N2.5trn Loan: AMCON Declares War Against Chronic Debtors

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BY BUKOLA IDOWU AND KAYODE TOKEDE, Lagos

The Assets Management Company of Nigeria (AMCON) has said it has drawn the battle line with some recalcitrant debtors who have refused all entreaties to repay their loans, totaling N2.5 trillion.

The company, which had published the list of names of its chronic debtors, noted that this has become necessary as it is increasingly becoming hard for it to get obligors to settle their debts.

The list, which includes some wealthy Nigerians, was disputed by some of the people mentioned who later took AMCON to court to challenge allegations leveled against them.

The managing director and chief executive of AMCON, Ahmed Kuru, revealed that the company has been finding it increasingly hard to get obligors to settle their debts.

He said, “It is evident that we have exhausted the low hanging fruits and have to roll up our sleeves for a drawn out battle as it becomes harder to get obligors to settle their debts. This has hampered our business model and our third objective of obtaining the best achievable financial returns on assets acquired from the bank.”

“Asides this, he said it has become challenging for AMCON to fulfill its obligations as it had a funding shortfall of funding for the Repayment of its loans in in the past two years. The ramifications for failure by AMCON to recover its debt, principally owed to the CBN, cannot be quantified as it goes beyond economic cost”.

The bad bank, since the beginning of this year, had embarked on aggressive debt recovery, taking possession of assets of debtors.

Kuru said, “In the last two years, AMCON’s debt repayment to the CBN were N456.4 billion and N517.7 billion but actual payments were N256.7 billion and N191.1 billion in 2015 and 2016, respectively. This translates to a funding shortfall of N199.7 billion and N326.4 billion in 2015 and 2016, respectively.

“Of this shortfall, repayment due from AMCON in 2015 and 2016 represented 42 and 53 per cents while the resolution cost fund represented 58 and 47 per cents in 2015 and 2016, respectively. The funding plan envisaged contribution of 70 per cent from the resolution cost fund and 30 per cent from recovery”.

AMCON also recently appointed Asset Management Partners (AMPs) to assist in the resolution of over six thousand accounts with loan balances of N100 million and below.

The AMPs are consortia with specialist skills to recover and resolve debts in banking, legal, valuation and accounting. The new partners were said to be currently involved in an induction programme prior to the final selection of successful qualified firms.

Kuru, however, said that AMCON established to purchase toxic debts, has so far recovered N716.1 billion from obligors with cash and assets accounting for 45 and 55 per cents respectively.

He noted that AMCON has repositioned its debt recovery approach to strengthen legal and credit restructuring units to collaborate on the 350 accounts termed “defaulters”; enhance the restructuring and turnaround team; and engage in asset tracing to enhance recovery.

AMCON’s total debt obligation of N4.6 trillion represents 75 per cent of the 2016 national budget, 26 per cent of the 2016 total national debt, and 5% of the country’s nominal gross domestic product in 2016.

Industry watchers had noted that AMCON may not be able to fully realise its loans before its closure date. There had also been speculations of an extension of the tenure of the bad bank but this had quelled by the draft guideline for the creation of private Assets Management Company released by the Central bank of Nigeria recently.

Commenting, the former second vice president of Nigerian Bar Association (NBA), Mr. Adekunle Ojo, said AMCON was established by Law in 2010 and it is expected to act within the Act.

He said, “Loans granted by banks were not supported by collateral. Bulks of these loans were granted to directors and family members. “You begin to ask, what are the likelihood of AMCON recovering the balance of N1.3 trillion from obligors? It is good we have a body like AMCON but the truth is that AMCON cannot work beyond the law and expectedly, what AMCON is getting might be their best.

“It is quite unfortunate that the remaining bad loans could never be recovered by AMCON.”

Also, responding, a lawyer and finance expert, Dr Wunmi Bewaji stated that AMCON can only act by the law. He questioned the establishment of AMCON.

“There is nothing AMCON can do if debtors don’t have the money or assets. AMCON will take over those obligors’ assets if they have any. There will be so many situations where there will be no assets.”

He explained further that AMCON’s establishment of a special court is a waste of time and tax payers’ monies. “It will be a waste of time for AMCON to establish a special court for obligors and I think we shouldn’t have AMCON in the first place’, he said.

Commenting further, the Chief Executive Officer, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo explained to LEADERSHIP during the weekend that AMCON cannot fully recover those bad debts.

He said many of those businesses indebted to AMCON are in moribund state awaiting recovery. “It is going to be difficult for AMCON to further recover more debts. Virtually everywhere Assets management comes up to rescue the economy, they ended up in debts. It is even the banks that bail them out”, he added.

It would be recalled that as of December 2016, the likes of Capital Oil and Arik Air were allegedly behind in repayment by billions.

Also, some of the companies concerned denied owing, while others disputed the figures and took AMCON to court.

AMCON was established in 2010 as a resolution vehicle to purchase the non-performing loans from banks, inject liquidity into the banks and subsequently recover the purchased bad loans.