The splitting “headaches’’ of AMCON

The Asset Management Corporation of Nigeria (AMCON) was established to assuage the 2008/2009 global recession by assisting businesses in the country to cushion the shocks from the recession.

It became a legal entity on the 19th July 2010, when the President of the Federal Republic of Nigeria signed the AMCON Bill into law. It has a 10-year lifespan.

AMCON then became a key stabilising and re-vitalising tool to revive the financial system by efficiently resolving the non-performing loan assets of banks in the Nigerian economy, a feat it has seemingly achieved.

AMCON’s Managing Director, Ahmed Kuru, says the first phase of its operations has been achieved because Nigeria had come out of that recession.

Kuru says that it is important that the business community understands the objectives of AMCON and its critical role in supporting and protecting the growth of the economy.

According to him, some organisations erroneously believe that AMCON is out to force them out of business, thus maligning the organisation.

In carrying out such an onerous task of loans recovery, and doing it rigorously to attain the desired goals, it must encounter difficulties but must also find ways of resolving them.

AMCON should not be seen as a business venture that is out to rake in profits if it will duly carry out its functions.

This, no doubt, prompted Kuru to tell journalists at a recent parley that the task of loan recovery from ailing businesses was huge.

He says it was a burden it was prepared to bear to salvage the economy and support businesses to remain afloat.

This duty, he notes, is being vigorously pursued by the corporation but reluctance on the part of debtors and the country’s prevalent economic quagmire is inhibiting debt recovery.

He acknowledged the key role the judiciary was playing in the adjudication of cases relating to debt recovery and adds that the corporation considered going to court as the last resort to recover loans.

However, it is known that debtors’ attitude has hindered to a large extent recovery efforts by the organisation which, as known to all, does not have the right to seize business assets except after due process of litigation.

AMCON’s right to secure asset forfeiture is also restricted by the absence of a board that will grant approval.

Kuru agrees to this, saying: “Like I told you, the challenge is from within; the framework setting up AMCON is a bit faulty.

“You cannot say that you are taking somebody’s liability because this person’s business has failed, totally failed in the commercial bank, and that you are giving the commercial bank liquidity’’.

Often the absence of a constituted board does not help it to take certain decisions.

It is pertinent to note that legal luminaries had warned of the dangers inherent in the laws establishing the organisation.

Constitutional lawyer, Mike Ozekhome (SAN), warns that “any decision, or resolution, or contracts executed or action taken
requiring supervisory board approval without a board in place as currently is the case is null and void in eyes of the law going by the Act establishing AMCON’’.

He notes that it could lead to some decisions of the current management being challenged in court.

It is important to note that the interests acquired with the non-performing loans have kept accumulating, often wiping out the gains that would have been made from such businesses.

But the major headache of the agency is the misconception by Nigerians that it is only out to take over businesses and is widely held in some quarters that it is a tool the government uses to fight perceived’’ enemies.

Another is how to raise the necessary fund to pay its debt, and how to manage the forfeited assets to the company.

Of importance to the organisation is the issue of misconception, hence AMCON is urging the media to inform the public about its objectives which, among others, is to support businesses and protect the economy.

One is not left in doubt as to why the organisation has made modest progress in its task since it is not cut out for huge profits.

Assessing the corporation’s performance since its inception amid challenges, one will be satisfied with the result it posted in 2015.

On the 2015 performance, Kuru disclosed that it recovered N644 billion, while posting a loss of about N304.35 billion, an amount bigger than the 2014 loss of N275.49 billion after it wrote-down the value of collaterals recovered from its purchase of bad loans.

He said that 56 per cent of the total N3.7 trillion it acquired from non-performing loans has also been settled.

This settlement, Kuru explains, does not mean cash in the pocket but that some organisations had entered into agreement with AMCON on their repayment schedule.

According to him, the situation is so because many of the companies are under the weather, while some had gone beyond redemption before AMCON bought into them.

Kuru says the challenges in the global and local economy was stifling its business recovery drive as seen in the depreciation of some stocks at the Nigerian Stock Exchange and the current volatility in the Foreign Exchange Market.

He also explained that the loss situation of AMCON would continue to reduce.

“Loss is unavoidable. When we bought these facilities, about 12,700 non-performing loans between 2010 and 2011, if you recall, there were interest elements on them.

“The obligors were made to pay interest which in itself from beginning was faulty.

“That is because the banks that sold these facilities to us had already provided for them.

“They were not charging interest at all because the businesses were dead. At the initial stage, there was a gap between the purchase price and the face value of the liabilities.

“So, for some of these obligors, by coming to AMCON, already had a discount with almost 51 per cent of those accounts restructured.

“Now in CBN’s valuation and based on prudential guidelines, any account that you have restructured with a payment plan is a performing account.

“Let us not forget that these accounts were brought from somewhere they had been buried.

“For you to now say AMCON is going to make profit in couple of years is not possible because these facilities are hard-core facilities and they are not performing.

“The only thing we can do is to continue to recover them. AMCON is not a profit-making organisation. It is a resolution company that has a timeline,’’ Kuru added.

AMCON’s Executive Director, Finance, Aminu Ismail, also explained that there is improvement in the corporation’s results in terms of its stand-alone because in 2014, the loss was N344 billion, but in 2015 reduced to N310 billion.

He further explained that the large chunk of the loss was the six per cent interest it is currently paying.

He, however, expressed optimism that as AMCON recovers and restructures more loans, the interest elements charged in subsequent years would also go down.

From the modest efforts it has made, it is observable that many factors are hindering AMCON’s operations and such include court judgments and counter-injunctions.

Be that as it may, AMCON plans that before winding down in about four years, it will sell some of the forfeited assets, especially the real estate, notwithstanding the poor performance of the economy and the attitude of operators in the sector.

Worried by the valuation of the properties based on real-time economic situation, Kuru said it might be difficult to sell them.

Again, when the operators are asked to sell, they undervalue the assets with the aim of buying them to make profit, thereby making the sale difficult.

To check this, AMCON has decided to sell when economic indices improve.

The most important thing for AMCON is the ability to, at the end of its sunset, be able to discharge its obligations diligently.

No fewer than four countries have adopted the Nigerian model in business recovery, including the U.S. and they have done well and their institutions are still not profit-making ventures.

To help the agency to meet its mandate, it is imperative for the Federal Government to reconstitute the board of AMCON without further delay.

This will enable it to take certain decisions in executing its mandate without legal tussles. Such a statutory board whose tenures are defined by law, should be dissolved by effluxion of time.