Nigeria President Goodluck Jonathan Signs Asset Management Corporation Law

Nigerian President Goodluck Jonathan approved a bill creating a company that will buy back debts from the West African nation’s lenders and spur growth in Africa’s most populous country and top oil producer.

The Asset Management Corp. of Nigeria, or Amcon, will help to “stimulate the recovery of Nigeria’s financial system from recent crisis by boosting the liquidity of troubled banks,” presidential spokesman Ima Niboro quoted Jonathan as saying in an e-mailed statement today.

The bill, passed by parliament last month and sent to Jonathan for his assent on July 9, is expected to encourage the banks to resume lending to customers, according to the Abuja- based central bank.

“This represents a significant win for Nigeria,” Razia Khan, Africa analyst at London-based Standard Chartered Plc, said today in an e-mailed note. “The expectation is that market liquidity will receive a boost.”

The central bank sacked the chief executive officers of eight of the country’s 24 lenders last year over their handling of a debt crisis and injected 620 billion naira ($4.1 billion) into them to stave off a financial collapse.

The asset management company will buy about $10 billion in bad debts by the end of the year, central bank governor Lamido Sanusi said on July 1.

If Amcon does “only half of its work well,” this will still trigger “a consolidation in the banking landscape, catalyze more foreign interest in the local market, and spur it to even higher values by year-end,” Sebastian Spio-Garbrah, chief executive officer of New York-based DaMina Advisors said in a note on July 8.

Banks, which make up about 60 percent of the Nigerian equities market by weighting, will lead the resurgence, he said. The country’s stock exchange plunged 46 percent in 2008 and 34 percent last year, making it one of the world’s poorest performers for the period. The bourse’s main measure closed today at 24,766.1. It has risen 19 percent so far this year.

To contact the reporter on this story: Paul Okolo in Abuja at pokolo@bloomberg.net

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