The issue of non-performing loans has been a source of worry for the Asset Management Corporation of Nigeria (AMCON) as the corporation has expressed concerns over the inability of deposit money banks to recover these debts.
According to the Managing Director of AMCON, Ahmed Kuru said the total debt owed the corporation was N4.5 trillion. He said this at an investiture of Governing Council/induction of members of the Chartered Institute of Loans and Risk Management of Nigeria.
The debt cannot be ignored: Karu said the debt was half of Nigeria’s annual budget and could be higher than the annual budget of countries like Rwanda and Kenya. Therefore, it could not be written off.
He blamed the banks for their poor risk assessment criteria as they continued to grant loans without assessing the risks associated with them. He said the corporation had made giant strides in recovering debts and driving down the ratio of chronic debtors to 5% ever since taking toxic assets from the banking sector.
“AMCON was created because of the crisis in the financial sector. We still have about N4.5 trillion debt uncollected and this is because some of our loans and risk management crisis were compromised. N4.5 trillion is higher than the budget of Rwanda, it is higher than the budget of Kenya. This induction of risk managers is a call to duty. Building up toxic assets is a combination of events. Let’s be above board and stand on professionalism and integrity.”
Harriet Akubuiro, President of the Governing Council of the institute, advocated for the importance of the country to take the issue of risk management very seriously. She said the institute would not relent in keeping the public abreast on the importance of sound risk management practices in Nigeria.
“Risk management concept is a new development in Nigeria, and we need to know how to manage risks. The world is evolving, and changes are happening every day. There is no business without risk and one of the objectives of the institute is to perform our advocacy role on financial matters regarding risk management in the economy.”
What this means: Non-performing loans are a burden for both lenders and borrowers. According to a Nairametrics report, NPLs reduce credit availability, distort the allocation of credit, negatively affect market confidence, and slow economic growth.