The Chairman of House of Representatives Committee on Banking and Currency, Hon. Sir Jones Chukwudi Onyereri has said the House of Representatives of the Federal Republic of Nigeria will not be lured into supporting the deceptive plot orchestrated by some people to lure Asset Management Corporation of Nigeria (AMCON) to purchase new debts from Deposit Money Banks (DMBs) in the country.
Hon. Onyereri who addressed his colleagues in Enugu State at the opening of the retreat for law makers declared open by His Excellency, Hon. Lawrence Ifeanyi Ugwuanyi, the Enugu State Governor said the members argued that would not be the right decision for the country considering the state of the economy, which is on the pathway to recovery after sliding into recession. He said, “We are also aware that some economists are clamouring for AMCON to buy more toxic assets from the Eligible Financial Institutions (EFIs) in view of the very high level of the non-performing loans that are worse than the 2009 experience and far above the regulatory threshold. We wish to sound a note of warning that this Committee will not; I repeat will not support any such move. At least not at a time like this in the history of our economy.”
According to the Chairman, the lawmakers are happy that AMCON as an interventionist institution of the Federal Government has performed above board since it was created, but are worried that the Corporation is often constrained by institutional and legal stumbling blocks from achieving optimum results. He said that was why the House in 2015, amended certain parts of the AMCON Act to further strengthen the institution – which included the establishment of the resolution sinking fund.
Apparently piqued that AMCON is seriously challenged, Hon. Onyereri again said, “These legal and institutional bottlenecks arise from 1) Lack of co-operation from EFIs, 2) Issues relating to Clawback on EFIs and intervened banks, 3) Wrong interpretation of the AMCON Act, which has led to conflicting decisions by the courts especially where it relates to possessory and freezing orders and 4) Disingenuous acts of the obligors, who exploit our court processes and the short comings in the extant statute to frustrate the efforts of the Corporation in recovering the loans from obligors.
“I find it troubling that while some of these obligors frustrate AMCON recovery efforts by exploiting the court system, they continue to do business with the Federal Government and get paid. These issues contribute a lot in hampering the efforts of the Corporation and must be nipped in the bud through proactive legislative instruments. We have to find ways to ensure better cooperation from the EFIs to enable AMCON effectively recover these loans. Where they are not willing to cooperate with AMCON, then AMCON must and should enforce its right of clawback on the EFIs. It is important to remember and note that public funds were used to buy these loans that helped prevent the EFIs from going under and as a matter of public urgency AMCON needs to recover these monies. Likewise, there is need to sensitize the courts on the need for speedy resolution of AMCON cases that are before it. The court processes need to be streamlined and obligors prevented from using technicalities from circumventing the process.”
Managing Director/Chief Executive Officer of AMCON, Mr. Ahmed Kuru disclosed to the committee that the Corporation’s recent assessment of obligors as at December 31, 2016 identified 350 accounts with a current exposure of N2.5 trillion that represent about 80 per cent of AMCON’s total obligor debt. “AMCON has also repositioned its 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 the difficulties”, Kuru said, “AMCON continues to persevere in the face of adversity”.
Providing additional insight into the challenges of AMCON, Kuru lamented that the ramifications for failure by AMCON to recover its debt, principally owed to the Central Bank of Nigeria (CBN), cannot be quantified as it goes beyond economic cost. According to him, in the last two 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.
In his words, “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 per cent and 53 per cent while the resolution cost fund represented 58 per cent and 47 per cent in 2015 and 2016, respectively. The funding plan envisaged contribution of 70 per cent from the resolution cost fund and 30 per cent from recovery.
“To put this into perspective, AMCON’s total debt obligation of N4.6 trillion represents 75 per cent of the 2016 national budget, 26 per cent of the 2016 total national debt, and 5 per cent 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.”
Going by all these challenges of AMCON, Kuru told the lawmakers to be mindful of the proposed bill of the Nigerian Assets Management Agency (NAMA). He stated categorically that, “…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.”