Assignment of Contractual Rights: A Critical Appraisal of The AMCON Model for Securitization of Debts in the Banking Industry in Nigeria

Abstract

In recent years, securitization has become a viable means of capital creation. By using the securities markets to fund portions of the loan portfolio, banks can allocate capital more efficiently, access diverse and cost-effective funding sources and proper management of risks exposure by passing them on to investors and third party. As part of efforts to promote financial stability and economic development; enhance quality of banks, and to enable a healthy financial sector evolution, the Central Bank of Nigeria (CBN) and Ministry of Finance, birthed the Asset Management Corporation of Nigeria (AMCON) in 2010. AMCON was modeled on asset securitization/Special Purpose Vehicles (SPV) models which have been used in other jurisdictions like Malaysia, Ireland and the United States. Because Asset Securitization itself is a form of assignment of contractual rights, it is subject to and is governed by rules of assignment. But assignments as originated at common law are no longer the same; assignments now, are governed by statutes in most states. The statutes may be mandatory; replacing common law assignments entirely; or permissive, allowing common law assignments to continue; some jurisdictions going as far as specifying applicable procedures in detail. This project work critique the conceptual and legal framework of AMCON and its operations so far, against the backdrop of existing models of asset securitizations in other jurisdictions particularly, the US TARP United States. It contends that the main reason why AMCON has not met its stated objectives is the absence of a viable legal framework for asset securitization both in the form of an interventionist SPV model like AMCON, and in the form of Private Participation in asset management. The project concludes by recommending the appropriate approach to resolution of non-performing loans in the banking sector in particular and assignment of debts and contractual rights in general, in line with global best practices in financial asset securitization and management.