Government Plans Bridge Bank To Support Struggling Lenders

Nigeria plans to start a fund that will operate a bridge bank to nurse struggling lenders back to health, Bloomberg reported on Monday.

The Central Bank of Nigeria will inject N10bn, or an amount that still needs to be determined by its board, into the so-called resolution fund every year, according to amended banking laws signed by the President, Major General Muhammadu Buhari (retd.).

Each lender will make annual contributions equivalent to 10 basis points of their total assets, or a percentage that the CBN still has to finalise.

The new rule is separate to the Assets Management Corporation of Nigeria, which was created to buy bad debts following a banking crisis in 2009, according to the amended laws. AMCON is expected to wind down by 2023.

While Nigeria’s biggest lenders have built strong buffers since the global financial crisis, some small- and medium-sized banks have struggled to ward off shocks arising from a 2016 economic contraction and the coronavirus pandemic.

In 2018, Skye Bank Plc collapsed and the Central Bank established Polaris Bank, a bridge bank to take over its assets and liabilities.

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