MEMBERS of the House of Representatives Committee on Banking and Currency, of the Federal Republic of Nigeria have indicated that they will be ready to block any plot to lure the Asset Management Corporation of Nigeria (AMCON) to acquire new debts from the Deposit Money Banks (DMBs) in the country.
At the opening of the retreat for lawmakers in Enugu declared open by the State Governor, Lawrence Ifeanyi Ugwuanyi, Monday, the Chairman of Committee, Hon. Sir Jones Chukwudi Onyereri said he and his colleagues agreed that their position would be the right decision for the country considering the state of the economy, which is on the pathway to recovery after sliding into recession.
Said Onyereri: “We are also aware that some economists are clamouring for AMCON to buy more toxic assets from the Eligible Financial Institutions (EFIs) in view of the very high level of the non-performing loans that are worse than the 2009 experience and far above the regulatory threshold. This Committee will not support any such move. At least not at a time like this in the history of our economy.”
He noted that although AMCON as an interventionist institution of the Federal Government has performed well since it was created, the institution is often constrained by institutional and legal stumbling blocks from achieving optimum results, “which was why the House in 2015, amended certain parts of the AMCON Act to further strengthen the institution, like the establishment of the resolution sinking fund.”
He explained further: “These legal and institutional bottlenecks arise from lack of co-operation from EFIs, issues relating to claw back on EFIs and intervened banks, wrong interpretation of the AMCON Act, which has led to conflicting decisions by the courts especially where it relates to possessory and freezing orders and disingenuous acts of the obligors, who exploit our court processes and the short comings in the extant statute to frustrate the efforts of the Corporation in recovering the loans from obligors.
“I find it troubling that while some of these obligors frustrate AMCON’s recovery efforts, by exploiting the court system, they continue to do business with the Federal Government and get paid. These issues contribute a lot in hampering the efforts of the Corporation and must be nipped in the bud through proactive legislative instruments.
“We have to find ways to ensure better cooperation from the EFIs to enable AMCON effectively recover these loans. Where they are not willing to cooperate with AMCON, then AMCON must and should enforce its right of claw back on the EFIs. It is important to remember and note that public funds were used to buy these loans that helped prevent the EFIs from going under and as a matter of public urgency AMCON needs to recover these monies. Likewise, there is need to sensitize the courts on the need for speedy resolution of AMCON cases that are before it. The court processes need to be streamlined and obligors prevented from using technicalities from circumventing the process.”
The Managing Director/Chief Executive Officer of AMCON, Mr. Ahmed Kuru disclosed that the Corporation’s recent assessment of obligors as at December 31, 2016 identified 350 accounts with a current exposure of N2.5 trillion that represent about 80 per cent of AMCON’s total obligor debt.
AMCON’s total debt obligation of N4.6 trillion represents 75 per cent of the 2016 national budget, 26 per cent of the 2016 total national debt, and 5 per cent of the country’s nominal gross domestic product (GDP) in 2016. Given the current demands on the Federal Government, it is doubtful that it can afford to expense AMCON’s debt in the short term.
Kuru said: “AMCON has also repositioned its debt recovery approach to strengthen legal and credit restructuring units to collaborate on the aforementioned 350 accounts termed “defaulters,” enhance the restructuring and turnaround team; and engage in asset tracing to enhance recovery.
“In spite of the difficulties, AMCON continues to persevere in the face of adversity.”
Kuru lamented that the ramifications for failure by AMCON to recover its debt, principally owed to the Central Bank of Nigeria (CBN), cannot be quantified as it goes beyond economic cost.
He said that in the last two years, AMCON debt repayment to the CBN were N456.4 billion and N517.7 billion but actual payments were N256.7 billion and N191.1 billion in 2015 and 2016, respectively.
He explained that, “this translates to a funding shortfall of N199.7 billion and N326.4 billion in 2015 and 2016, respectively. Of this shortfall, repayment due from AMCON in 2015 and 2016 represented 42 per cent and 53 per cent while the resolution cost fund represented 58 per cent and 47 per cent in 2015 and 2016, respectively. The funding plan envisaged contribution of 70 per cent from the resolution cost fund and 30 per cent from recovery.
“AMCON’s total debt obligation of N4.6 trillion represents 75 per cent of the 2016 national budget, 26 per cent of the 2016 total national debt, and 5 per cent of the country’s nominal gross domestic product (GDP) in 2016. Given the current demands on the Federal Government, it is doubtful that it can afford to expense AMCON’s debt in the short term.”
AMCON’s chief executive alerted the lawmakers on the proposed bill of the Nigerian Assets Management Agency (NAMA) and requested that the Committee in reviewing the bill consider its impact on AMCON. “Our position is that AMCON should not qualify as an agency as covered under the proposed NAMA bill since AMCON’s assets were principally acquired from the banking sector for the purpose of debt resolution,” he said.