By Paul K Adegboyega
The Asset Management Corporation of Nigeria (AMCON) was set up in July 2010. Like other “bad banks” in other parts of the world established in the wake of the 2008 global economic crisis, the motivation for its establishment was to protect the local economy from the impact of the global financial crisis which damaged financial institutions worldwide and contributed to a run on Nigerian banks and the crash of the Nigeria stock market. Many analysts agree that AMCON was the right step at the right time given the historic economic challenges that the economy faced at the time. It helped to stabilise the economy and provided a sturdy platform for other necessary measures that were taken to get it back on track. A decade after it was born, the Corporation is still some. But it has notched up some undeniable contributions. Here are six.
1. A KEY SOURCE OF ECONOMIC STABILITY
Where would the Nigerian economy be today if AMCON had not been established ten years ago? The simple answer: not in a good place. The Corporation was born in crisis, as response to the 2008 economic crisis that convulsed economies around the globe, including Nigeria’s. Many countries took drastic steps to mitigate the impact of bad loans on their banking system. These include safe-guarding deposits, providing emergency liquidity, partial or complete bank nationalization and the creation of “bad banks” – institutions established to acquire toxic assets, such as non-performing loans (NPLs).
In Nigeria, AMCON was set up as an economic stabilizer and financial shock absorber. When the Central Bank of Nigeria (CBN) injected N620 billion into distressed banks in 2009, AMCON purchased toxic assets of approximately N3.7 trillion. Its efforts brought stability to the Nigerian financial system alleviating liquidity and insolvency problems of affected banks and improving the NPL ratio. Banks that benefitted from this initial intervention include Union Bank, First Bank, Intercontinental Bank, AfriBank, Oceanic Bank, Intercontinental Bank, Spring Bank, Equitorial Trust Bank.
As a consequence of AMCON’s intervention, the banking industry and the Nigerian economy as a whole lived to fight another day, surviving in decent shape. By dealing forthrightly and creatively with the contagion of toxic debt which was threatening the financial system, AMCON performed an important foundational benefit that continues to help the Nigerian economy at many levels.
2. IMPROVED RISK MANAGEMENT AND LENDING CULTURE IN BANKS
Saving and stabilising Nigerian banks was a core consideration for the establishing of AMCON. It remains a central priority for the Corporation because of the organic and virtually irreplaceable role of banks in the modern economy. This is reflected in AMCON’s mission – to positively impact and improve the economy of Nigeria by;
Complementing the recapitalization of affected Nigerian banks;
Providing an opportunity for banks to sell off Non Performing Loans(NPLs);
Freeing up valuable resources and enabling banks focus on their core activities;
To propel the lending ideology in banks again.
AMCON’s focus on realising this mission has led to better risk management and improved lending culture in banks, making them more diligent. Nigerian banks have become less reckless in their lending resulting in a reduction in default rates. It is also significant that by having AMCON absorb most of the bad loans, the banks were free to continue lending and financing the myriads of expenditure and investment which are critical to keeping the economy going.
3. SAVED JOBS
A major benefit of AMCON’s interventions from its inception a decade ago is the thousands of jobs that have been rescued along with distressed firms and assets. This has been the case starting with the initial 10 banks that benefitted from the CBN/AMCON intervention in 2010. The estimate, according to Kuru is that by mid-2018, 15,000 jobs had been saved as a result of AMCON’s interventions.
Over 3000 jobs saved after AMCON brought Arik Air and Aero Contractors back to life;
Over 500 created so far from the takeover and sale of Delta Steel, Aladja to Premier Steel; a total of 5000 direct and indirect jobs projected
6000 jobs saved from AMCON’s intervention in Polaris Bank (formerly Skye Bank) according to NDIC… (1 trillion saved in deposits)
This is by no means an exhaustive list.
4. FIGHTING STUBBORN DEBTORS
It is by no means over, but AMCON’s on-going battle against well-connected and stubborn debtors is a necessary and ultimately beneficial battle. To appreciate why it is so important, consider this startling fact: Sixty seven percent of the over five trillion naira debt managed by the Corporation are owed by just 20 individuals and companies. For the current Ahmed Kuru-led management which has given loan recovery a central place in its priorities, this battle is a defining one. And it cannot be otherwise. As the Corporation’s website states: “AMCON was created to be a key stabilizing and re-vitalizing tool established to revive the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy.” AMCON cannot do justice to this core mission captured in the civilised phrase “resolving the non performing loans” without taking strong action against uncooperative debtors who have rejected the Corporation’s efforts to reach agreement with them because they believe their political connections will save them. Kuru has done his best to disabuse their minds of such wrong notions.
Under his watch, AMCON has taken the debtors to court and seized their assets after obtaining court orders. In an unprecedented step, the Corporation published their names in newspaper advertisements in an effort to name and shame them. These efforts are gradually producing results. Apart from debt payments which are trickling in, these measures have helped to reduce reckless practices by business owners: AMCON has placed many debtor firms under receivership thereby instilling more accountability and reducing previous excesses.
5. THE NEW AMCON ACT
The updated enabling legislation for the Corporation is also a major accomplishment. It closes the gaps in the old legislation and grants IT stronger and broader powers to fulfil its mandate and achieve the objectives that are so vital for the health and stability of the economy. To make the new law a reality, AMCON sought and got the backing of the executive, the legislature and the judiciary to amend its enabling law. This effort culminated in President Muhammadu Buhari signing the new AMCON Act into law in August 2019. Now, AMCON has acquired more powers to access to the financial details of debtors and when necessary, place their bank accounts under surveillance. AMCON was also enabled to establish the location of debtors’ funds at home or abroad, to advise the government to deny contract awards to such individuals or companies and place bank accounts belonging to debtors under surveillance, which it could not previously do. The new AMCON Act is a robust weapon in the arsenal of the Corporation.
6. RECOVERY OF FUNDS
“If at sunset AMCON is unable to recover the huge debt of over N5trillion, it becomes the debt of the Federal Government of Nigerian which taxpayers’ monies will be used to settle. The implication is that the general public will be made to pay for the recklessness of only a few individuals who continue to take advantage of the loopholes in our laws to escape their moral and legal obligations to repay their debts.”
AMCON CEO Kuru is dead serious about debt recovery. It is his constant theme and the subject of many of his public comments. It is also the context for the Corporation’s war against uncooperative debtors. It is significant that despite the economic disruptions caused by the Covid-19 pandemic, AMCON continues to recover funds. For instance, during the recent lockdowns across the country AMCON was able to recover N5 to N10 billion. This progress was in spite of disruptions to legal processes, physical visits to assets and other aspects of debt recovery. In all, AMCON has recovered a total of N1.1 trillion since its establishment.
Despite this decent level of progress in difficult circumstances, the Corporation is still very far from its destination. And that explains Kuru’s impatience. A lot more is yet to be recovered.
*Adegboyega is a policy analyst.