Business
CBN Plans To Absorb Bank Debts
The Asset Management Company (AMC) guaranteed by the Central Bank of Nigeria (CBN) to absorb rescured banks’ bad debts would be set up in the first quarter of 2010.
Lamido Sanusi Lamido, CBN Govrnor said the company, which was initially planned to come on board before the end of 2009 would now be set up in the first quarter of 2010 as the legislative arm of the government could not finish its work to provide legal backing for the company.
“Now it’s looking like we may spill into early January because there were all sorts of holidays. We’re still optimistic we should get it out of the House of Representatives committee before they go on recess,” Sanusi said.
The CBN boss explained that the legislation would form an AMC, which will exchange bad bank loans for government bonds, is before parliament. He had hoped the legislation would be ready before the end of December but acknowledged that looked set to slip.
It would be recalled that all deposit money banks (DMBs) in Nigeria have announced financial results for the third quarter of 2009 in line with clearly defined and transparent reporting requirements.
CBN said the formation of AMC should facilitate an improvement in banking sector liquidity, protection of the earnings of banks from further erosion and a reduction of the debt overhang on the capital market and participants.
“This should provide a much needed fillip for the revival of the Nigerian capital market,” CBN said. The AMC is expected to take impaired assets off the bank’s balance sheets and replace them with government guaranteed bonds. This will provide liquidity in the entire Nigerian banking system and bolster the prospects for long-term growth.
Mohammed Abdullahi, the Head, Corporate Affairs of the CBN said, “the third quarter earnings announcements for a number of banks have included a level of provisions that have led to reported losses, reflecting the true position of the lending portfolios.
This has been particularly evident in the nine banks assessed to be in a “grave situation’ following the outcome of the combined CBN/NDIC examination”, losses waiting to be soaked up by the AMC.
Finance experts believe that potential investors are waiting to see how quickly an asset management company can be set up to soak up bad debts and make the banks attractive for sale. However, not only is the fate of the money market dependent on the setting up of the AMC, finance experts believe that without it, the stock market as well is not likely to record any sustained recovery.
Bismarck Rewane, an economist and member, Presidential Economic Steering Committee said 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. Investors world continue to hold back until the ongoing confusion in the banking system is resolved.”
Mr Lakin Poola, Managing director LP Associates said given the present state of the banking industry, despite the banks’ audit, it will take more than an asset absorbing bad debts company to restore sanity and confidence in the industry, “I am not sure any single event can save this industry,” he added.
Edun made the call while speaking at the 2025 Fellowship Investiture of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, where he reaffirmed the federal government’s commitment to sustaining ongoing reforms and expanding access to finance as key drivers of economic growth beyond four per cent.
“We all know that monetary policy under Cardoso has stabilised the financial system in a most commendable way. Of course, it is a team effort, and those eye-watering interest rates have to be paid by the fiscal side. But the fight against inflation is one we all have to participate in,” he said.
The minister stressed the need for banks to broaden credit access and finance innovation-driven enterprises that can create jobs for young Nigerians.
“The finance and banking industry has more work to do because we must finance their ideas, deepen the capital and credit markets down to SMEs. They should not have to go to Silicon Valley,” he said.
The minister who described the private sector as the engine of growth, said the government’s reform agenda aims to create an enabling environment where businesses can thrive, access funding, and contribute meaningfully to job creation.
The facility, known as the Nigeria Actions for Investment and Jobs Acceleration (P512892), is a Development Policy Financing (DPF) operation scheduled for World Bank Board consideration on December 16, 2025.
According to the Bank’s concept note , the financing would comprise $500m in International Development Association (IDA) credit and $500m in International Bank for Reconstruction and Development (IBRD) loan.
If approved, it would be the second-largest single loan Nigeria has received from the World Bank under President Bola Tinubu’s administration, following the $1.5 billion facility granted in June 2024 under the Reforms for Economic Stabilisation to Enable Transformation (RESET) initiative.
The World Bank said the new programme aims to support Nigeria’s shift from short-term macroeconomic stabilisation to sustainable, private sector–led growth.
“The proposed Development Policy Financing (DPF) supports Nigeria’s pivot from stabilization to inclusive growth and job creation. Structured as a two-tranche standalone operation of US$1.0 billion (US$500 million IDA credit and US$500 million IBRD loan), it seeks to catalyse private sector–led investment by expanding access to credit, deepening capital markets and digital services, easing inflationary pressures, and promoting export diversification,” the document read.
The document further stated that Nigeria’s private sector credit-to-GDP ratio stood at only 21.3 per cent in 2024, significantly below that of emerging-market peers, while capital markets remain shallow, with sovereign securities dominating the bond market.
To address these weaknesses, the DPF will support the implementation of the Investment and Securities Act 2025, operationalisation of credit-enhancement facilities, and introduction of a comprehensive Central Bank of Nigeria rulebook to strengthen risk-based regulation and consumer protection.
The operation also includes measures to deepen digital inclusion through the passage of the National Digital Economy and E-Governance Bill 2025, which will establish a legal framework for electronic transactions, authentication services, and digital records.
Beyond the financial and digital sectors, the programme targets reforms to lower production and living costs by tackling Nigeria’s restrictive trade regime. High tariffs and import bans have long driven up consumer prices and constrained competitiveness, particularly for manufacturers and farmers.
Under the proposed reforms, Nigeria would adopt AfCFTA tariff concessions, rationalise import restrictions, and simplify agricultural seed certification to increase the supply of high-quality varieties for maize, rice, and soybeans. The World Bank projects that these measures will help reduce food inflation, attract private investment, and enhance export potential.
The operation is part of a broader World Bank FY26 package that includes three complementary projects—Fostering Inclusive Finance for MSMEs (FINCLUDE), Building Resilient Digital Infrastructure for Growth (BRIDGE), and Nigeria Sustainable Agricultural Value-Chains for Growth (AGROW)—all focused on expanding access to finance, strengthening institutions, and mobilising private capital.