Nigeria: State firm buys $15 billion of Nigeria’s bad debt
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Nigeria: State firm buys $15 billion of Nigeria’s bad debt

All Nigerian banks to benefit; Banks contribute to sinking fund

Nigeria’s new bad bank announced last month that it would purchase non-performing loans from all local lenders and not just the nine banks that were rescued through a $4 billion government bailout last year.

The announcement follows the $14 billion listing of Dangote Cement at the end of October, which boosted the Nigerian equity market’s overall capitalization by a third. But bank share prices remained stable as investors appeared unsure how the state’s new bad bank, whose board was approved last month, would improve liquidity.

South Africa’s Standard Bank circulated a press release from the Asset Management Corporation of Nigeria (Amcon) in mid-November stating that Amcon’s board had approved the purchase of loans totalling more than N2.2 ­trillion ($14.7 billion), some $5 billion more than expected. Amcon, which will be headed by former Goldman Sachs banker Mustafa Chike-Obi, aims to complete the transactions by December 30.

The release further stated that banks had agreed to contribute to a sinking fund. This aims to reduce the chances that a federal government guarantee would need to be accessed when Amcon’s work ended if the value of the bad debt were not recovered.

Samir Gadio, emerging market strategist at Standard Bank, says contributions to the fund will amount to 0.3%

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