Legislature Seeks CBN/NDIC Intervention On Non Performing Loans

 


Yemisi Izuora

The House of Representatives Committee on Insurance and Actuarial Matters has raised serious concerns over the economic implications of the country’s Non Performing Loans, NPLs.

The Committee said the situation is worrisome and required quick intervention of the Central Bank of Nigeria, CBN, and the Nigeria Deposit Insurance Corporation, NDIC.

Raising the issue during the committee’s oversight visit to the Corporation,  Chairman of the Committee, Hon. Olufemi  Fakeye, urged the NDIC to ensure that the rising incidence of NPLs in the banking industry do not pose a threat to the  economy.

The Managing Director/Chief Executive, NDIC, Alhaji Umaru Ibrahim in his response disclosed that the Corporation in concert with the CBN have raised a joint committee to consider the establishment of another Asset Management Company (AMCON2) to acquire NPLs of banks.

Ibrahim said that the CBN and the Corporation are already exploring how to tackle the challenge of NPLs in the banking industry adding that one of the options available includes the establishment of another Asset Management Company similar to  the  Asset Management Corporation of Nigeria (AMCON), which would be private sector  funded and driven.

That decision he said was part of considerations taken during the last quarterly meeting with the CBN.

According to him, The second important decision we took was to study the need to establish what you may call AMCON Two,   that is the second round of AMCON, which would be driven by the private sector. This is very important because we know what has happened.

There are concerns about using taxpayers’ money to bailout institutions. So, it is in line of the global best practice that we go back to the drawing board because our initial concept of AMCON in the early 90s is that it was going to be a joint venture between the private and public sector investors, so as to minimise the risk of using taxpayers’ money to resolve the problem of buying and selling of bad loans.

“So, we have established a joint committee that would look into this and we hope that in the long run, we should be able to establish a second AMCON that would be private sector driven. Here, other investors can invest in it and if the CBN, NDIC or the Finance Minister can invest, so that going forward, buying and selling of bad loans would be under the control of that entity.

That would pave way for the gradual transition or folding up of the present AMCON”

Ibrahim also disclosed that the CBN and NDIC have set up a joint committee to study emergence of unconventional financial products.

He said: “We decided it is time for us to critically study the emergence of some unconventional products that have become prevalent globally in the financial landscape which would radically affect the banking system. Here am talking about digital banking.

Bitcoins are used as payment instruments and you can’t trace those who transact in Bitcoins.

They buy and transact among themselves and in certain countries, Bitcoins are even converted in cash. Some big banks in the United States have developed their own Bitcoins. Now, this has compelled regulators over there to wake up.

“These instruments are invisible, so how do you measure the amount of money in the market? When they now tell you about inflation, how do you  try to curtail the amount of money in circulation? So, it is a big wake up call, for us in countries where these phenomenon is creeping in slowly.

So, they are new advanced Wonder Banks and for that reason, we have established a joint committee with the CBN to have a holistic study of this phenomenon.

So, I am happy to say we are thinking ahead and very soon there would be regulations, if not legal framework to manage this emerging instrument.”

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