Nigeria’s central bank has set up a technical team to value bad bank loans that will be purchased by the OPEC member’s new asset management company, the regulator’s governor said on Friday.
The central bank and finance ministry are making final preparations for the creation of the asset management company (AMC), which will buy up non-performing loans in exchange for government bonds in order to free up banks’ balance sheets.
The House of Representatives signed a harmonised bill on Thursday, while the Senate is expected to vote on the legislation when it resumes work on June 22.
“The central bank and the finance ministry have already set up technical teams that are doing implementation,” Central Bank Governor Lamido Sanusi told The Tide source.
“We are looking at the toxic assets, we are looking at the value of the collateral, we are working on valuation models.”
With bad loans off banks’ books, the regulator hopes financial institutions will resume lending in sub-Saharan Africa’s second-biggest economy, where credit has been tight since last year’s $4 billion bail-out of nine weak lenders.
“We will have a return to credit growth. It will be gradual but this time it is hopefully going to be sustainable,” Sanusi said.
The central bank wants new investors to recapitalise the rescued lenders but they are unlikely to do so until after the AMC purchases the bad loans.
“By the time we have done the M & A (mergers and acquisitions), taken off the toxic assets and gone through a recapitalisation process, the supply side of credit will improve,” he said.