Securitisation and SPV: A Critical Assessment of the Asset Management Corporation of Nigeria (AMCON)

Abstract

This paper looks at securitization as a form of structured financing which transforms identifiable assets of the financial institution into tradable securities that can be sold in the capital market. This process (securitization) is capable of replenishing banks of the funds to execute other projects. The process is incomplete without the special purposes vehicle (SPV) which pays for the assets sold by the financial institution through the issuance of debt securities to investors in the capital market. This paper also shares that even though securitization has its benefits, it still has risks and costs associated with it and as such several jurisdictions have enacted laws and rules on securitization to regulate the entire process, the SPV and key players of the process of which Nigeria is yet to have a law or rule on. One special SPV is the Asset Management Corporation of Nigeria (AMCON) which has been described as an emergency bank rescue vehicle created for purposes of reforming the banking system by acquiring non-performing loans of banks. Although not expressly stated in the AMCON Act, the AMCON can be seen as a potential SPV since it performs virtually the same functions of a typical SPV. This paper highlights the various features of a typical SPV seen in the AMCON and shall conclude that although the AMCON shares similar attributes with a typical SPV, there are crucial aspects of AMCON’s functions which tends to question its classification as a potential SPV.