Chike-Obi, Managing Director of AMCON, sympathized with shareholders of the nationalized banks but stressed that his company was the bigger loser afterall. According to Chike-Obi, during a press conference, AMCON lost 80 per cent stake in Spring Bank, 47 per cent investment in Afribank, and 14 per cent equity interest in Bank PHB.

Notwithstanding the scary financial mishap, he said that AMCON had again committed about N678 billion as seed funds into the nationalized banks — Mainstreet Bank, Keystone and Enterprise Bank. Explaining the rationality of the financial move, Chike-Obi said that the option was most apt, to protect depositors’ money and save the jobs of workers of the nationalised banks.

He expatiated that government’s re-investments in the three banks after the revocation of their operating licenses averted “a national disaster”, while securing huge deposited funds and some 5,000 jobs. Chike-Obi expressed optimism that the newly appointed chief executive officers of the banks will successfully turn the banks around, so as to return tax payers’ money at the end of the day. The Federal Government in the same vein and for the first time since the nationalisation of the banks, ahead of the September 30 deadline, canvassed support towards the purchase of the rescued banks by AMCON.

The Office of the Attorney-General of the Federation (AGF) apparently cleared every doubt as to the Federal Government’s role in the nationalization process when it affirmed that the government gave its full legal backing to the entire process. “The AGF is aware that the Nigeria Deposit Insurance Corporation (NDIC) had composite consultation with the Central Bank of Nigeria (CBN), the Ministry of Finance and the Ministry of Justice, on these actions.

“The AGF also notes that the CBN, NDIC, AMCON acted in full appreciation of their functions and powers under the respective statutory mandates and in particular, the protection of depositors and the system,” Mr Ambrose Momoh, the Chief Press Secretary to the AGF said in a statement. Mr Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company was therefore convinced beyond all doubts that the Federal Government had given a legal seal to the nationalisation.

By implication, he added, shareholders havelost out in the national investment game of risk. Many shareholders, who are at the receiving end of the nationalization exercise, have not taken kindly to the government’s action, claiming that they had been short-changed.

The National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu said that his group was not surprised by the activities of AMCON. “We are not surprised. The actions of AMCON have vindicated us because ISAN had from the beginning stated that it (AMCON) was an instrument floated to appropriate private assets.”

He said that the nationalization of private assets portrayed the nation as an unfriendly investment destination and as one having an inconsistent economic policy. President Jonathan should declare an emergency in the nation’s banking industry to avert dire consequences on Nigeria’s economic and financial status.

“The revocation of the operating licenses of the three commercial banks undermines the nation’s economy.”

Also bemoaning the situation of the nationalized banks, the National Chairman, Progressive Shareholders of Nigeria (PSAN), Mr Boniface Okezie said that due process had not been followed before the nationalization. According to Okezie, shareholders will soon challenge government’s action in the court of law because it is an illegality.

A legal practitioner, Mr Kassim Shomoye, supports such a viewpoint, pointing out that the shareholders had all the right to challenge the government’s action. He stressed the critical roles shareholders played as drivers of economic growth of a country, which makes it imperative for them to be carried along in an emerging economy like Nigeria.

“Shareholders are the parliament of any company and must be carried along in the transformational agenda of government, especially in the on-going economic reforms. Consultation of shareholders in banking reforms does not undermine the powers of CBN to regulate national banking operations but the issue is that the CBN governor is overbearing.”

Also piqued by the nationalisation of the three banks, Afrinvest, an issuing house, expressed surprise that the CBN had not waited for the September deadline given the distressed banks to recapitalise before swinging into action.