Managing Director/CEO, AMCON, Mr. Ahmed Kuru

The Asset Management Corporation of Nigeria AMCON has expressed fresh concerns over its rising debt profile to the Central Bank of Nigeria CBN, which currently stands at N4.7trillion, arising from the seeming reluctance of its obligors, mostly Federal Government agencies to meet their obligations.

Recall that AMCON was created by the National Assembly in response to the global financial crises of 2008/2009 and therefore acquired over 12,000 non-performing loans worth about N3.7 trillion from 22 banks. Out of these, the corporation injected N2.2 trillion as financial accommodation to 10 commercial banks in order to prevent systemic failure.

This action helped stabilise Nigeria’s financial system, leading to the protection of about N3.66 trillion of depositors’ funds and about 14,000 jobs were saved. The idea was to recover the debts either through structured repayment or dispose of transferred assets towards settlement of the bonds.

Meanwhile, leading legal experts including the former Chief Judge of the Federal High Court, Justice Ibrahim Auta and the President of Court of Appeal, Justice Zainab Adamu Bulkachuwa have made a strong case for a paradigm shift in debt recovery processes in Nigeria.

Managing Director/CEO of the corporation, Mr. Ahmed Kuru, who spoke at a seminar for judicial officers in Abuja, disclosed that AMCON is currently indebted to the CBN to the tune of N4.7trillion, which he observed is more than half of the 2018 national budget proposal before the National Assembly.

He also hinted that more than 70 per cent of the corporation’s Eligible Bank Asset (EBA), portfolio is also locked in one form of litigation or the other, thus soliciting the support and cooperation of the judiciary to resolve these loan issues within record time.

According to him, there is also rising number of appeals emanating from trial courts on AMCON’s cases, adding that at this stage in the corporation’s existence, expeditious determination of appeals brought before the courts remains key for the agency to resolve all outstanding assets and prevent the undesired economic consequences of failure to recover the assets. He also argued that the inability of the corporation to resolve this rising debt profile would have dire implications for the entire Nigerian economy.

The Managing Director had on assumption of office reviewed the challenges as well as bottlenecks inhibiting recoveries and therefore mounted a strong campaign that the current practice where habitual and recalcitrant debtors are treated with kid gloves, especially by agencies of government would not help AMCON resolve these loans before their sunset dates.

Justices Auta and Bulkachuwa, while speaking at the event, insist that there must be a new approach towards debt recovery processes in Nigeria, arguing that such shift would enable the corporation achieve its statutory mandate of resolving its huge outstanding debt obligations.

According to Justice Auta, the approach to debt recovery and resolution must change at this point in the life of AMCON especially going into 2018 and beyond because the Corporation came as a child of necessity at the time it was created with all the good intentions in the world to recalibrate the beleaguered economy of the country at the time.

In his words, “Nigeria witnessed the 2007 global financial crisis, which was caused by insolvency, illiquidity, poor corporate governance and outright financial crimes. However, with the creation of AMCON by the federal government, no bank has been liquidated, depositors’ funds are safe and no bank has been subject to collection queues. The financial crisis led to the depression in value of the securities created against these defaulting loans thereby leaving the banks with an unfortunate inability to recover their losses. The effect of such monumental exposure was that banks were unable to sustain the equilibrium of lending required to maintain a vibrant economy. This in turn led to higher interest rates and an inability to perform the bank’s primary functions of financial intermediation like the pooling of savings and lending.”

He also said: “In addition to the significant reduction in lending to customers, financial crisis created by non-performing loans can result in breakdown of interbank lending, which in turn leads to drastic drop in liquidity of banks and a consequent reticence or direct inability to advance loans to the broader public. Collectively, these factors create a vicious cycle resulting in a hike in interest rates; concomitant default and insolvency; volatility of currency values; a drop in investments and general stagnation of the economy among other crisis.”

Justice Auta having enumerated the facts argued that it is extremely important for all stakeholders, especially Judges to note the correlation between bank failure, which AMCON saved, and a large concentration of non-performing loans. He added that Judges have critical role to play in the insulation of the macro-economy from fragmentation since most disputes that relate to banking, which AMCON currently shoulders are presented before them. Describing the AMCON framework as “extremely complex” he said AMCON’s goal can only be accomplished if all stakeholders, especially the entire hierarchy of the bench will appreciate the fundamental underpinnings of its regime.

While speaking on the issue, Justice Bulkachuwa argued that since the growth of the financial sector is tied to economic growth, Nigeria’s economy, the livelihood and wellbeing of the citizenry are inextricably related to finance.

She further argued that all over the world, whenever the economy goes into crisis, governments intervene to stabilise the macro-economy, which AMCON did in the case of Nigeria.

But with what she described as “deliberate reluctance” of debtors to redeem their obligations to AMCON, Justice Bulkachuwa said, “Having realised deliberate reluctance of debtors to redeem their obligations to AMCON, it would seem that AMCON has limited options other than resorting to our courts to enforce its enormous powers towards debt recovery. To recover as much debt as possible within its defined lifespan, expediency is essential if AMCON is to achieve its value maximisation and financial stability goals.”