MORE than five years after its establishment, the Asset Management Corporation of Nigeria appears to have lost its focus. While similar institutions elsewhere have fulfilled or are fulfilling their mandates, ours appears helpless to recover its outstanding acquired debts. In this era of change and prudence, AMCON should deliver by quickly recovering as much debt as possible.
The news coming from the “bad bank” is not re-assuring. Late last month, the Senate was shocked to hear that AMCON still has as much as N5.4 trillion in outstanding debt. Nigerians were later to learn that about 220 well-connected persons alone owed N1.14 trillion of this and showed no inclination to repay. Apparently at the nudging of lawmakers and the Central Bank of Nigeria’s “name and shame campaign,” the agency has published a list of 215 firms and their promoters, who, combined, owe N1.14 trillion and show no willingness to pay up. Some private jet owners were spotted among the named promoters. Some of those listed count or like to count themselves among the well-heeled and jet-set. This makes AMCON’s seeming tardiness in foreclosing on some of these debtors even more infuriating. Why should the taxpayer continue to carry the unpaid debt of some recalcitrant debtors who belong to the rent-taking class?
Ahmed Kuru, the managing director of AMCON, put it in perspective: “We have seen that most of the debtors…are big men that fly in private jets and live in big mansions.” Lamenting that, despite their extravagant lifestyles, they were not servicing their debts, he said, “A situation where you have less than five per cent, or less than 300 people, accounting for more than 80 per cent of the outstanding obligation of AMCON, is very disturbing.”
Given this, we also find Kuru’s subsequent conciliatory statements disturbing. “You don’t recover that in a day; neither do you recover that in a year. Our intention is not to kill any business; our intention is for the businesses to perform; if there is any help they want from us as AMCON, we help them, but the accounts must perform.” Kuru added: “So, it’s not an event, it’s a process. Because somebody owes us N120 billion, you don’t expect anybody to bring that in one year. We are encouraging them to come and talk to us so that we can have an agreement and understanding; then, their business is running and they are paying the obligation and everybody will be happy.”
We applaud all efforts to revive genuine concerns, as AMCON claims to be doing, but reject any further concessions to high-profile chronic debtors. The person who owes N120 billion must have provided collateral and has recoverable assets. Besides, he has had ample time to repay but did not. AMCON was a response to a deep crisis in the financial sector that saw the regulators assuming control of eight banks. Apart from injecting N620 billion into the stressed banks to forestall systemic failure that threatened the financial system and the capital market, the CBN promoted a “bad bank.”
Such a bank is set up to buy up the bad loans of financial institutions with significant non-performing assets. This frees the troubled banks to grant new credit, recapitalise and return to profitability. This process protects depositors, while shareholders and bondholders bear the losses. In pursuit of its mandate to stabilise and revitalise the financial system, AMCON initially mopped up the toxic assets of 22 banks arising from 12,537 loans. Revelations from the CBN audit and from ensuing court processes, exposed widespread insider abuse and a system of corruption where a small circle of business elite trawl banks taking jumbo loans that they have no intention of repaying.
No one asked Kuru to kill any business; just to recover as much of the debts the “bad bank” assumed as possible. But then, a business that is inimical to the health of the economy deserves to die. It is the nature of capitalism that badly managed, indebted companies will go under to make way for efficient ones. When the United States and European governments organised bail-outs for banks and other troubled big firms during the meltdown, many recovered and are thriving; some 465 banks closed in the US alone between 2008 and 2012, according to its Federal Deposit Insurance Corporation. Moreover, loans are, or ought to be backed by collateral: has AMCON exhausted all options to recover assets pledged by the debtors? How come some are still jetting around and living in luxury? Foreclosure and seizure of assets follow when all else fails.
When, in 2013, the CBN barred banks from extending further credit to chronic debtors, AMCON struck a deal with a well-known businessman, whereby some portion of his N190.42 billion debt was written off in exchange for a surrender of substantial assets (about N140.99 billion), thus freeing him to participate in the power sector privatisation process. This is beyond the absurd. AMCON should be more aggressive against recalcitrant debtors. It should have no difficulty identifying those who have the means to repay, but treat loans as part of the prevalent elite rent-taking culture. A person who takes an intervention loan for aviation, for instance, diverts the money, kills the airline and moves on or one who takes mega loans and has been openly splashing billions of naira on politics, even securing a high profile elective office, should not be spared. AMCON should foreclose on their assets, including their jets and mansions.
There is another oil sector magnate, who not only ran an expensive campaign for the governorship of a South-East state, but became a point man in the multi-billion naira re-election bid of former President Goodluck Jonathan, publicly spending billions of naira with reckless abandon. AMCON has every reason to apply the big stick in recovering the N104.8 billion debt his company owes.
In Finland, OHY Arsenal was set up in response to the country’s banking crisis of the early 1990s and commenced winding down after successfully completing its assignment and saving the financial system. The United Kingdom with the UK Asset Resolution and Spain with SAREB also fulfilled their mandates, while Italy and India have just announced plans for their own “bad banks” with definite tenure.
AMCON should not treat its chronic debtors with kid gloves. It should reverse its loss position of N626.79 billion in fiscal 2014 to profitability and recover all debts as soon as possible.
