At LEADERSHIP Twitter Spaces: AMCON Creates Moral Hazard For Banking Industry – Analysts

Analysts have said while bridge banks help to create stability in the banking industry whilst safeguarding depositors fund and jobs, it has created a moral hazard where borrowers are unwilling to pay off their debts.

Speaking during a Twitter Spaces dialogue on the topic: “Nigeria’s Bridge Banks Options and Systemic Crisis Prevention” hosted by LEADERSHIP, former presidential aspirant and economist, Dr Tope Fasua as well as lecturer at the Lagos Business School, Professor Adi Bongo, stressed the need to address the moral hazard created in the banking industry by the bad bank.

This is following the sale of Polaris Bank, one of the bridge banks last week to Strategic Capital Investment Limited (SCIL) for N50 billion, instead of N25 billion required of a fresh banking license. Fasua speaking on the moral hazard created by AMCON said “I don’t support bad banks. AMCON was created in 2010 and they were supposed to last for 10 years with the sunset clause and they are still around.

“Some economists are recommending that we should create AMCON 2 and it seems the banks are already raking up some bad loans which they are ready to throw in the mix so that Nigerian taxpayers will pick up the bills. Some of the very rampant and very bad borrowers brag about it. At some point in time, it became a case of if your name is not on AMCON list it means you are not rich enough.

“Customers will deliberately mismanage their loans and say take it to AMCON. Out of the N6 trillion that was taken to AMCON only N1 trillion plus has been recovered and not all of that is in cash, some are assets. AMCON MD had said there are about 350 people sitting on about N4 trillion and they move around in private jets as though they are not owing.

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“The whole idea of a bad bank is to set things straight and ensure that people do the right thing but in Nigeria I am not sure that is the case. People see it as an escape route to do what they want to do and frustrate the life of managers of AMCON which in itself should have been wound down.

The Judiciary is also not helping maters, many of the cases that have been taken to court have been compromised and many of these borrowers are still doing business with government.