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Document Type

Case Study

Abstract

Nigeria experienced the Global Financial Crisis as a dramatic decline in the price of crude oil and a burst stock market bubble. These losses were compounded by a high level of margin lending, resulting in large numbers of nonperforming loans (NPLs) for Nigerian banks. The government established the Asset Management Corporation of Nigeria (AMCON) in July 2010 to purchase NPLs and inject capital in insolvent banks. In three purchases between December 2010 and December 2011, AMCON acquired loans with face value ₦4.02 trillion ($26.8 billion) for ₦1.76 trillion. As a result, NPLs in Nigerian banks fell from a peak of 37.2% to 5.8% within 2 years of the establishment of AMCON. However, AMCON suffered heavy losses during its debt recovery and recapitalization efforts, and, by 2014, it carried a negative equity of ₦3.6 trillion. To offset these losses, AMCON created the Banking Sector Resolution Cost Fund (RCF). AMCON projected this sinking fund to provide the bulk of its revenue, though it remains unclear as to whether the ₦1.5 trillion RCF could completely cover AMCON’s losses.

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