* AMCON loss signals wake-up for banks, government
* Analysts question impact of loss on bond refinancing next
* AMCON loss underpins banking sector recovery
By Chijioke Ohuocha
LAGOS, Dec 14 Nigeria's state-backed "bad bank"
AMCON reported a 2.37 trillion naira ($15 billion) loss on
Friday, exposing the scale of financial devastation wrought by a
2009 banking crisis to be deeper than first thought.
The surprisingly large loss also raised questions about how
AMCON will refinance a 1.7 trillion naira zero-coupon bond at
the end of 2013, and may have implications for the Nigeria's
The after-tax loss - which AMCON officials revealed at a
news conference - comes in the first accounts to be published by
the bad bank since it was set up in 2010 to absorb the debts of
banks hamstrung in a crisis caused by over exposure to a weak
oil and local stock market in 2008-09.
The crisis nearly sank nine lenders until the central bank
intervened with a $4 billion bail out fund to keep them afloat.
The loss was a "wake-up call" that the banking sector's
problems will not be resolved as easily as first thought and
that banks may end up paying a higher contribution towards its
resolution, said Razia Khan, head of Africa research at Standard
"The non-performing loans that we bought were four times
larger ... which shows you that what was disclosed as NPLs
(non-performing loans) on the books of the banks were (below)
what we found when they started selling to us," said AMCON
Executive Director of Finance Mofoluke Dosumu.
"We bought four times what we initially envisaged."
Analysts questioned how AMCON's losses would impact its
ability to repay a total of 4.5 trillion naira government-backed
bonds used to clean up the banking sector if the value of the
assets it hold continued to erode and whether the sinking fund
will be sufficient in the short-term.
ASSET VALUES KEY
The banking sector has recovered sharply after the crisis
with strong earnings drawing investors back to Nigerian shares
following several years of turbulence in the local stock market
that wiped 60 percent off their value in 2008.
The index of Nigeria's top ten banks has gained
17.5 percent so far this year to recover from a loss of 32
percent in 2011. The main-share index is up 33
The loss figure, which was quoted as of December 2011, just
reflected write downs of debts taken on at the time and equals
half of Nigeria's annual budget.
"The 4.5 trillion naira bonds equal about 11 percent of GDP
... if AMCON can't repay them, the government will have to. That
would have a huge impact on the government's balance sheet,"
said Leon Myburgh sub-Saharan Africa strategist at Citi.
But others say the loss may be ring-fenced and AMCON may
raise other revenues.
"It's a one off loss. My understanding is that they don't
have to finance it," said Standard Bank's Samir Gadio.
"Effectively, they've just marked to market their losses at
the time and we all know they acquired a lot of NPLs."
AMCON said it had recovered 85 billion naira worth of bad
loans and it expected to make more recoveries.
Chief executive Mustapha Chike-Obi, said he was confident
the "bad bank" will be able to refinance its bonds at maturity
next year and it could also choose to retire them using the
proceeds of its sinking fund.
Chike-Obi said that Nigerian banks had agreed to increase
their collective contributions to a post-crisis "sinking fund"
used to refinance the bank's bad debts to 100 billion naira, up
from the 60 billion naira they had already put in.
It also expects to conclude the privatisation of three banks
it nationalised after the crisis, by mid-2014, which would bring
in some money, Chike-Obi said.