By AYOOLA OLAOLUWA
Armed with its new sweeping powers, the Asset Management Corporation of Nigeria (AMCON) (AMCON) is determined to deliver on its herculean mandate. Business Hallmark recalled that the financial crisis that hit the nation’s financial system in 2008 impacted adversely on the economy.
While banks grew bigger after the 2005 consolidation exercise, they did not become better managed institutions. Following the joint banking audit by the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC), it was revealed that the banks were saddled with huge non-performing loans in their books which in some cases completely eroded shareholders’ equity in the affected institutions.
AMCON was therefore set up, under the terms of the Asset Management Corporation of Nigeria Act 2010, as a special purpose vehicle to free the banks from the devastating grip of these toxic assets then totaling N7 trillion which has dropped to N5 trillion.
In order to recover the huge debts, the corporation had introduced several tools, including use of threat, coercion, publish and shame and other forms of pressure and persuasion. It also engaged Asset Management Partners (ARMs) to provide debt recovery and management services as defined within the scope of the AMCON Act.
However, despite the numerous efforts deployed by its management to achieve its set goals before the expiration of the ten-year mandate, available records show that the corporation had only been able to recover about N1.7trillion from the eligible bank assets (EBAS).
Out of the recovered amount, cash accounted for 60 per cent, while non-cash assets such as properties and equity securities accounted for the balance of 40 per cent. Over the same period, AMCON’s repayment of its indebtedness to CBN was over N1trillion, while its total debt obligation to the CBN still currently stands in excess of N5 trillion.
Before the new maneuver by the corporation, AMCON and its debt recovery partners (AMPs) were in a bind as the debt recovery process which proved to be long and arduous. Among the major challenges they faced in the recovery process relate to the antics of lawyers who went all out to frustrate the smooth and speedy determination of cases by introducing technicalities that slow done the judicial process.
Also, the difficulties in taking over assets of debtors even after cases have been determined by courts of competent jurisdiction has created a situation where over N5trn is tied up in bad commercial loans sitting in AMCON’s financial records. Faced with these daunting challenges, the corporation decided to change tactics by deploying new strategies to overcome the obstacles on its path.
It was learnt that after buying into the recommendations brought before it by the management of AMCON, the Federal Government recently set up a task force to recover the outstanding N5tn debts owed the corporation. To give bite to the taskforce, the federal government deems it appropriate to set up a task force that will work out strategies to recover the bad debts.
At the meeting held at the Presidential Villa in Abuja last week, AMCON’s chairman, Muiz Banire, said top 20 debtors owed 67percent of the N5 trillion debts. The agencies represented on the taskforce are the Economic and Financial Crimes Commission, Nigerian Financial Intelligence Unit, the Independent Corrupt Practices Commission, and the Ministries of Justice and Transportation.
While inaugurating the force/committee in Abuja, the vice president, Prof. Yemi Osinbajo, said they will be working to develop and implement new strategies that will ensure that the determination of the government to recover the money is speedily achieved.
“The key is collaboration. We need a small team comprising these agencies to look at the next steps that we need to take, especially the criminal aspect, forfeiture and all of that,” said the vice president.
According to information available to BH, the task force will be targeting the first 20 top debtors, made up of individuals and entities on AMCON’s list, who are about 67 per cent of those owing the N5tn debt. A source privy to the new battle plan said that the decision to bring on board several government agencies in the fight to recover the outstanding debt was necessitated by the need to empower AMCON and its debt recovery partners who have found themselves hampered by a myriad of challenges.
“There are a lot of technicalities involved and this affects the work flow of AMCON which is time-bound in debt recovery. The corporation is handling about 3,000 court cases with debtors, which is part of the reasons why the debt recovery process is slow in the country.
He also revealed that there are over 12,000 bad loans of various sizes to be recovered, with AMCON handling over 6,000, while the AMPs are also saddled with the task of recovering the remaining 6,000.
“The corporation and its debt recovery partners have found themselves hampered by a myriad of challenges scuttling effectiveness of the debt recovery process and making it (AMCONs) previous sunset date for institutional wind up of 2020 even more unlikely.
“Many AMPs have found themselves using their own financial resources to investigate and identify debtors properties and pursue court orders to get these properties attached to legal proceedings against the debtors.
“When the recovery agents became cash-strapped, the recovery processes also become stuck by the lack of liquidity, which in turn allowed debtors to slip through the fingers of the recovery partners.
“Therefore, the coming on board of the EFCC, NFIU, ICPC and the Ministries of Justice and Transportation will go a long way in complementing the efforts of the corporation and its partners”, the source who did not want his identity revealed told our correspondent.
Also, another strategy to be deployed by the government is the recommendation to give urgent funds to AMPs and recovery agents to speed up the debt recovery process. The funds released upfront, according to the memorandum of understanding, are to be deducted later from the commissions due to the AMP after executing the debt recovery task.
The plan also include barring indebted entities from transacting business with the government, which is the biggest economic agent in the economy.
While the government is looking at strengthening AMCON and its debt recovery agents, it is also exploring ways of enhancing the corporation through constitution amendment. The government, it was learnt, has decided to push for the early passage of a bill seeking to amend the AMCON before the National Assembly.
The bill, it would be recalled, was considered by the House of Representatives on April 11, 2018, but it didn’t scale through before the 8th assembly wind up in June 2019. The proposed amendments are scripted specifically for those who hitherto think they can ride on some loopholes in the Act to perpetually engage AMCON in court.
The Asset Management Corporation of Nigeria says the top 20 debtors who owe over 67 percent of the N5 trillion debt the corporation is seeking to recover as ‘national cake’.
“These 20 persons owe almost N4 trillion. We have several thousand accounts in our kitty and just like when you do your scale of preference when we arrange it, there are top 20, 50, 100, and it moves on in that order.
“So what the chairman of AMCON talked about was that if we are able to resolve these 20, we would have done over 60 percent of the total obligation, which, of course, is massive.
“We can only imagine what N5 trillion can do to a country where the government is borrowing to fund the budget.
“There are individuals in this country who hold on to this money and it is not that they don’t have the wherewithal to pay, but they just don’t want to pay because, for them, it is ‘national cake’. But this is taxpayers’ money. Some workers have died because of these people. Some institutions have been crippled because of them. The economy is also suffering because of them,” Banire had said.
However, an investment Research expert at Afrinvest (West) Africa Limited, Mr. Adedayo Bakare, countered Banire, arguing that a large chunk of the debt may never be recovered.
“The fact that some debtors are in leadership positions does not mean they have the money to pay back their huge debts, except those who suggest so are assuming that since they are in leadership positions, they are stealing a lot of money that would enable them to pay back, which may not be totally true.
“If you owe a hundred billion naira, probably through your company and AMCON acquired the debt from a bank; the fact that you become a senator tomorrow does not mean you are going to get the hundred billion naira to repay AMCON,” he said.
Bakare observed that apart from the fact that some people do not have the money to pay back, recovering debt is a difficult task especially when there are debtors creating unnecessary legal barriers to prevent the corporation from getting the money. He also said that AMCON is assuming too much responsibility by taking over businesses that it has no capacity to run.
“For instance, the corporation may not have enough human capital to run airlines, manufacturing businesses and others, but it has taken them over. The best option for the corporation is for it divest some of the equity (ownership interests) positions it is holding in some of the entities to private investors who have the technical know-how to manage such businesses”, he told BH.
The Head of Corporate Affairs, AMCON, Jude Nwauzor, while speaking with BH, said that with the new strategy employed by AMCON and its partners, Nigerians would soon start to see results.
“The corporation has been empowered and strengthened to be able to recover debts on time. The Federal Government is now fully involved in the drive to recover outstanding debts. Nigerians will in no time start seeing the results of the new strategy”, he said.