Assets Management Corporation of Nigeria (AMCON) was created in 2010 to be a key stabilizing and re-vitalizing tool established to revive the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy. In this interview with the Economic Confidential Editor, Ewachje Ajefu, the Managing Director/CEO of AMCON, Mr. Ahmed Kuru went down memory lane in journey of over half a decade of asset management and debt recovery of the financial institution apart from sundry issues affecting the Nigerian economy. Excerpts:
EC: How has been the journey of managing assets since inception?
It has been very rough and tough. It is like you asking the mortuary attendants how he or she has been managing with the dead. They are used to seeing dead people all the time such that when their relations die, it’s nothing new because they have become used to them. For us here in Assets Management Corporation of Nigeria (AMCON) it is very rough. We have been very busy to recover money. You know it is not easy to recover debts. If you give your neighbor who came to you under a distressed situation and lend him money, and promise to give you back the money when salary is paid at the end of the month, I can tell you in nine out of ten cases will frown his faces when you approach them for refund. He will feel you are disturbing him after all these relationships. So to chase debtors is the most difficult task especially in this sector. Number one you have people who perpetually do not want to pay debts, and secondly the economy is very hard. When the economy was good, you will wonder what has prevented him from paying debts. And now when things have gone bad, they have reasons not to pay!
EC: How come banks could not recover their debts?
In the banking industry, the debt recovery department was usually a place where they keep people that were not busy. If you send them to credits, they are not performing, send them to human resources, no improvement, even operations you will be discouraged. So if the management didn’t want to sack them, they sent them to recover debt. Because debt recovery then was seen as ‘just go and recover my money for me’ as if it does not require special skills. But I can tell you that it does require special skills because you are dealing with people who are terrible and sometimes dubious apart from dealing with a difficult situation itself and you want to collect money that has already been spent. So it is very rough and tough.
EC: Can you put a value in terms of Naira and kobo on the assets so far in your possession?
You know valuation of assets goes with time. What you value yesterday may differ from today. All I can say for now is that we bought assets worth about N3.3 trillion and we paid N1.7 trillion. Now the assumption is that with the passage of time some of the valuation will go up. And if the valuation goes up, we will be able to take advantage of the gap to cover the financial accommodation we provide that is not backed by any assets. When AMCON was set up, it was to provide financial stability. That financial stability was as a result of the global financial crisis. What was done at that time because Nigerian banks were showing signs of distress, and backed by lack of liquidity for the people, and to jump-start the economy again, government decided that banks should transfer all the non-performing loans to AMCON so that AMCON will provide liquidity to them. Now there were assets worth N3.3 trillion, and AMCON paid N1.7 trillion. What people do not realize is that there is also what we call financial accommodation. Because of the financial situation at that time, there was need to bring the net asset value of some of the financial institutions to zero. So it was decided that about eight banks should be provided with financial accommodation worth N2.3 trillion, such that if the net assets come to zero, they will be able get themselves out of the financial crisis. The assumption is that if I am buying assets worth N3.3trillion, and paid N1.7 trillion, you have a margin of N1.6 trillion. And with the passage of time, and given the inflationary nature of our economy, the assets will get value from the value of N1.6 trillion to even N3.3 trillion which will be able to take care of the financial accommodation we are talking about.
EC: Did it work easily that way?
No. Unfortunately the reverse is the case. There are reasons for this. Number one, those assets were in distress at the time of acquisition and the ability to get value for them now is almost impossible. This is because they are coming from the financial institutions that if they had their choice, they would not have sold them to AMCON. So for them to have sold them to AMCON means they are not in advantage. Secondly, the current economic situation does not support assets to have value because most of the assets depreciated within this period. Now if you want to value this building today, and say it is N2 billion. Somebody will come and tell you he will pay N500 million! And so there is a gap. Instead of the real market value going up, it will continue to depreciate. In our possession today, we have assets worth in excess of N2 trillion. So even if you want to sell these assets today, I can assure you will not get N2 trillion. For us, supporting the economy is very key. But when the economy is growing, our assets will also grow.
EC: Does the change in exchange rate affect the assets in your possession?
No it should not because our liabilities are in Naira. If the economy is booming really it does not have direct impact in what we have. In areas where it will affect us is where we have established letters of credit in favor of our obligors when they import certain items like petroleum products. Take for instance you establish for either N170/$ or N190/$. Today we have no commitments to pay those foreign banks if not we will do it for above N300/$. So if I have to deploy N2 billion before now, today I have to pay not less than N4 billion. So in that case it has a direct impact. But I can tell you when you are talking about foreign exchange in Nigeria, because of the sensitive nature of the economy we are operating, you will be shocked that if you go to your village, the Akara seller will tell you that dollar is now N300.When she starts making the analysis for you of how she doing her business. So if she was selling for N200 before its now N300! She will back it up by telling you transport fares have gone up, firewood price is up and even relating everything to dollar rise.
EC: Are you perpetually bailing up financial institutions?
What I said and I will repeat is that AMCON is not set up to perpetually bail out financial institutions. AMCON has a sunset period. When AMCON was set up, it was supposed to be there for only ten years! And that is the law. It was set up because of the global financial crisis of 2008/2009 and to my mind, it has contributed in stabilizing the economy as at the time it was set up, because it has provided financial stability to the financial institutions. Now if you set up an institution to address failure, that means you are anticipating failure and I don’t think that is a good mindset. So there should not be an institution to anticipate failure. Even for Police Force, they are there to prevent you from committing crime, but not set up to catch criminals. But if they can’t prevent you that is the time they can arrest you. Now it’s time for AMCON tackle its financial obligations and that is why you see the aggression in recovery. As for the debtors, if you say there is no money to pay us, remember AMCON paid cash for these assets. So if you don’t have money to pay us then return the assets, because the assets belong to us. Remember too that we got these assets from a distressed situation. This is because if those banks have solutions to their problems, they would not have sold those assets. Banks intentions most times are to create credit. So having a good credit is a plus for any bank. But if there is something positive in it they would not sell. So if you can’t pay now, what we do is to seat down with you and discuss how to help your business. It is only when it’s obvious that we cannot help you that we now ask you to return the assets to us. Note too that this AMCON has been on in the last five or six years. So if in the last five or six years when they say the economy was booming you cannot pay your debts, what can you say now that the economy is in recession?
EC: When will you redeem your bonds?
We have to redeem our bonds, which will become due at the end of the tenure. But most fundamentally, there’s this assumption that because we transfer assets from commercial banks to AMCON, people expect magic wand. They have forgotten that some of these facilities have been restructured several times between five to even fifteen years. They were technically dead! Some of them are not even in coma, I mean dead. Some of those that in coma, we incubate them and see how they will recover. We are not set up to manage any business. We are just facilitators. In the last five years we have been restructuring and the performance level is less than 10 percent! We now restructure for recovery. At any point in time we see a business doing well we support them because you cannot go and start seizing assets in that condition but only give them time to pay. But it is also important to send out a message that AMCON is operating in national interest. The debt that is resting in AMCON is government debt. If we don’t recover that money, in one way it becomes the responsibility of government in one way or the other. So government cannot carry taxpayers’ money to be subsidizing businesses. We are sounding this because we have quite a lot of people fighting us out there as if this is personal.
EC: How do you feel about those fighting AMCON?
I will want somebody to fight me on the basis of facts and not on pages of newspapers made up of press releases that predominantly false. Some will even tell you they have paid their debts, and why are you after them. We in AMCON have not lost our senses to the extent of chasing people everywhere. The upsurge in misinformation is so alarming. But I can tell you we don’t fight anybody on the pages of newspapers, but what is important to us is to recover our money. We will also support businesses we believe will be able to recover and bounce back to pay our debts. Some of these businesses think because those behind them are powerful means we cannot ask them for their debts.
EC: What about some of your debtors arguing about their indebtedness?
You see there should be no argument in the first place. Whatever we collect here, I am not being paid bonus. However amicable resolution of disputes is the best option. All the money we collect go to government. It’s like somebody going to collect tax. It is not personal. If you collect the tax, you will not put it in your pocket. Generally, in this country when people are big, they believe nobody can touch them. The moment you touch them it becomes personal. I believe we can talk about your indebtedness and find a way of going round it. If I discover that there is no way in your lifetime you can pay this debt, then give me the asset, there is no two-way about that, because you cannot perform any miracle. If anytime you see AMCON in court, you will notice the meticulous way they have gone before the court and you can’t fault that. When everything has failed, some people wants to be smart, doggy, legalistic, then we will have no option than to follow the legal means of recovery. And then our law has provided for us to talk you ultimately to an arbitrator, which in this case is the court. And whatever the court decides is okay by us. If the court says you should not pay me, I will not lose my sleep because there is nothing personal.
EC: It seems some of the major debtors are very powerful?
No matter how highly placed they are in the society, we will carry out our duty of debt recovery even in the face of intimidation. We will follow any case in court to its logical conclusion be it in the High Court, Appeal Court and up to the Supreme Court until we are satisfied that the Act setting us have been fully complied with. We are not taking anything personal here but only for national interest. We are not interested in grandstanding or drama because it doesn’t help the process.
EC: Now let us talk about the life span of AMCON. Will it be extended?
Now the way the law says is that when at the end of the ten years AMCON is not able to recover all the facilities, the National Assembly has the discretion to give extension. They are not amending or creating a new law, as the law gives them that power to give extension. So it is just for us to go to them and ask for extension in even view of the situation and if in their wisdom our demand is justifiable, they will oblige.
EC: The Central Bank of Nigeria has been deducting money from the banks in your favour as sinking funds. For the benefit of Nigerians, what is sinking fund?
First of all, AMCON is a child of necessity. It was created to help the financial institutions to weather the storms of global financial crisis of 2008/2009. Now if you recall, I told you that we took N1.7 trillion to buy assets worth N3.3 trillion. Then N2.2 trillion for financial accommodation. You know too that in restructuring we will not have recourse to tax payers’ money. Now since the intervention was targeted at us, we will also contribute towards the stabilization fund. So from whatever you realize from your assets vis-à-vis your bonds, the sinking funds will continue to complement. Now that is the law.
EC: We realise that in some cases AMCON takeover properties of debtors that were not in the loan agreement. Do you have power to do so?
The Act that establishes AMCON empowers it to go after assets and properties of the debtors wherever they are. Our law gives us the right to go after such assets. For instance, if you come under a vehicle and collect our money and suddenly we realise that you ere somewhere doing other businesses. Meanwhile you have taken our loans for a different project, the law allows us to go after you so far we can link it to the loan. The law also allows “Asset Tracing” which means that it is not only the asset you give us that we should go after. If you have any asset, anywhere, once we can trace it, we can go to the court to obtain the possessing order.
EC: Is that what happen to assets under Global Fleet and NICON groups that are owned by an individual?
Well, you are the one that said it. What I can tell you is that once there is common ownership wherever it is we can go after it. For instance, an “A” may borrow the money, then the principal that borrow the money has interests in “B,” “C” “D” up to “Z.” We can follow all through because the law allows us to do that by linking them up.
EC: Your parting words for debtors?
I will say to debtors to come forward for us to discuss and find lasting solution. The idea of attacking us on the pages of newspapers will not help them. We have in this process helped a lot of businesses bounce back and on the part of recovery. We don’t want any business to suffer because of their debts. We are not out to kill businesses but to encourage them to grow by following the global best practices in debt reconciliations and settlements. Our desire is to recover the money for the nation through painless processes.
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