The Chairman of the House of Representatives Committee on Banking and Currency, Jones Onyereri, has said that the House would stop the Asset Management Corporation of Nigeria, AMCON, from purchasing new bad debts from Deposit Money Banks, DMBs, in the country.
Mr. Onyereri, who was speaking in Enugu State at the opening of a retreat for the lawmakers, noted that since the country’s economy is already on the path of recovery from recession, it would not be advisable for AMCON to take on that responsibility now.
“We are aware that some economists are clamouring for AMCON to buy more toxic assets from the Eligible Financial Institutions, EFIs, in the country. We wish to sound a note of warning that this committee will not, I repeat, will not support any such move.
“At least not at a time like this in the history of our economy. The very high level of non-performing loans in the country are worse than the 2009 experience and far above the regulatory threshold,” Mr. Onyereri said.
Although he commended AMCON for performing above board as an interventionist institution of the federal government, he expressed worry that the corporation often faces institutional and legal constraints to achieving optimum results.
In 2015, Mr. Onyereri said, the House decided to amend certain aspects of the AMCON Act to further strengthen the corporation, including the establishment of the resolution sinking fund to support its operations.
The lawmaker traced the legal and institutional bottlenecks to lack of co-operation from EFIs; issues relating to claw-back on EFIs and intervened banks, and wrong interpretation of the AMCON Act, resulting in conflicting decisions by the courts, especially where it relates to possessory and freezing orders.
The other challenge, he said, has to do with disingenuous acts of the obligors, who exploit court processes and the shortcomings in the extant statutes to frustrate the efforts of the corporation to recover the loans from obligors.
“I find it troubling that while some of these obligors frustrate AMCON 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 clawback on the EFIs.
He said AMCON needs to be empowered to recover the public funds used to buy these bad loans that helped prevent the EFIs from going under.
Besides, he stressed the need to sensitise the courts to speed up the process of resolving AMCON cases before it, by streamlining the processes and preventing obligors from using technicalities to circumvent the process.
The Managing Director/Chief Executive Officer of AMCON, Ahmed Kuru, said the corporation’s recent assessment of obligors as at December 31, 2016 identified 350 accounts with a current exposure of N2.5 trillion, representing about 80 per cent of AMCON’s total obligor debt.
He said AMCON had also repositioned its debt recovery approach to strengthen legal and credit restructuring units to collaborate on the 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,” Mr. Kuru said.
He said reasons given for AMCON’s failure to recover its debt, principally owed to the Central Bank of Nigeria (CBN), could not be quantified, as it goes beyond economic cost.
The AMCON boss said the corporation’s debt repayment to the CBN stood at about N456.4 billion and N517.7 billion for 2015 and 2016 respectively against actual payments of N256.7 billion and N191.1 billion.
This translated to a funding shortfall of N199.7 billion and N326.4 billion for the two years respectively, represented 42 per cent and 53 per cent gaps, while the resolution cost fund represented 58 per cent and 47 per cent in 2015 and 2016, respectively.
The funding plan envisaged 70 per cent contribution from the resolution cost fund and 30 per cent from recovery.
“Today, 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 in 2016. Given the current demands on the Federal Government, it is doubtful that it can afford to dispense AMCON’s debt in the short term,” he said.
Mr. Kuru urged the lawmakers to weigh the implications of the proposed Nigerian Assets Management Agency, NAMA, on AMCON, arguing that under the law, the corporation should not qualify as an agency it covers, as its asset were principally acquired from the banking sector to resolve debts.