Home / Banking and finance / EFFECTIVENESS OF ASSET MANAGEMENT COMPANY OF NIGERIA AS A DEBT RESOLUTION TOOL IN NIGERIA BANKING SECTOR

EFFECTIVENESS OF ASSET MANAGEMENT COMPANY OF NIGERIA AS A DEBT RESOLUTION TOOL IN NIGERIA BANKING SECTOR

 

Table Of Contents


<p> </p><p>Title page &nbsp; — &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – i &nbsp; &nbsp; </p><p>Declaration — &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -ii</p><p>Approval page — &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -iii</p><p>Dedication — &nbsp; &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -iv</p><p>Acknowledgement — &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -v &nbsp; &nbsp; </p><p>Table of content &nbsp; — &nbsp; &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -vi &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Abstract — &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; – &nbsp; &nbsp; &nbsp; -vii</p> <br><p></p>

Project Abstract

Abstract
This research project focuses on evaluating the effectiveness of the Asset Management Company of Nigeria (AMCON) as a debt resolution tool in the Nigerian banking sector. Nigeria has faced challenges with non-performing loans (NPLs) in its banking industry, leading to financial instability and hindering economic growth. AMCON was established in 2010 to address the issue of toxic assets in the banking sector by acquiring non-performing loans from banks and recovering them through various resolution strategies. The study utilizes a mixed-methods approach, combining quantitative analysis of financial data with qualitative assessment of AMCON's debt resolution processes. Financial data from AMCON's annual reports and the Central Bank of Nigeria will be analyzed to assess the impact of AMCON's interventions on reducing NPLs in the banking sector. In addition, interviews with key stakeholders, including officials from AMCON, banks, regulatory authorities, and borrowers, will provide insights into the challenges and successes of AMCON's debt recovery efforts. The research aims to evaluate the effectiveness of AMCON in resolving non-performing loans in the Nigerian banking sector and its overall impact on financial stability. By analyzing the trends in NPL ratios before and after AMCON's interventions, the study seeks to determine the extent to which AMCON has been successful in reducing toxic assets in the banking system. Furthermore, the qualitative assessment will shed light on the operational strategies employed by AMCON and the challenges faced in recovering debts from defaulting borrowers. The findings of this research will contribute to the existing literature on debt resolution mechanisms in emerging economies, particularly in the context of the Nigerian banking sector. The study will provide insights for policymakers, regulators, and financial institutions on the effectiveness of asset management companies like AMCON in addressing NPLs and promoting a healthier banking environment. Recommendations based on the research findings will be proposed to enhance AMCON's debt recovery processes and strengthen the overall resilience 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 β€œthe 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.


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