Central Bank of Nigeria (CBN) is set to license, regulate and supervise the Private Asset Management Companies (PAMCs) with paid-up capital requirement of N10 billion as contained in the exposure draft released on Tuesday.
The PAMCs are expected to manage the risk assets of banking sector, which has worsened as a result of macro-economic challenges.
“Development in the Nigerian banking industry have necessitated the need for the licensing of PAMCs to play complimentary roles in the management of non-performing loans in the industry,” Kevin Amugo, director of financial policy and regulation stated in circular on Tuesday.
Specifically, the ratio of non-performing loans (NPLs) to gross loans deteriorated in the second half of 2016 by 2.3 and 8.7 percentage points to 14.0 per cent at end-December 2016 compared with the levels at end-June 2016 and end-December 2015, respectively. The deterioration in asset quality was largely attributed to the rising inflationary trend, negative GDP growth, and the depreciation of the naira, according to financial stability report of the CBN.
Licensed PAMCs are authorised to acquire eligible assets of deposit money banks and other financial institutions (OFIs). It can also hold, manage, realise and dispose of eligible assets acquired from banks, OFIs in accordance with guidelines issued by the CBN.
Licensed PAMCs are prohibited from provision of credit to customers, acceptance of deposit from customers, provision of guarantees for loans and obtaining loans from banks and OFIs among others.
According to the exposure draft, a promoter seeking to operate a PAMC shall pay a non-refundable application fee of N500,000 only payable to CBN and evidence of deposit of specified minimum paid-up capital requirement of N10 billion into the designated account with the CBN.
Analysts see the CBN’s decision to regulate private asset management companies as most welcome development. However, they are concerned about setting the minimum capital requirement at N10 billion or $31.250 million dollar.
Bolade Agbola, executive director, Cashcraft Asset Management Limited, said it is very outrageous and in conflict with the national desire to reduce barrier to doing business in Nigeria.
According to him, the minimum capital requirement is an excellent tool for encouraging people to pool talents and capital together to do business but it must be reasonable so that it does end up becoming a constraint to would be entrepreneurs to do business.
“The minimum capital requirement does not synchronize with that of capital market operators that perform similar functions such as broker dealer, Issuing house and fund managers with respective capital requirement of N300 million, N200 million and N150 million. CBN needs to carry along the capital markets community that had been carrying out private asset management function in Nigeria for ages,” Agbola said in an emailed response to BusinessDay.
HOPE MOSES-ASHIKE
