The Asset Management Corporation of Nigeria (AMCON) is in hot pursuit of more than N5 trillion Nigeria’s taxpayers’ monies trapped with bad debtors. The Ahmed Kuru-led management has particularly shown courage in leveraging the AMCON’s amended Act to rally all forces against recalcitrant debtors, irrespective of status and societal positions. In this Special Report, Newsclick Nigeria’s Senior Correspondent, Olusegun Kugbayi examines the underlining issues behind the recent invitation of the AMCON Managing Director by the Economic and Financial Crimes Commission (EFCC) which some Analysts see as a new ploy to distract the Corporation and whittle down its enforcements as the election cycle gathers momentum.
The Asset Management Corporation of Nigeria (AMCON) has in recent period shown a renewed agility in its pursuit of recalcitrant bad debtors. The bad debt corporation appears to have found new winning tricks with increasingly successful court cases and orders mandating tracking and seizures of assets of bad debtors. Riding on the back of increased powers and clarity in its amended Act, the bad-debt corporation has upended its assets search, recovery, litigation and management processes, blocking several loopholes previously being used by highly powerful obligors to evade payment of bad debts running into several trillions of naira. The amended laws and improved processes, have resulted in recent huge trough of court orders and seizures. With the humongous amounts and personalities and properties involved, the headline news have added to the discomfiture as the nation is increasingly waking up to the realities of the “big men” and the mess of debts owed the nation, in an era of increasing national borrowing to finance budget deficit.
This was the background to the recent petitions by some powerful fronts to the Economic and Financial Crimes Commission (EFCC) against the management of AMCON alleging impropriety in the pricing and disposal of assets. The case of Atlantic Asset, which facility led to the collapse of the defunct Skye Bank Plc and loss of investments by shareholders, featured prominently in the petitions. The invitation and questioning of the Managing Director of AMCON, Mr Ahmed Kuru were carefully orchestrated and ‘leaked’ to turn what could have amounted into inter-agency exchange of files, to a headline breaking news couched in semblance of investigation of AMCON and its hard-fighting MD. It is noteworthy that the invitation for questioning by EFCC came as the ultimatum given by AMCON to recalcitrant debtors to submit repayment plan forthwith or risk being published in national dailies expired. AMCON had obtained the nod of the National Assembly to publish the names behind the multi-trillion naira debts in national dailies. While the National Assembly, irked by the audacity and continuing delaying tactics employed by the powerful obligors, had given immediate approval for the ‘naming and shaming’ tactic of publishing names in national dailies, AMCON in its usual meticulous approach and observance of due process and legal norms, issued a public notice of demand for repayment plans by the obligors, setting a deadline after which it would have no choice but to publish the names of the bad debtors. It should be noted that these debts were purchased by AMCON during the first and second phases of Eligible Bank Asset (EBA) more than 11 years ago. What was supposed to be a lifeline to the debtors and the financial sector, by implications also the nation, during the throes of the banking crisis, has become a festering sore on the psyche of the nation.
The EFCC petitions sought to raise public opprobrium to befuddle the unsuspecting public, since they ultimately lack the facts to prove their case of impropriety and under-pricing. But the processes of asset valuation, pricing and disposal are well explained and the evidences abound of the efficiency of the value accretion of the corporation. AMCON’s assets consist broadly of shares or equity stakes that arose from direct capital injections and swaps and financial claims that arose from bad debts due from obligors, which indirectly gave the corporation claims on the collaterised and non-collaterised assets of the obligors. For both classes of assets, AMCON has clearly spelt-out processes in line with international best practices and extant rules and laws on asset valuation. It should be noted that because of the quantum of its bailouts, AMCON was the second largest holder of quoted equities after the pension industry. The bad-asset resolution company had invested trillions of naira in the purchase of non-performing loans and recapitalisation of banks, which yielded direct and indirect shareholdings in the banks and non-financial companies.
For shares, the corporation follows the share pricing valuation methodologies usually adopted by companies offering shares for sale, which in the case of publicly-listed shares, the current and average pricing values. These shares disposals are done through the negotiated window of the Stock Exchange, which offers the corporation best value, lower cost and transparency, as details of such are published for public consumption. Such sales in the past, were done at premium to market prices, underlining the efficiency of the corporation’s valuation methodology and negotiation power. For instance, when AMCON sold its fourth largest equity stake in Paints and Coatings Manufacturers Nigeria (PCMN) Plc, it was sold at a negotiated price of N1.05 per share, which was a premium of 61.54 per cent on PCMN’s then current market price of 65 kobo and five per cent above the company’s one-year then highest price of N1. Also, when the corporation divested its 9.4 per cent equity stake in Niger Insurance Plc., it did so at a premium to the openly available market price, leveraging the advantage of its bloc holding. These disposals are also guided by the overall interest and sustainability of the companies, ensuring that financial strength, competence and technical capability are not lost on the altar of value retrieval. This was the underlining reason for the sale of the corporation’s equity stake in Sterling Bank Plc., to the Bank’s staff cooperative society, which coughed out N3.8 billion to close the deal. Such consideration, has seen the survival of most intervened institutions including Union Bank of Nigeria and Wema Bank among others. AMCON’s divestments are also guided by the corporation’s primarily established credo of extracting its value and restoring the sustainability of the company involved without unduly holding on to equity stakes, as the corporation has continuously reaffirmed its mission as bad-debt recovery vehicle and not a long-term investor or manager of corporate entities.
As such, in instances where the obligors and companies have shown good faith and willingness to repay their debts, AMCON evidently has historically shown strong preference for amicable, arm-length resolution. In the case of RT Briscoe (Nigeria) Plc, AMCON deployed a receiving-recovery arrangement aimed at facilitating the repayment of some of the company’s bank debts without undermining the operations of the ailing company. The receivership was designed to allow for unfettered business operations of the company under existing board and management, and included the fulfilment of all pre-receivership contractual obligations. This, saved the pre-independence company burdened with loans and depleted capital base, and impliedly shareholders and employees from unfathomed losses. Incorporated in 1957, RT Briscoe (Nigeria) had evolved from a truck-engine importer to become Nigeria’s most visible listed automobile company, owned by more than 40,000 Nigerian shareholders.
Newsclick Nigeria further reports that in instances where the corporation resorts to seizures and aggravated debt recovery strategies, publicly available evidences have shown that these were the last recourse after long-drawn forbearances and evasive tactics by the obligors. For instance, it was only in March 2021 that AMCON took over assets linked to Centage Savings and Loans Limited and its chief promoter over an indebtedness of more than N3.5 billion that span over 10 years ago.
Head, Corporate Communications, Asset Management Corporation of Nigeria (AMCON), Jude Nwauzor, noted then that the case of Centage Savings and Loans Limited and its chief promoter have been a protracted issue since the loan was purchased during the first and second phases of Eligible Bank Assets (EBA) purchase from the then Finbank (now FCMB) and GTBank, over 10 years ago.
“Since then, AMCON has offered the obligor, a good measure of olive branches and explored all avenues to resolve the matter amicably, but the obligor and his company, Centage Savings and Loans Limited have remained recalcitrant and unwilling to repay the huge debt owed the corporation,” Nwauzor stated. The same applied to the seizure of assets of an Ogbomosho Senator, whose properties were seized over unwillingness to pay a N600 million debt. The N600 million indebtedness was in relation to a loan from Guaranty Trust Bank (GTB) Plc., which was subsequently classified as non-performing and then purchased by AMCON from GTB during the second phase of eligible bank asset purchases several years ago. The Senator allegedly refused to repay the loan despite the concessions made to him by the corporation in a bid to amicably resolve the bad debt.
A Public Affairs Analyst, Mr Akeem Adeleke, said the no-holds-barred approach of AMCON to its enforcement and the current change of strategies that appears to be winning with successful court cases and seizures, are piling up the heat on the recalcitrant obligors, most of whom are highly placed individuals. As the election cycle draws nearer, they hope to draw on political sympathy and the somewhat lukewarm attitude to economic policies to divert attention. AMCON’s recent seizures included properties of several highly placed politician-businessmen, across all the political divides. Besides, AMCON Act allows the corporation to trace, track and attach previously unlisted assets and properties of the obligors to the tune of the bad loan size, thus blocking a loophole hitherto exploited by obligors who pledged collaterals significantly lower than the value of their loans and those who carried on with new life by simply abandoning the loans and pledged collaterals, while doing well on new businesses and taking new loans. AMCON is bringing the fight literally home to the obligors, de-masking them of their false sense of social, economic and political importance and squeezing their financial survival by coupling together the totality of their assets and loans. “The stark reality is that most of these ‘highly influential persons’ are insolvent and bankrupt when you look at the size of their bad loans the corporation is seeking to recover and their assets, so they are fighting for their life and that’s why you see all tactics being deployed to hoodwink the public. They have lost in the law courts as the judiciary appears increasingly intolerant of delay tactics and technicalities,” Adeleke said.
In the case of Deap Capital Management and Trust Plc which had indebtedness of some N1.6 billion, AMCON had in July 2020 enforced recovery order and seizure on properties belonging to the Chief promoter of the company, after allegedly offering him concessions and exploring all avenues to resolve the debt harmoniously to no avail. However, due to the lack of adequate collateral, AMCON had to commence asset tracing on the company’s directors, an exercise, which revealed seven properties, which the corporation subsequently enforced in February 2021. AMCON’s action was in line with Section 61 of the AMCON Act, 2010 and Section 49 (1) & (2) of the AMCON Act 2019 (As Amended), which gave the corporation powers to trace and attach unlisted assets.
AMCON had purchased the non-performing loan (NPL) of Deap Capital Management & Trust Plc during the first phase of Eligible Bank Assets (EBA) purchases from Zenith Bank and FCMB in 2011. It took more than a decade to bring the obligors to book. The board of the company had resigned on December 31, 2020 simply thinking they could walk away, but AMCON had another masterstroke. Relying on order of the Federal High Court, Lagos Division made on January 18, 2021, AMCON on February 23, 2021 took effective possession over assets belonging to 14 former directors of Deap Capital. The list of assets showed the pain points of AMCON’s new approach as the seized assets included properties situated at Ikeja, Lagos State; Magodo Residential Scheme; Lagos, Okota, Lagos, Isolo; Lagos State, Lekki Peninsula Residential Scheme, Lagos, Lekki Area, Lagos; Government Land Allocation, Lekki Peninsula Scheme II, Lekki, Lagos State; and 2nd Avenue Estate Extension Ikoyi, Lagos State. The court also ordered the freezing of the bank accounts and shares of the 14 company directors.
Following the same approach, AMCON had in March 2021 took over 13 prime assets linked to Centage Savings and Loans Limited and its chief promoter over an indebtedness of over N3.5 billion. The case of Centage Savings and Loans Limited and its chief promoter had been a protracted issue since the loan was purchased during the first and second phases of Eligible Bank Assets (EBA) purchase from the then Finbank (now FCMB) and GTBank over 10 years ago. AMCON not only took over the 13 assets strewn across highbrow Victoria Island, Ikeja, Lekki, Magoro and Ajah, Lagos; as well as Apo and Lugbe in Abuja, Federal Capital Territory (FCT); the court also ordered freezing of the bank accounts of the chief promoter.
Kuru understands the enormous challenges the corporation is facing. According to him, AMCON is in peculiar situation. Out of total of N4.158 trillion by July 2021, the Corporation had so far recovered over N1.48 trillion. AMCON still has 7,902 outstanding obligors with total outstanding loan of above N3.1 trillion. With a breakdown, 350 obligors alone account for over N2.053 trillion, which is more than 70 per cent of total outstanding amount.
“All our action is geared towards settling our obligation with the CBN. After recovery and disposal, funds are paid directly into our CBN account. Recovery and disposal of assets have so far contributed above N1.270 trillion towards settling our obligation. The economy and the banking industry are not growing at the expected rate thereby creating a huge gap in our recovery activities. At the recovery rate we are currently experiencing, we may not be able to cycle out even in the next five years. Additionally, the interest rate AMCON is shouldering on its bond to the CBN is making it difficult for the recovery rate to grow.
“There is no easy way to recover money, no easy way. It is always difficult for both sides. One doing a hard job and the other responding to a hard situation. Let us not forget that these loans have remained uncollected for minimum of 10-15 years! Just imagine your neighbour coming for the repayment of loan given to him before your 10-year-old son was born. It is not easy! However, we have responsibility to collect and shall continue to pursue them within the purviews of the law.
“You should not therefore be surprised when people, obligors continue to report us to you or react based on one sided view in the social media. It is difficult for us, but it is a trust, which we intend to keep. The easy way for us is to be routine debt collectors, which I can assure you will not yield any result and we would continue to have the debt burden increasing due to compounding interest,” Kuru said.
The bad debt resolution agency has reaffirmed that it remains committed to an all-out seizure of assets of recalcitrant debtors as it seeks to recover more than N5 trillion locked up in bad debts purchased during a bailout period for the banking sector. With greater alignment of strategies with its professional partners and legal teams; as well as the additional powers granted it under the amended Act, which provides the agency with wider power for prosecution and enforcement against the debtors, the resolve of the Kuru-led management is a mortal threat to bad debtors.
This special report was facilitated by Newsclick Foundation for Investigative Journalism (NFIJ)
