Nigeria bad bank could soak up US$2,7 billion

CAPE TOWN – Nigeria’s central bank hopes legislation will be in place by the end of the year for an asset management firm which could absorb up to 400 billion naira (US$2,7 billion) in bad bank loans, its governor said on Wednesday.

Nigeria has injected about 600 billion naira into the banking system since mid-August, bailing out nine banks found to be so weakly capitalised that they posed a systemic risk to sub-Saharan Africa’s second biggest economy.The loans the banks had racked up included credit to speculators on a stock market which fell 60 per cent over the past year and unsecured financing to fuel importers who saw oil prices halve over the same period.Lamido Sanusi has made stabilising the banking system his top priority since assuming office in June.’We do hope to take off some of the assets where liquidity is tied up … and also give banks a chance for self capital recovery through appropriate pricing of those assets,’ Sanusi told Reuters.’Right now we are looking at anything from 350 to 400 billion naira and that would be roughly the amount of money injected into the system,’ he said on the sidelines of a Standard Bank Africa Forum conference in Cape Town.Sanusi also said talks with investors about recapitalising some of the rescued banks would start in the coming weeks.The creation of an asset management company to soak up banks’ bad debts has been on the cards in Nigeria since financial sector reforms four years ago, but legislation to create such a vehicle has so far not been passed.’We are working on the bill and we hope to have a draft ready by the end of this week,’ Sanusi said.’Then depending on when the Attorney General pushes it through to the president and how fast we can get the national assembly to pass it, in our mind we would like to get this in place before the end of the year,’ he said.Nigeria’s parliament, not renowned for its speed, is already debating bills including restructuring the mainstay oil sector and electoral reforms, and with the end-of-year holiday only weeks away some analysts say Sanusi is being optimistic.- Nampa-Reuters