AMCON: Is There Scope for Improvement in Debt Recovery?

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Thursday, September 03, 2020 / 12:08 PM / by  CSL Research / Header Image Credit: The Interview Magazine

 

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The Managing Director of the Asset Management Corporation of Nigeria (AMCON), Ahmed Lawan Kuru, has called on the National Assembly to support the corporations' efforts in recovering debt estimated at over N5trn from obligors. According to Ahmed Lawan, the Senate could exert pressure on some of the obligors through its Committee on Banking, Insurance and Other Financial Institutions. This was disclosed after the Senate committee met with the leadership of the corporation to review the impact of COVID-19 on AMCON's policies and processes, with a view to repositioning it for optimal performance.

 

AMCON was established in 2010 to buy the Non-Performing Loans (NPLs) of Nigerian banks with a view to stabilising the banking system and is currently being funded by a combination of loan recoveries, contributions from the Central Bank of Nigeria (CBN), sale of assets pledged, and a sinking fund levied on the banks. Banks were initially mandated to contribute 0.3% of total assets to the sinking fund. This was further increased to 0.5% of total assets in 2013 (and 0.33% of contingent liabilities).

 

Since the last crash in oil prices in 2015 that eventually led to the economic recession witnessed in 2016, AMCON has struggled over the years in servicing its c.N5.4tn (US$14bn) of liabilities (which also includes bonds held by the central bank). The former AMCON Chairman, Muiz Banire was once quoted in the local media that 20 individuals and companies owe 67% of the N5.4trn debt. The high concentration of the AMCON's debt in the hands of a few obligors who are regarded as political "big wigs" has raised eyebrows that their political power and ability to elongate judicial process could have contributed to the slow progress in debt recovery.   

 

AMCON had previously tried a number of methods to recover these loans, such as naming of debtors in the print media, appointing Asset Management Partners (a consortium with specialist skills required to ensure recovery and debt resolution) and even forming a task force comprising  the Economic and Financial Crimes Commission (EFCC), Nigerian Financial Intelligence Unit (NFIU), the Independent Corrupt Practices Commission (ICPC). Despite these measures, the corporation has not seen significant improvement in debt recovery.

 

The federal government has also supported the recovery efforts of the corporation with the use of legislation. In 2019, President Muhammadu Buhari signed the Asset Management Corporation of Nigeria (Amendment) Act, 2019 which among other things empowers AMCON to; (a) Place any bank account or any other account comparable to a bank account of a debtor of an eligible financial institution under surveillance (b) Obtain access to any computer system component, electronic or mechanical device of any debtor with a view to establishing the location of funds belonging to the debtor (c) Obtain information in respect of any private account together with all bank financial and commercial records of any debtor of any eligible financial institution. In our view, all efforts to recover these debts will be further exacerbated by the impending recession and attendant impact on sectors such aviation, oil and gas, and manufacturing which AMCON is exposed to.

 

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