Managing Director of the Asset Management Corporation of Nigeria (AMCON), Mr Ahmed Kuru, held a news conference recently on ‘Debt Recovery, Nigeria Economy and the Corporation.’ He explained why AMCON stepped into some businesses, its challenges and why it cannot sell off all assets at the present state of the Nigerian economy. Excerpts by CHIMA NWOKOJI.
WHY can’t AMCON dispose of all its assets?
If AMCON disposes of all its assets, it will not be able to realise up to N1.5 trillion out of about N5.3 trillion exposure in its books. That is why the banks’ sinking fund is very important to us. Whether we make profit or loss, at the moment is not important. What is important to us is what we have been able to recover at minimum cost. This is because the more you recover, the more the cost of recovery goes up. It means we have made more expenses to lawyers and recovery agents. We are sitting on substantial real estate assets because due to the economic situation, if we sell them today, we are going to record a lot of losses.
If there are some loans that can never be recovered, why is AMCON still keeping them in its books?
There is a gap between valuation and the actual value of assets. We have shares that have lost their values. For example, someone took a loan of N120 million in those days of share manipulations at the stock market. Today, the shares are barely N100 million. The auditors determine the current value of those shares. There are also certain types of obligors that cannot pay their debts. Though their values have diminished, the AMCON Act does not allow us to write them off like the banks, until the winding down of the corporation. At the end, if there is any outstanding, we hand them over to NDIC and CBN. One thing is certain, even if you extend the life of AMCON for 20 years, it will not be able to recover all the loans. By 2023 to 2024, the corporation is expected to wind down. However, the banks will continue to contribute to the sinking fund. If after operating for 10 years, in addition to two to five years when the facilities were still domiciled with the commercial banks and we couldn’t do anything that means there is nothing else we can do.
ALSO READ: ‘AMCON lacks good knowledge of Nigeria’s aviation history’
What are the challenges facing AMCON in the business of debt recovery?
At the point when the transactions were entered into, some of the banks did financial engineering. They raised the interest payable and instead of the obligor paying N4 billion, it became N7 billion. So there are some loans that are unrecoverable.
AMCON bought 14,000 loans. Talking about 14,000 firms and individuals is not small amount of task. There are about 350 of them that account for 85 per cent of the exposure. If we focus on that 350 and we achieve 50 per cent of that, we have achieved the global standard of 50 per cent of recovery.
AMCON has about 400 staff that cannot do these jobs alone. That is why we introduced assets recovery partners who will assist in recovery of loans from lower level businesses. We have given out more than 7,000 accounts to them. I know that we may not recover all the 14,000 loans, but we can concentrate on the major ones. The Judiciary has been helping us a lot by putting some of our cases on fast track. The corporation is working with the judiciary and the legislatures to see the areas of the AMCON Act that could be amended for more efficiency.
Why does AMCON intervene in businesses?
AMCON is not structured to run any business. If you see the corporation meddling with any business, that means the obligor has failed to perform, and we are compelled to intervene. When we intervene, we look for professionals that understand that business to run it for a period that we want to divest. So, all our subsidiaries are passing through one form of divestment process or the other. It is not very easy to divest. Our gestation period at the point of entry is usually six months. If it extends to a year or more than that, it means that is a special circumstance. We do not have any business to run for a long term. So far, AMCON has disposed some financial assets, including three banks and is in the process of divesting its interest in Peugeot Automobile Nigeria (PAN). Our intervention in the agriculture sector is in the region of about N1.7 trillion.
In a situation where an obligor in the process of restructuring offers to service his or her debts beyond the lifespan of AMCON, what happens?
Based on my little knowledge of international business, I don’t see where an obligor will be allowed to pay beyond the lifespan of AMCON. However, where we can clearly see what a new investor is doing, see your business plan and cash flow, see the industry you are playing in, the capacity of the management, and we are convinced that you can do well in that line of business we can look at that. That investor will have to convince us on how he or she is going to turn around the business. But this is not for the original owner of that business. It is for the new investor with adequate capital. If it is the original owners, we will sell the assets or that obligor will go and bring our money.
What is AMCON doing about the problem with Daily Times Newspapers?
This is a very complicated matter because there is a controversy between the families of Senator Okechukwu Obiorah and the Anosikes. AMCON is only interested in getting its money. We had initial agreement with Obiora to make some payments to us. Unfortunately for him, he couldn’t keep to that agreement. We then moved in to possess his assets. You know that in newspaper business, you can print your paper in a different printing press while your main office remains somewhere else. So, that Ikeja location is not the problem in terms of production of Daily Times. For us, we just want to be fair and ensure that we recover our money. We have the order of the court to take over the premises. The property according to court order belongs to AMCON. Unfortunately, because of the security infrastructure, you can go to a magistrate court in Igbosere and get an order, go to Lion building very close by and get some police officers, then go for an operation at Festac Town. That is the situation we are. But I can tell you that nobody can chase AMCON away. What has happened is that some people came and said they were from the Inspector General of Police team. In AMCON we have enforcement unit comprising of more than 60 resident police officers. So, nobody can come from anywhere to take over our assets. But I can tell you that very soon there will be a solution to the Daily Times crisis because we are looking at it not as a newspaper but as a debt. We will deal with it in such a way that the newspaper will continue to come out so that we don’t kill the business but we can recover our money.
AMCON has kept under lock and key, a hotel owned by one of Nigeria’s football heroes Kanu Nwankwo. Why not consider his sacrifice to the country in the past?
I think one of the qualifications for being a national hero is to meet financial obligations. AMCON did not refuse to respect court orders by refusing to release his hotel. He took a facility from a commercial bank. What he told us was that someone he calls his partner is supposed to be paying the debt but the person stopped. How does that concern us? Let him take that person to court. And I can tell you, one of the honourable ways of settling financial obligation is not to take the court process. You cannot take a loan on the basis of being a national hero and fail to pay.
Your slogan says don’t go into hiding, come and talk to AMCON. Are there debtors that have gone into hiding?
To borrow money is not criminal but what you do after that is what makes it criminal. More than 5,000 debtors have gone into hiding. They relocated without traces. By next week or next month we will start publishing a list of debtors, so that they can come to us rather than going into hiding. Before AMCON can go to court, we must have been talking to the debtor for up to five years. Corporate governance in business, our experience has shown that quite a lot of businesses have gone down because of governance issues. Take aviation industry for instance. There is no airline in Nigeria that has operated for 10 years successfully without problems such that we can say that this is a model of an airline. There is a fundamental structural problem. People must be held accountable for any form of impunity. But I can assure you that it is human beings that are responsible. When you give people a perfect document they look for where there is loophole. If there is none, they create one on the document. Since 1999, it is only this week that Nigeria convicted only one governor. People go away with any form of impunity.
Can you say that AMCON has achieved its mandate in the area of debt recovery efforts in 2017?
Up to the financial year of 2017, we have recovered a total of N740 billion. Of course, we have a lot of substantial assets that we are holding in terms of real estate and some other forms of assets. But most fundamentally, quite a lot of traction has been achieved over the period. AMCON has recovered an average of about 37 per cent of what it is supposed to recover.
And in the other climes, the best that asset management companies have done in terms of recovery is about 50 per cent. So, if you gauge what we have done against what is obtainable internationally, you will see that we have done well. AMCON’s loss reduced from N164.94 billion in 2016 to N16.41 billion in 2017.