AMCON has overstayed its welcome enough is enough

When the Asset Management Corporation of Nigeria (AMCON) was created in 2010, it was meant to be a one-time intervention.

The banking sector was in crisis after the global financial meltdown, weighed down by toxic loans and fragile balance sheets.

AMCON was designed as a clean-up vehicle. It would buy non-performing loans, recapitalize distressed banks, restore confidence and then quietly disappear after a decade.

That was the promise. Instead, fifteen years later, AMCON is still here, bigger and more expensive than ever. What was supposed to be a temporary fix has become a permanent tax on the entire banking industry.

How AMCON Became a Perpetual Burden

Every deposit money bank in Nigeria pays into the Banking Sector Resolution Cost Fund, the pool that funds AMCON. The charge is calculated as half a per cent of total assets and another half a per cent of off-balance sheet exposures. In practice, it is one of the single biggest operating expenses banks face today.

The official number reported for 2023 was about N367 billion. But scratch deeper and the figure looks much larger. Zenith Bank disclosed that it paid N144 billion in AMCON charges in 2023. With roughly 17 percent market share, that implies the total banking industry may have contributed as much as N847 billion in a single year.

To put that in context, N847 billion is bigger than the federal government’s entire health budget for 2023. It is more than the combined profits of several mid-tier banks. And it is money that is siphoned away before shareholders, depositors or the wider economy can benefit.

A Drag on Returns

The impact of this burden is not abstract. Analysts estimate that the AMCON levy knocks between 100 and 150 basis points off the return on equity of Nigerian banks. That is the difference between a bank reporting a respectable 20 per cent return on equity and a disappointing 18.5 per cent. Over time, that gap compounds into billions of naira in lost shareholder value.

For investors, this difference matters. It is the fine line between classifying Nigerian banks as global growth stories or as value traps. For the economy, it means banks have less capacity to lend, less room to cut loan pricing, and less capital to expand into new areas of financial intermediation.

The Fairness Question

There is also the question of fairness. AMCON was created to rescue poorly managed banks and clean up reckless lending from the 2000s. Yet all banks, including those that managed their risks prudently, still pay the same levy today.

This system effectively punishes discipline and rewards past failure. Efficient banks that avoided the crisis still find themselves subsidising the mistakes of weaker peers from more than a decade ago. And today’s depositors and shareholders are footing the bill for a problem that should have been resolved years ago.

A Bottomless Pit

The most troubling part is that the money flowing into AMCON has not fixed the hole. As of June 2023, AMCON’s balance sheet showed a negative equity position of N4.694 trillion. Despite over a decade of levies and asset recoveries, the corporation remains deep in the red.

To date, AMCON has purchased N3.797 trillion worth of non-performing loans for about N1.8 trillion and injected N2.2 trillion into distressed banks. Recoveries have reached about N1.96 trillion, only 52 per cent of the assets acquired, far below the original assumption of 70 per cent. The result is an institution that continues to consume resources without a clear path to solvency.

In other words, banks are pouring close to N1 trillion a year into a bottomless pit.

The Opportunity Cost

Imagine what banks could do if this levy disappeared. Eight hundred billion naira annually could fund thousands of SME loans, mortgages and consumer credit facilities. It could strengthen capital buffers, making the system more resilient. It could support lower interest rates, easing the cost of borrowing for businesses and households. And it could reward shareholders with stronger returns, encouraging fresh investment into the sector.

Instead, this money is trapped in AMCON’s machinery, doing little for growth, little for stability, and even less for investor confidence.

Time to Call It a Day

AMCON served its purpose. It bought time for the sector and restored confidence at a critical moment. But its mission has been accomplished. The banking industry is no longer in existential crisis. Governance standards have improved, capital requirements are stricter, and risk management is stronger.

What was medicine in 2010 has become poison in 2025. Keeping AMCON alive indefinitely distorts incentives, depresses returns and drags the entire sector backwards.

It is time to wind AMCON down. Policymakers must set a firm sunset date, ring-fence whatever assets remain, and end the blanket subsidy that punishes responsible institutions. The billions of naira currently trapped in AMCON should be freed to finance growth, strengthen capital, and reward investors.

The original mandate was ten years. We are now in year fifteen. Enough is enough.

AMCON has overstayed its welcome enough is enough - Nairametrics