Business
Stock Market Recovery Hinges On AMCO’s Establishment
The attainment of a sustained recovery of the nation’s stock market is due largely to the establishment of Asset Management Company (AMCO).
This was the position of stock market analysts at an Executive Breakfast Meeting at the Lagos Business School, a monthly forum organised by Bismarck Revane, Chief Executive, Financial Derivatives Company Limited.
The analysts expressed optimism that the Act which has been with the executive arm of government for the past four years will be presented to the National Assembly before the end of this year. The forum said in its report that, “Without the Asset Management Company or the UK bad bank good bank model, we do not expect a sustained recovery in the stock market. The Asset Management Company will be presented to the National Assembly before the Christmas break”.
According to them, the asset management firm, which is to absorb most of the impaired assets in the banking system will help the credit squeeze and worsening liquidity conditions in the economy.
The AMCO bill is at present with the Ministry of Justice which has led to some bureaucratic bottlenecks consequently causing a delay in its getting to the National Assembly.
The forum described the AMCO as same as the United States Model with features such as assumption of toxic assets by Special Purpose Vehicle (SPV), only capital injection, risk of failure of toxic assets do not recover and the risk of erosion of brand value.
The UK model according to the forum’s report has the features of two new entities emerging – bad bank holding only toxic assets and good bank capital and liquidity injection to help the toxic band without jeopardising the franchise.
The benefit of the bill, they said hinges on the hope that a good proportion of banks’ non-performing loans (toxic assets) will be taken over by the AMCO thus allowing banks to clean up their balance sheets and free up funds to energise the economy.
The stock market lost 3.07 per cent last month while the market capitalization lost 26.06 per cent, the forum noted, adding that, the Nigerian Stock Market is the second worst performing market after Ghana among its peers in the sub-Saharan Africa.
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