AMCON, AMPs and Debt Recovery Turnaround – First Glance

Proshare

Friday, 17 May 2019  /  01.00PM  /  By Otto Abasiekong and Oyeyinka Oyewo  

 

The Asset Management Company of Nigeria (AMCON) and its debt recovery partners (AMPs) are in a bind as the debt recovery process has so far proven to be long and arduous. Major challenges facing the recovery process relate to the antics of local lawyers to frustrate the smooth and speedy determination of cases by introducing technicalities that slow done the judicial process. In addition, the difficulties in taking over assets of debtors even after cases have been determined by courts of competent jurisdiction has created a situation where over N5trn (or 63% of the federal government’s 2019 budget) is tied up in bad commercial  loans sitting in AMCON’s financial records.

 

AMCON was established on 19th July, 2010 by the AMCON act, it was designed to provide stability for the Nigerian financial system, by resolving the worsening cases of non-performing loans of banks.

 

Nevertheless, this has not been without major problems as AMPs have found themselves hampered by a myriad of challenges scuttling effectiveness of the debt recovery process and making AMCONs previous sunset date for institutional wind up of 2020 even more unlikely. A critical problem for AMPs is funding. Many AMPs have found themselves using their own financial resources to investigate and identify debtors properties and pursue court orders to get these properties attached to legal proceedings against the debtors.

 

In situations where AMPs have become cash-strapped the recovery process has become stuck by the lack of liquidity of the recovery agents allowing debtors slip through the hitherto firm fingers of the recovery partners.

 

On October 24, 2018 Proshare published a report from AMCON culled from “The Cable” of the top 105 erring debtors that refused to reach settlement with the corporation. Find link to story List of AMCON’s Top 105 Debtors


With over 12,000 loans of various sizes to be recovered, the AMPs currently handle over 6,000 with the attendant rigours of ensuring  a strategic approach to the debt recovery process.

 

AMPs are Asset Management Partners who are engaged by the provisions of the AMCON Act, to provide debt recovery and management service as defined within the scope of the law.

 

Additional responsibilities for the AMPs as stipulated by the AMCON Act, include;

  • It shall be the responsibility of the Service Provider to contact the Debtors in respect of the Eligible Bank Assets (“EBAs”)  and provide a feedback within one month of the date of the engagement, and subsequently provide periodic reports as directed by AMCON

  • The Service Provider shall take necessary steps to locate Debtors, trace assets of Debtors, negotiate with the Debtors and reach settlement with the Debtors in line with the Guidelines to the Engagement; all settlements reached with the Debtors shall be presented for AMCON’s approval within 14 (fourteen) days.

 

From some of the accounts of over 10 foreclosure suits assigned to various AMPs since 2016, most of the cases are now in court, while there has been progress in tracing the properties of the respective debtors.

 

Also, some of the loans of the Obligors have been restructured and negotiations made through the AMPs to AMCON, which has seen some of the debts cleared and recovery achieved.

 

Further Proshare engagement with an AMP who had been assigned a number of AMCON debt cases since 2016 , presented a number of issues around the debt resolution process for legacy loans of banks.

 

Below are some of the selected cases that some of the AMPs are handling and the status update;

 

AMCON Vs Uhumwangho Nomweneho Princess

 

Nature of Dispute: Foreclosure Suit

Amount: N12,674,200.97

Initiation Date of Transaction in Bank:  February 2008

Date taken over by AMCON:  Unknown

Date assigned to AMP: July 2016

 

Current Status:

Case still ongoing in court. There was an interim order earlier granted in the case to take over the property  of  the obligor. However the obligor’s family were able to prove that the property occupied belong to the family member and not just the obligor. The court later gave an interim order for AMCON to vacate the property, case still ongoing in court.

 

 

AMCON Vs Akaba Rhodes Limited

 

Nature of Dispute: Foreclosure Suit

Amount: N62,913,745.24

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: July 2017

 

Current Status

Case still ongoing in court. At the point of interim execution it was noticed that the attached property were confusing and cost the AMP closing the wrong property. The  AMP has since then served the banks the interim order to freeze the obligors account. However, the AMP has been able to trace the correct property and also levy execution. Case is still ongoing in court for judge to grant the AMP receiver manager, after which the property can be disposed to recover debt.

 

 

AMCON Vs Delcom Systems Limited

 

Nature of Dispute: Foreclosure Suit

Amount: N91, 808, 399.73

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: 2010

Date assigned to AMP: June 2016

 

Current Status

The court earlier ordered that the AMP should list any property belonging to the obligor for attachment. The AMP has conducted extensive search at the Land Registry Asaba, unfortunately no property was traced to the obligor. The court subsequently ruled that the family of the obligor is not part of the indebtedness and that family property should not be attached. The court finally advised that we should return to court against the obligor when we are sure of a property belonging to him that we can take over. There was no money in all the obligor s frozen accounts.  Case still ongoing in court.

 

 

AMCON Vs Dual Engineering

 

Nature of Dispute: Foreclosure Suit

Amount: N59,845,075.54

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: July 2017

 

Current Status

The account of the said obligor was earlier restructured but defaulted. He approached the AMP in February 2019 that he was ready to pay the sum of 50 million to clear his debt and it was going to be a bullet payment, AMCON countered the offer and requested that he pay the sum of 75 million, however the obligor gave a counter offer to pay the sum of 55 million which AMCON later restructured to 57,810,000 and the obligor accepted and was given till 4th of April to make payment a date on which he again defaulted, a further concession was given till April 30th for him to make the payment and again there was a default. A foreclosure suit has been prepared by the AMP and according to available information it was filed in the 1st week of May to take over the obligors property.

 

 

AMCON Vs Tempair Global Services Limited

 

Nature of Dispute: Foreclosure Suit

Amount: N17,633,289.6

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: June 2016

 

Current Status:

The obligor’s loan was restructured to Four Million Naira (N4, 000, 000). He has since paid Two Million, Six Hundred Thousand Naira (N2, 600, 000), Leaving the balance of One Million, Four Hundred Thousand Naira (N1, 400, 000). The obligor’s period of remittance in line with the letter of restructure issued to him has expired. The AMP is yet to trace or link any property to him for possible attachment to be filed in court.

 

 

AMCON Vs Afo Product Nigeria Limited

 

Nature of Dispute: Foreclosure Suit

Amount: N59,845,075.54

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: July 2017

 

Current Status:

The matter was filed in Federal High Court sitting in Lagos. Upon hearing the court advised that the AMP should get a copy of the third party deed of legal mortgage of the property the AMP is seeking to attach. The AMP has written a letter to AMCON to send the documents to it but the consultants are yet to receive them and this has caused a delay in the case.

 

 

AMCON Vs Bayelsa State Ministry of Sports Development

 

Nature of Dispute: Foreclosure Suit

Amount: N171,884,452.67

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: July 2017

 

Current Status:

Demand letters have been served to the said obligors, however, the suit hasn’t been filed because an AMCON deponent is needed to file the suit in the court and AMCON is yet to provide one which has cause a delay in the suit filing.

 

 

AMCON Vs GOD DE FARMS LTD

 

Nature of Dispute: Foreclosure Suit

Amount: N50, 533, 828.86

Initiation Date of Transaction in Bank: July 2007

Date taken over by AMCON: Unknown

Date assigned to AMP: June 2016

 

Current Status:

Demand letters were served and the obligor contacted the AMP and the sum of 15 million was proposed, accepted by AMCON and a bullet payment was made to offset the debt. In July 2017 a letter of non – indebtedness was issued.

 

 

AMCON Vs I.M Uwagboe Oil Limited

 

Nature of Dispute: Foreclosure Suit

Amount: N33,956,429.1

Initiation Date of Transaction in Bank: Unknown

Date taken over by AMCON: Unknown

Date assigned to AMP: June 2016

 

Current Status:

Demand letters was served obligor contacted the AMPS and the sum of 5 million was proposed, accepted by AMCON and was paid in instalment to offset the debt. A letter of non-indebtedness was issued by AMCON

 

 

Challenges in Debt Recovery Process

From the interview conducted with some of the AMPs and the Supervisors, the outlined challenges  include the following; 

 

Liquidity 

In the area of liquidity, the challenge highlighted is the fact that debtors are not liquid enough to pay off their debts. They have been pleading  for time which has in a way affected the debt recovery process.

 

Frustration of Judicial Process to Liquidate Properties of the Obligor

The AMCON Act empowers the recovery agents or AMPs to liquidate the properties of the obligor, through the laid down court orders and procedures.

 

Understanding this the Obligor rather chooses to frustrate the process of the sale of his/her properties for the recovery of the debt owed, appealing through the court. This has also slowed the process of recovery even when an initial court order is in place for the enforcement of the liquidation.

 

The consultant cited a case in one of the States were the Obligor got a court injunction to frustrate the sale of his property, until the issue had to be settled out of court. 

 

Delay in AMCON Letters for Speedy Debt Recovery Resolution

In some of the cases handled by the AMPs, the delay in getting the demand letters and also the ones covering Third party deed of legal mortgage of property from AMCON , has slowed some of the legal proceedings and prospects of speedy recovery of debts.

 

Over-Valuation of Properties Traced to Debtors

Proper valuation of properties that are traced to the Obligor for recovery remains one of the identified challenges in the debt recovery process. Some of them are over-valued and when proper assessments are done the properties do not meet the said estimates,  which slows the debt recovery process.

 

Financial Regulatory Issues

The Threshold set by financial regulators for debtors to meet in clearing their debts also constitutes another challenge, as debtors face the burden of meeting up and paying the complete amount they are owing.

 

This also affects the rate of recovery and returns, alongside the debt recovery process.

 

Tracing Properties of Debtors for Debt Recovery

One of the challenges that AMPs encountered was the ability to trace the properties of the debtors, who have defaulted and are yet make significant commitment to clear their debts.

 

Political Issues

Some of the debtors are notable politicians who are using their clout and positions to frustrate the debt recovery process

                                                                                                                                                     

Timely Payment of Commissions

The AMPs saddled with the responsibility of debt recovery for AMCON also have issues of timely payment of their commissions for debt recovery.

 

While the efforts of AMCON in empowering the AMPs are appreciated, prompt payment of commissions after debts are recovered is one key area that must be given top priority, to boost the recovery process.

 

Lessons Learnt

The AMPs engaged identified the following as lessons learnt in the course of the discharge of their duties;


  • The process of debt recovery is not an easy task when the AMCON debtor is not liquid.

 

  • Even with the Collateral of the Debtors, it takes a rigorous legal process to execute judgement and dispose of the properties.

 

  • The ability to project debt recovery collection is challenged by the process of engaging the debtor to pay and also seeking legal action to dispose their assets, when they fail to comply with the provisions of the AMCON Act.

 

  • Debt recovery is real hard-work

 

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AMCON Perspective

In an interview with one of the officials of the Asset Management Corporation of Nigeria, AMCON some of the key takeaways on the issues around debt recovery  bordered on the following;

 

Legal Cases

According to the official AMCON is handling about 3,000 court cases with debtors which is part of the reasons why the debt recovery process is slow in the country.

 

There are a lot of technicalities involved and this affects the work flow of AMCON which is time-bound in debt recovery.

 

Economic Implications

The N5trn debt size owed financial institutions is affecting the economy. If such an amount is fully recovered it can go a long way in driving socio-economic activities and address issues like unemployment and infrastructure.

 

Cooperation from Judiciary and Relevant Agencies

There is a lot of support and cooperation required from the Judiciary and agencies like the Economic and Financial Crimes Commission, EFCC  and the Independent Corrupt Practices and Other Related Offences Commission, ICPC to aid the work AMCON is carrying out in the process of debt recovery.

 

Relationship with AMPs

AMCON has been engaging the AMPs and are open to feedbacks on how improve the mechanism for them to carry out their roles effectively.

 

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Way Forward

From the perspective of the AMCON AMP Consultants a major step forward in improving the debt recovery process will be “Funding the Recovery Process” which is vital for a seamless operation.

 

Funding The Debt Recovery Process

 

The way forward is for AMCON to make funds available for AMPs and recovery agents to speed up the debt recovery process.

 

The funds released upfront can be deducted later from the commissions due to the AMP after executing the debt recovery task.

 

This will help AMPs who have cases in regions like the South-East, South-South and the Northern geo-political zones, who will require the funds to execute their tasks.

 

At the moment AMCON has started funding enforcements which is good, but should be extended to the recovery process.

 

The funds released for the AMPs in the recovery process should be deducted from the commissions due to the AMPs. 

 

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Conclusion

At a recent meeting with the board  members of AMCON, Vice President Professor Yemi Osinbajo , SAN, decried the fact that the debtors were still owing N5trn. Quoting  “The Nation Newspapers” the Vice President stated that a  plan is in place by the Federal Government, through an inter-agency collaboration framework that comprises Ministries, Departments and Agencies (MDAs) and supervised by his office , that will prevent indebted entities from transacting business with the government, which is the biggest economic agent in the economy. Find link to the story Business Giants in Trouble Over N5tr AMCON Debts 


While this recent statement will generate a lot of discussions in the country, one major issue is the pathway to achieving the AMCON target of debt recovery through the AMPs and other assigned recovery agents.

 

AMCON on its part has taken a bold step in warning the AMPs that poor-performance will lead to a revocation of their license and operational mandate, which is vital to instilling the drive to achieve the set tasks on debt recovery.

 

An important note here is for the management and board of AMCON to also explore ways of creating an enabling framework for the AMPs and recovery agents to carry out their roles effectively.

 

AMCON should consider the following;

  • Prompt release of funds to AMPs to carry out the debt recovery process

 

  • Timely payment of commissions to AMPs when the debt recovery is achieved

 

  • Encouragement and recognition of High-performing AMPs

 

  • Funding the debt recovery process for AMPs who have cases in regions that will require additional costs and logistics, that can be deducted from the their commission

 

These are some of the measures that should go a long way to speed up the debt recovery process in the country.

 

AMCON also has the right to review the license/mandate of AMPs who after all provisions have been made failed to recover the bad debts assigned to them.

 

The AMPs are critical in the process and quest of AMCON recovering the N5trn owed the banks in Nigeria, which can also bring liquidity into the Nigerian economy.

 

A more strategic approach in the engagement between AMCON and the AMPs will help to improve the debt recovery process in the country.

 

Proshare Nigeria Pvt. Ltd.

 

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