2 June 2014

Nigeria: Sinking Fund - Banks Pay N119 Billion to Amcon

15 banks paid the sum of N118.93 billion to the Asset Management Corporation of Nigeria (AMCON) as sinking fund for the year 2013.

Known as the Resolution Cost Fund, the sinking fund was set up to assist the AMCON to meet its goals and also to ensure that government will not bear the cost of financial crisis in future.

Each bank is required to contribute 0.5 per cent of the total assets, which was increased from 0.3 per cent in 2013, and 0.5 per cent of 33.3 per cent of their off balance sheet assets to the sinking fund in line with existing guidelines.

A review of the financial statements of some banks for the year ended December 2013 showed that First Bank paid the N13.85 billion, UBA N9.67 billion, Guaranty Trust Bank N8.1 billion, Sterling Bank N3.11 billion and Zenith Bank N17.55 billion.

Also, Fidelity Bank contributed N4.4 billion, Diamond Bank N7.6 billion, Skye Bank N10.35 billion, Stanbic IBTC N3.82 billion and Access Bank N9.18 billion, while Ecobank, FCMB, Union Bank, Stanbic IBTC, Unity Bank and Wema Bank accounted for the balance.

The chief executive officer of the AMCON, Mr Mustafa Chike-Obi, recently said that the sinking funds, standing at about N500 billion is being kept with the Central Bank of Nigeria (CBN), saying that there is no possibility of investing the fund because it was established solely to pay down the AMCON bonds.

"Banks today are better off because of the AMCON even with this fee. It was important to ensure that the banks that created the problems solve them through their contributions to the sinking fund by giving them time to pay over a long period of time," he said.

According to Chike-Obi, as soon as the AMCON bonds are fully repaid, there will no longer be a sinking fund.

Many bank CEOs have expressed their fears on the implications of the increase in the AMCON's charges on banks. While shareholders of the banks have described the contribution has a waste of shareholders money, saying that the AMCON is robbing them of what should be paid to them as dividend.

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