Project Abstract

Abstract
Asset Management Company of Nigeria (AMCON) was established to effectively manage and resolve non-performing loans in the Nigerian banking sector. This research project aims to evaluate the effectiveness of AMCON as a debt resolution tool in Nigeria's banking sector. The study employs a mixed-method approach, combining quantitative analysis of financial data and qualitative assessment through interviews with key stakeholders in the banking industry. The research findings suggest that AMCON has played a significant role in resolving non-performing loans in the Nigerian banking sector. Through the acquisition of non-performing assets from banks at a discounted value, AMCON has been able to clean up banks' balance sheets and improve their financial stability. This, in turn, has restored confidence in the banking sector and enhanced overall economic stability. Furthermore, the study reveals that AMCON's debt resolution strategies, such as debt restructuring, asset recovery, and loan restructuring, have been instrumental in reducing the burden of non-performing loans on banks. By working closely with banks and debtors, AMCON has been able to negotiate favorable terms for debt repayment, thereby facilitating the recovery of debts that were previously considered irrecoverable. Moreover, the research highlights the challenges faced by AMCON in its debt resolution efforts, including legal bottlenecks, valuation issues, and lack of cooperation from debtors. These challenges have posed obstacles to AMCON's efficiency in resolving non-performing loans within the stipulated timeframes. However, the study recommends that AMCON streamline its debt recovery processes, enhance collaboration with stakeholders, and leverage technology to improve its debt resolution outcomes. In conclusion, the research underscores the importance of AMCON as a debt resolution tool in the Nigerian banking sector. Despite facing challenges, AMCON has been effective in managing non-performing loans and enhancing the overall financial stability of banks. By implementing the recommended strategies, AMCON can further strengthen its role in resolving debts and contribute to the long-term sustainability of the Nigerian banking sector.

Project Overview

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Asset Management Company of Nigeria is one of the birth institution set up in the wake of financial crisis in the banking sector. Asset Management Company was set up on 19 July, 2010 and imposed with the responsibilities; of taking over non-performing loans which constitute a huge debt burden for the ailing banks. Consequently, the company has acquired non-performing risk assets of ailing banks amounting to about N2.8 trillion, which has further enhanced the banks liquidity, profitability, capital adequacy as well as their safety and soundness (Egwuatu, 2011). It is also worthy of note that this action saved the nation of N2 trillion (Sanni, 2011).  The companys functions also included Assisting banks dispose of  Assets in accordance with the provisions of the Act; They are to Hold, manage, realize and dispose of Eligible Bank Assets and collect the interest, principal and capital due and the taking over of collateral securing such assets. The company is also to ensure that financial returns on eligible assets are obtained in line with the provision of the act and carry out other functions relating to the management and collections of eligible bank asset. The study seeks to proffer an appraisal of the effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector.

1.2 STATEMENT OF THE PROBLEM

The function of AMCON was to serve as a special purpose crisis-resolution institution in the Nigerian banking sector. However, the company is faced with some challenges which includes political interference as a result of the non- consistency of tenureship of the governor of the central bank, policy changes and moral declination on the part of the financial institution who have better knowledge of the non- performing loans profiles, the lack of adequate funding is affecting the operations of the company in its effort to tackle non- performing loans in the economy. The issue of corruption involving high network individuals in government is also constituting a challenge to the effort of the company as governments transferred large amount of loans that had initially been extended by the originating banks based on political connections and/or fraudulent assets to the AMCs which are difficult to be resolved or to be sold off .The problem confronting the study is to appraise the effectiveness of asset management company as a debt resolution tool in Nigeria banking sector.

1.3 OBJECTIVES OF THE STUDY

The Main Objective of the study is to proffer an appraisal of the effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector; The specific objectives include:

    i.       To determine the nature and purpose of Asset management company of Nigeria.

 

  ii.       To appraise the level of bank non-performing loan profile in Nigeria.

 

 iii.       To investigate the effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector.

1.4 RESEARCH QUESTIONS

    i.       What is the nature and purpose of Asset Management Company of Nigeria?

  ii.       What is the level of bank non-performing loan profile in Nigeria?

 iii.       What is the effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector?

1.5 STATEMENT OF THE HYPOTHESES

The statement of the hypotheses for the study is stated in Null as follows:

H01: The level of the level of bank non-performing loan profile in Nigeria is low.

H02:  The effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector is low.

1.6 SIGNIFICANCE OF THE STUDY

The study seeks to promote accountability, transparency and prudence in the financial services sector in Nigeria. The effectiveness of the Asset management company of Nigeria would be enhanced if all stakeholders involving the banks, individuals and firms are committed to the course of a debt free economy that will promote the wellbeing and economic growth of the nation.

1.7 SCOPE OF THE STUDY

The study focuses on the appraisal of effectiveness of asset Management Company as a debt resolution tool in Nigeria banking sector.

1.8 LIMITATION OF THE STUDY

The study was confronted with logistics and geographical factors.

1.9 DEFINITION OF TERMS

NON-PERFORMING LOANS DEFINED

A non-performing loan constitute those loans considered as default for which neither the interest not capital has been paid within a period of 90 days.

SECURITISATION DEFINED

This is the process of redefining and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors.

CORPORATE GOVERNANCE DEFINED

Corporate governance is viewed as “the set of rules that influence expectations about the use of control over resources of a firm.

ACCOUNTABILITY DEFINED

This is the act of being answerable and liable to an obligation.