The Central Bank of Nigeria (CBN) last week deducted from banks N111 billion as contributions to the Sinking Fund of the Asset Management Corporation of Nigeria (AMCON).
Known as the Resolution Cost Fund, the sinking fund was set up to assist AMCON to meet its goals and also ensure that government will not bear the cost of financial crisis in future. Each bank is required to contribute 0.5 percent of total assets and 0.5 percent of 33 percent of their off balance sheet items to the sinking fund.
Vanguard investigations revealed that the N111 billion represents the banks contribution to the Fund for the year and was based on the financial accounts of the banks as at December 31st 2013. The amount deducted represents about one-third of the N354.7 billion recorded as profit before tax by the top five top banks in 2013.
Investigation further revealed that the withdrawal of the N111, coupled with the withdrawal of N115 billion by the Nigeria National Petroleum Corporation (NNPC) from the banks, caused the volume of idle cash (excess liquidity) in the interbank money market to fall by 36 percent. Investigation revealed that market liquidity fell to N359.65 billion on Friday from N569.6 billion at the beginning of the week.
It will be recalled that shareholders have severely condemned banks’ contribution to the AMCON Sinking Fund. Speaking at the 2013 annual general meeting of Diamond Bank, Sir Sunny Nwosu, National Coordinator Independent Shareholders Association of Nigeria, described the contribution as a waste of shareholders money.
He said, “The question here is of what benefit is AMCON? AMCON is robbing shareholders of benefits that ought to have come to the seed providers. So I want to know what benefit we are getting. Is it the benefit of the cheap assets they have taken from us or is it the continuous waste on that side”.
Similarly, Mr. Boniface Okezie, President of the Progressive Shareholders Association of Nigeria, criticised banks’ contributions to AMCON. He said AMCON is not a friend of shareholders, and if it cannot survive without collecting money from banks, it better wind up. AMCON should not be taking from us. I don’t see what they are doing.
In his response, Managing Director/ Chief Executive of Diamond Bank, Mr. Alex Otti, said he agreed with the views expressed by the shareholders on banks’ contributions to the AMCON sinking fund.