AMCON: The law and burden of high profile debts recovery

 

The Nigerian economy was in a dire state when some financial institutions and some underlying strategic businesses in the country through their chequered histories came to the brink of collapse in the aftermath of the global financial crisis of 2008 through the acquisition of non-performing loans, then came Asset Management Corporation (AMCON)  to the rescue, writes,Editor Gentechnews, Tony Nwakaegho.

The near collapses of these institutions were due to foreign portfolio withdrawals of credit lines and investment from Nigeria; the stock market leading to loss of about 80 per cent of its value when the banking Industry crisis deepened due to poor risk management that led to increase in the non-performing loans (NPLs) of the banks as a percentage of industry loans.

This has been recurring decimal in the banking sector as the CBN governor, Godwin Emefiele said after the intervention in the First Bank imbroglio that the First Bank has for years been plagued by “bad credit decisions, significant and non-performing insider loans and poor corporate governance practices”.

In a speech to journalists, CBN governor, Godwin Emefiele, said First Bank maintained healthy operations up until 2016 financial year when the CBN’s examination revealed that the bank was in grave financial condition with its capital adequacy ratio and non-performing loans ratio substantially breaching acceptable standards.

The CBN boss said: “The bank maintained healthy operations up until 2016 financial year when the CBN’s target examination revealed that the bank was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards.

“The problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices.

“The shareholders of the bank and FBN Holding Plc also lacked the capacity to recapitalise the bank to minimum requirements. These conclusions arose from various entreaties by the CBN to them to recapitalise.”

President, Bank Customers Association of Nigeria (BCAN) Uju Ogubunka, stated that the challenge facing FirstBank should have been tackled earlier by the CBN, without getting to this level.

“I expect the CBN to be more proactive going forward. The level of insider loan abuses seen in FirstBank was an indication of regulatory negligence. The perpetrators and the directors involved in the insider loan abuse that were in excess of the single obligor limit should have been sanctioned before now. Supervisory roles of the regulator should be more proactive going forward,” Ogubunka said.

The former Executive Director, Keystone Bank Limited, Richard Obire said the CBN acted rightly in the face of critical corporate governance crisis in the bank.

Obire said “It seems there are significant governance issues at FirstBank where a director is borrowing so much from the bank that it has come to constitute balance sheet challenges.”

This type of situation made the CBN to propose to the National Assembly on the need to set up an Asset Management Corporation (AMCON) to recapitalise the banks and to recover the debts using the various resolutions mechanisms, but these mechanisms were flawed; hence the corporation sought the amendment of the AMCON Act.

The Nigeria’s Senate also recently passed the AMCON bill after considering the report of its Committee on Banking, Insurance, and Other Financial Institutions.

The amendment bill now empowers AMCON to, among others, take possession, manage or sell all assets traced to debtors, whether or not such assets or property are used as security/collateral for obtaining the loan.

The bill also empowers AMCON to access the special tribunal established by the BOFIA, 2020 for dealing with financial related matters.

Senator Uba Sani (APC, Kaduna Central), chairman of the Committee while arguing the bill said the stakeholders in their submissions pushed for AMCON to be empowered to take possession, manage, foreclose or sell, transfer, assign or otherwise of property used as security for eligible bank assets among others.

Senator Ovie Omo-Agege (APC, Delta Central), deputy president of the Senate,  however during the clause-by-clause consideration of the bill,  questioned the rationale behind the recommendation of the committee in clause two, which empowers AMCON to take possession of assets outside of those used as collateral in obtaining a loan request.

Senator Bassey Akpan (PDP, Akwa-Ibom North-East) added that no creditor should be allowed to go outside the asset presented for the facility.

The law setting up Asset Management Companies is different in different locations. In other climes, ownership was transferred with the enactment of the law, but in Nigeria, AMCON has to go to the court because of the constitutional right of hearing as well as the winding down laws which are different.

Some pundits had earlier viewed some aspects of the amendments as unconstitutional citing the time limit for courts to determine AMCON cases within six months as violation of the right to fair hearing as it will prevent the judges from doing a detailed job on every matter.

One of the proponent opined, “Important to note that many of the provisions of the AMCON (Amendment) Act, 2019, which empowers the agency to gain access into the personal accounts of individuals (debtors), access his\her personal details and even take possession of funds in those accounts autonomously are inconsistent and run at parallel with sections 37 and 44 of the Constitution which seeks to protect the privacy of citizens and deter compulsory acquisition of their movable and immovable property by any agency, without adequate compensation.

It was in view of this development that in September 2019, the Presidency constituted ‘Inter-Agency Committee for the Recovery of AMCON Debts’ comprised of eight key government agencies – Independent Corrupt Practices Commission (ICPC); Nigerian Financial Intelligence Unit (NFIU); AMCON; Nigeria Deposit Insurance Corporation (NDIC); Federal Ministry of Justice (FMoJ); Economics and Financial Crimes Commission (EFCC); the Central Bank of Nigeria (CBN) and the Department of State Services (DSS).

Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr Ahmed Lawan Kuru highlighted that one of the major challenges to AMCON’s recovery mandate is the slow pace of the judicial processes as well as obligors deliberately hiding under the technicalities of the law to cause orchestrated legal delays; hence AMCON enforcements lately.

According to Jude Nwauzor, Head Corporate Communications Asset Management Corporation of Nigeria, “currently debtors owe AMCON over N5trillion and it has over 3,000 cases in court.”

Finding has shown that in terms of recoveries, so far, AMCON have made a total recovery of above N1.2 trillion, sold assets worth about N500 billion and have resolved close to 5000 Eligible Bank Assets (EBSs) as well as paid over N2 trillion to the CBN.

Recall also that AMCON acquired over 12,000 NPLs worth N3.7 trillion from 22 banks and injected N2.2 trillion as financial accommodation to 10 banks in order to prevent systemic failure.

AMCON has also supported the aviation and manufacturing sectors with its intervention efforts in Arik Air and Aero Contractors.

AMCON is indeed fighting for the good of all Nigerians because recovery of these monies and its judicious application to the Nigeria economy will improve critical infrastructure such as roads, rail lines, security, power generation and distribution, mass housing, amongst others.

The AMCON Boss affirmed that it has reached a stage in the operations of the corporation that its future successes and achievements most certainly depend on the staff, third parties like the judiciary substantially and other agencies of government.

From all intents and purposes the management of AMCON has no control over the National Assembly matters as any contentious clause in the latest bill could be challenged in a court of law, which will further enrich the legal jurisprudence in Nigeria.

However, if AMCON fails to recover the outstanding debt from these recalcitrant debtors, the whole thing will be a burden to all Nigerians.