AMCON AND THE CHALLENGE OF BAD DEBTS
AMCON offers little shelter from the storm
In the wake of the global crisis that almost brought some financial institutions to their knees in 2008, the Asset Management Corporation of Nigeria (AMCON) was created as a vehicle to revive distressed banks by efficiently resolving the non-performing loans. In pursuit of this goal, AMCON purchased eligible banks’ assets worth N4.02 trillion at a price of N1.76 trillion with a mandate of restructuring opportunities for borrowers. Unfortunately, the failure of some bank customers to repay loans has largely frustrated AMCON’s set objectives. Besides, key players in the aviation sector have also queried the corporation’s mission in the sector, arguing that rather than save Aero and Arik airlines under its receivership from collapse, the fortunes of the carriers have continued to dwindle.
Established by the act of the National Assembly in 2010, with an intended 10-year lifespan, there is no doubt that the corporation’s mandate of stabilising the banking sector was immediately felt with the take-over of more than N5 trillion loans and injection of fresh funds into the sector. Indeed, some banks are perhaps still operating today due to AMCON’s intervention in the industry. Besides, AMCON has sold assets in excess of N500 billion and has resolved about 5000 Eligible Bank Assets (EBSs). The corporation has till date recovered about N1.6 trillion out of accumulated liabilities.
AMCON has also paid over N2 trillion to the Central Bank of Nigeria (CBN). “The fundamental objectives for the establishment of AMCON was to rescue commercial banks and some underlying strategic businesses in Nigeria from the brink of collapse through acquisition of non-performing loans and to dispose of the underlying assets in the most profitable manner,” said the chief executive of the corporation, Ahmed Kuru. “Without mincing words, I can tell you these have been executed effectively.”
However, same cannot be said of the corporation’s effort at recovering and restructuring bad loans. The excitement that followed the creation has dimmed due to the inability to successfully put the debt recovery issue to rest. AMCON was supposed to recover these loans within the stipulated time frame and return same to government coffers to support the economy. But as of June 2020, a decade after AMCON came into being, the Central Bank of Nigeria (CBN) stated that non-performing loans in banks stood at N1.2 trillion. This represented about 6.4 per cent of the N18.9 trillion gross credit of the banks to the economy during the period.
The introduction of the Global Standing Instruction (GSI) by the CBN is to curb the activities of those who take bank loans without thinking of paying back. A critical element of the GSI provides that should a customer default in paying up the loan or accrued interest upon maturity and has no funds in the account being operated with the bank, the Nigeria Inter-Bank Settlement System (NIBSS) will be instructed to debit from any other bank’s account where the customer has funds, be it joint or family account. The impact of the measure is minimal at best. The AMCON Act itself was amended twice, in 2015 and 2019, for more efficiency.
The last amended signed into law by the immediate past President Muhammadu Buhari empowered AMCON “to take possession, manage, foreclose, or sell, transfer, assign or otherwise deal with the asset or property used as security for Eligible Bank Assets (EBAs), and related matters.” As always AMCON has often blamed the slow pace of our judicial process as one of the major challenges to its recovery mandate. All its appeals and threats, including shaming the chronic debtors on the pages of newspapers did not achieve much. Instead of achieving a reduction, the debts are mounting and have reached N16 trillion as the corporation has continued to purchase new non-performing loans from banks outside its original mandate.
