This is the full text of the speech by the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr. Ahmed Kuru on the occasion of the retreat with members of the House of Representatives Committee on Banking and Currency at Golden Royale Hotel Enugu, June 16 – 20, 2017
I welcome all of you to the House Committee on Banking & Currency Retreat. The theme for this retreat, “enhancing debt recovery efforts as a tool for growing the nation’s economy”, is apt given our current economic reality. We are grateful for the opportunity, to once again, interact with the House Committee on Banking & Currency. As a reminder, AMCON was formed in 2010 to intervene in the banking sector to maintain economic and social stability in Nigeria following the unprecedented rise in non-performing loans (NPL) to 34.3% of industry assets in 2009, with 8 banks requiring capital to remain solvent. AMCON’s core objectives are to recapitalise the banks, get the industries assets and subsequently get the best financial returns on the assets.
Based on the aforementioned objectives, AMCON acquired over 13,000 NPL worth N3.7 trillion from 22 banks and injected N2.2 trillion as financial accommodation to 10 banks in order to prevent systemic failure. This intervention helped stabilise the financial system as about N3.66 trillion of depositors’ funds and interbank takings were protected; and approximately 14,000 jobs were saved. We have so far recovered N716.1 billion from obligors, of which cash and assets account for 45% and 55%, respectively.
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. To clarify, obligors indebted to AMCON for the sum of N1.3 trillion have sued in various courts in Nigeria either disputing the debt or claiming damages against AMCON. This has hampered our business model and our third objective of obtaining the best achievable financial returns on assets acquired from the banks. The idea is that AMCON is to efficiently monetize the assets to repay its own obligation without recourse to the public treasury. AMCON has been constrained in its debt recovery owing to a myriad of challenges such as:
The uncooperative attitudes of obligors who are either unwilling and/or unable to pay. Such debtors prefer to resort to all manner of diversionary tactics as opposed to dealing with the problem, which is their indebtedness;
The economy is struggling to get out of recession thereby affecting us and our obligors. This has resulted in a general devaluation of assets;
The banking sector has not grown as envisaged based on past performance. This has impacted our recovery as the banking sector contributes to the resolution cost fund, is less than the projected target;
The AMCON Act which did not envisage the challenge of taking over full title rights to collateral and resistance from obligors in relinquishing assets or honouring their obligations; and
The Nigerian judiciary which we continue to interact with and educate on the importance for a quick debt resolution.
Our recent assessment of obligors identified 350 accounts that represent about 80% of AMCON’s current exposure of N2.5 trillion as at 31 December 2016. Consequently, we have repositioned our debt recovery approach to strengthen legal and credit restructuring units to collaborate on the aforementioned 350 accounts termed “defaulters”; enhance the restructuring and turnaround team; and engage in asset tracing to enhance recovery. In spite of this difficulties, we continue to persevere in the face of adversity and my colleagues will provide more information on our efforts and the challenges we continue to face in debt recovery.
The ramifications for failure by AMCON to recover its debt, principally owed to the CBN, cannot be quantified as it goes beyond economic cost. For instance, in the last 2 years, AMCON 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% while the resolution cost fund represented 58% and 47% in 2015 and 2016, respectively. The funding plan envisaged contribution of 70% from the resolution cost fund and 30% from recovery.
To put this into perspective, AMCON’s total debt obligation of N4.6 trillion represents 75% of the 2016 national budget, 26% of the 2016 total national debt, and 5% of the country’s nominal gross domestic product in 2016. Given the current demands on the Federal Government, it is doubtful that it can afford to expense AMCON’s debt in the short term. From our previous interactions, this Committee had requested that we present a proposed amendment to the AMCON Act which we have done and we are in contact with the Committee as they review our proposal. Some of the areas under consideration are:
Power to investigate debtor account in all financial institutions
Power to issue clearance of non-indebtedness to debtors seeking to do business with the Federal Government
Consent of the Attorney General of the Federation must be obtained prior to the commencement of any enforcement action against AMCON
Funds of the Corporation cannot be frozen or sequestered
Exclusion of the limitation laws from eligible bank assets (EBA) and related rights of AMCON
Courts should de-emphasize legal technicalities and focus on the substance of AMCON’s claims
Power to sell collateral without recourse to the court
Court judgment to be registrable in all lands bureau
Power of AMCON to engage external counsel to prosecute offences under the Act.
It is our opinion that these amendments will curtail frivolous tactics employed by recalcitrant obligors under our judicial system and improve our debt recovery. Furthermore, we note that this Committee is reviewing the proposed bill of the Nigerian Assets Management Agency (NAMA) and request that the Committee also considers its impact on AMCON. Our position is that AMCON should not qualify as an agency as covered under the proposed NAMA bill since AMCON’s assets were principally acquired from the banking sector for the purpose of debt resolution.
We also place on record the unflinching support we get from this Committee on matters that concern our activities. With your pronouncement and body language quite a lot of our obligors know that they have no hiding place. We shall continue to solicit your support for more intervention as we go through this tedious journey. But we can assure you of our resolve to pursue the recovery of all outstanding obligations. We attach a list of our top 100 obligors for ease of reference. I thank you all for attending this retreat.
