We’ll soon package more companies for sale – AMCON MD
Ahmed Lawal Kuru is the managing director/chief executive officer of the Asset Management Corporation of Nigeria (AMCON). He is two and a half years old on the job. In this interview with some journalists in Abuja, Kuru speaks on the journey so far. Excerpts:
You have been around for about two and a half years, what were the major successes in dealing with the bad debts recovery and the cases you have in court?
We are just finalising our account so it will not be fair for me to publicise those figures but after the approval of the account, we should have engagement with the press so that we can discuss the figures specifically. By our nature, some of us try not to sing our own praises but I can tell you that we have empowered our people more; we have engaged with the obligor more and they now understand that if you have touched a bank’s money or you have an outstanding with AMCON, you have to come and talk to us. Nobody is exempted from that. We have pursued aggressively quite a lot of court cases and we have won a lot.
We have more than 3,000 cases in courts. So if in a year you are able to get some judgments, you should then celebrate it. However, you find that just because you have won some cases, the obligor will go to the court of appeal and then to the Supreme Court. That normally goes beyond the tenure of one administration. From high court to court of appeal to Supreme Court, obviously you need more time unless a miracle happens and the case hearing is expedited. If it is an election case, they can accelerate it, but commercial transactions cases take much longer time. We have been able to seize a lot of properties and foreclose on a lot of properties; we have been able to resolve a lot of immediate recovery, which is now in excess of N300 billion, we will tell you specifically when our account is out. People are now properly sensitized and empowered to go out based on very strong performance evaluation mechanism to recover funds or restructure funds from obligors.
Of course, we have also been able to support some other businesses like the common ones you talk about - Aero Contractors. With our intervention, Aero today is the only airline in Nigeria that provides C-check services in Nigeria for the Boeing series aircraft. But most importantly to us, we have sensitized the entire spectrum of our stakeholders that we are different. The EFCC and judiciary have been supportive and when we go to some of these entities, we always request for fairness because whatever we do, ultimately, we will answer for them. Subsequently, we have clear objectives, the first is that do we have a fear of God, secondly is that does it have national interest. For all the activities we have carried out, we have taken insults and other condemnation but I tell my people as long as we are doing what is right, and we have the fear of God, we should carry on. As such our people are motivated. The whole aim is that if you can’t pay through your business, then you have to surrender your assets, if you don’t have the cash for payment then we have no option than to take over your assets. So it is not a pleasant assignment but one has to do it.
How much recovery have you made so far?
What we are doing now is that we get the assets and sell them. Every year, we try to recover assets. Even if we recover N300 billion and still have 260 per cent interest, and even if we pay them the interest is still around N270 billion despite repayment. So in all principal and interest will amount to about N520 billion. What happens is that the effective areas will continue to increase. Therefore the over N200 billion that hasn’t been paid in principal will now have to be spread across three months of the exhausted period. So you find out that interest will not reduce. If I can get interest that I can pay over month, it enhances my ability to service the percentage there. But unfortunately, some people fail to understand that I am not like a typical bank that has a basket of funds where current accounts have about 60-65 per cent interest rates and maybe savings is 3 per cent as the proceeds of current account.
For AMCON, every penny here counts because we issue bonds to buy all these liabilities. We don’t operate on intervention, so whatever you take, there is an interest attached to it. Even the salary you pay there is nothing attached to it. However, there are some funds to cushion the effect but you have to be careful so you don’t overburden them. That is why CBN is always creating a balance to ensure that we survive. For me I believe the next few years are going to be very critical because if you are working for the next years and you can’t recover what is expected, then you need to change your position in recovering assets. That is why we are working to make sure we have a realistic model that will help us to abide by the AMCON act.
What is your strategic focus for AMCON? Secondly, looking at the economy, how will you say AMCON can achieve its targets for the year?
Generally speaking from what we can see, the economy is improving, but most of our references go to the specific business that we have. Most of the businesses have gone beyond the state of redemption regardless of the state of the economy. In terms of manufacturing, we have concerns because some items of equipment have been lying fallow for over 25 years so the dynamics have changed. So for this year our target is to create relationships so that we can package related businesses and attract foreign investors as well as discuss with them how to take over some businesses. Where this is not possible, we will engage the relevant authorities. So for this year our focus is on the corporate finance side to see how we can attract more investors and repackage businesses and assets. However, if the assets are real properties we just take over them and where the business is in power, real estate or oil and gas all we are after is how it will add value to third party interests. Foreign reserve is going up, foreign exchange is stabilizing, and other indicators are becoming more positive for investors to come in. I want to state that we are not looking at investors that will come and spend six months; we are looking at investors with long-term vision and objective and quite a number of them have shown interest; we are currently working on how we can partner with them.
What are some of the challenges facing
AMCON under your leadership?
The challenges that we currently have are in two folds: the first has to do with willingness and ability; the second has to do with the state of the economy. Most of these debts were irregularly booked in the first instance and when you are off-track like that, the ability to recover is hampered by the structure of the facility. Don’t forget that we acquired these non-performing loans from banks to rescue the Nigerian economy from the clutches of financial crisis at that time.
As you know, a number of these loans were already bad even before AMCON was created in 2010. Some had run as bad loans in these banks for about seven to 10 years, while AMCON has existed for only about seven years. So cumulatively, most of these loans have lived with the banks for up to 20 years. Therefore if there is any other name outside hard core that is what these loans should be called.
To recover such facility or facilities will be difficult as resolution could be either in the form of asset forfeiture or conversion. Any path towards resolution comes with a lot of challenges that include legal tussles, attitudes of debtors, and more. When we are battling with the problem converting some of those assets into cash, some of the obligors engage us in court process that could last for 10 to 15 years. So we have problems with the attitudes of the debtors. We also have problem with the judiciary. The problem with the economy has to do with those that are willing to pay their debt but don’t have the ability to pay. We also have instances where certain individuals are not just ready to pay. These are some of the challenges we face in recovery situation.
Many cases have been dragging, but you came in and started engaging the judiciary to fast-track resolution of the cases. What has changed so far?
Our aim for engaging the judiciary is positive: to make everybody aware that what we are doing in AMCON is for national interest and not for individual profit. AMCON was created as a result of the financial crisis. Upon creation, AMCON arrested the crisis situation and provided liquidity for the financial institutions. This helped stabilise the economy. I can tell you that AMCON recorded success with that first level assignment. But the situation at this phase in AMCON’s life is about recovery, which is very hard for various reasons. For instance, people would want to go to court over frivolous issues, using the constitution. And they have the right to be heard. There are instances in which we also take people to court as our law has empowered us to do in certain situations. We have had to go to court on some of those bad loans where the collaterals have not been properly perfected, but have been voluntarily released by the company.
Engaging with the judiciary has been very helpful because it has made us to understand areas we need to improve upon; it helped us in engagement with some of our lawyers and also helped to update our stakeholders as to the provisions of our Act. Most importantly, because of our engagement, some of the courts have come out with ‘Practice Direction’ where AMCON cases can be fast-tracked because our Act specifically identifies the Federal High Court as the court of first instance and they have been very magnanimous by coming up with that practice direction so that they can put AMCON cases on the fast track.
Whether we will be able to circle out some of these big cases, one way or the other, it must happen because there is no big case that you cannot tie something to it. For any big case, you will also find a big man behind it; once there is that, the man is visible. We will ensure that we follow the law and convince the individual to come and talk to us so we can find a means to resolve it. I am very optimistic that some of the big cases, if not most of them will be resolved. We may not be able to resolve them the way and manner we may want, but we will be able to resolve them in such a way that will ensure that the underlying business survives for the sake of the economy.
Are there some resolutions with obligors outside of these cases that you took to EFCC or ICPC?
There are. In our alternative resolution mechanism, we have provided quite a lot of resolution options including mediation, adjudication, amongst others. Going to court is one of them. But most importantly, the acting chairman of the Economic and Financial crimes Commission (EFCC) has set out a very robust AMCON desk in its Abuja and Lagos offices, with operatives that focus only on AMCON cases. It is a fullfledged office. Sometimes in transactions, there are often the criminal side of it and that is why our Act has recognised that on the criminal side of it, we can also take some measures. Because we are not a law enforcement agency, the way we interact with the obligor also matters. The best we can do is to write letters, but EFCC has a team and they have the backing of the law to invite anyone and that person must comply so we have used them effectively and they have been very supportive in our recovery efforts.
Despite the creation of AMCON, the size of non-performing loans in the industry is still scary. In a situation that AMCON refuses to take over more of these loans, what then happens?
We have already passed the level of taking new loans; the ones we are dealing with are those that were taken from 2010 through 2012 to 2013 - no new loans are being taken. We can’t have an organisation that consistently takes bad loans from banks, that means we are encouraging bad debts. AMCON was a child of circumstance. It was set up as a result of the crisis of 2008 and 2009 to help stabilise Nigeria’s financial system and economy at large. The idea behind AMCON is not peculiar to Nigeria, it has happened in US, Europe and in the Middle East, but such mediation is usually for a specific period. That is why we have a period within which we are expected to carry out our assignment as AMCON, close shop and then move unto something else. We are not in the business of chasing fresh loans for some of these financial institutions unless if it is very strategic.