The
Asset Management Corporation of Nigeria’s bonds acquired by the Central
Bank of Nigeria has raised the central bank’s liabilities from N2.1tn
in 2009 to N6.1tn in 2013, a new report released by Afrinvest has
revealed.
The 2014 Banking Sector report, which was
released in Lagos Tuesday, disclosed that the development had made over
40 per cent of the CBN’s asset portfolio ‘unmarketable.
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The report read in part, “Our review of
the CBN’s balance sheet as of November 2013 raises crucial questions
that require urgent attention. The CBN’s proactive response to the
2008/2009 banking crisis was arguably the right move although this has,
in itself, magnified CBN’s level of indebtedness. Over 40 per cent of
CBN’s asset portfolio is unmarketable, comprising principally of AMCON
bonds, intervention funds and development finance loans.
“These are long term investments without a
discernible exit time frame other than the eventual performance of the
loan portfolio. For instance, the 190.5 per cent surge in other
liabilities from N2.1tn in December 2009 to N6.1tn in November 2013,
traceable to the acquisition of AMCON’s debt by the CBN, is alarming.”
The report noted that in the event of
another crisis in the banking sector, the CBN might not have the
capacity to bail out the banks without avoiding the option of printing
money.
Afrinvest, however, noted that the option to print money might have significant consequences on price stability.
Consequently, it stated the CBN might be
forced to raise the AMCON levy on banks from the current 0.5 per cent to
include an additional 0.5 per cent of their off-balance sheet items in
coming years.
The report added, “This will exert
further pressure on industry bottom lines as AMCON’s fee as a proportion
of total OPEX has risen from 4.6 per cent in the financial year 2012 to
7.6 per cent in the financial year 2013 and is expected to cross the 10
per cent threshold in financial year 2014.”
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