AMCON Recovers 57% Bad Debts
Nume Ekeghe The Asset Management Corporation of Nigeria (AMCON) said it has recovered 57 per cent of the bad debts it took on five years ago to rescue banks in Africa’s largest economy from collapse.
“We’re a little bit behind, but not too far behind, what we expected,” Bloomberg quoted AMCON’s Chief Executive Officer, Mr. Mustafa Chike-Obi, to have said in an interview in Lagos.
“The courts are a constraining factor. As much as we want to carry a hammer, we still have to go through the court system and remain an institution that obeys the laws. That takes time.”
AMCON managed to collect or reorganise the debt it bought at a rate of 1.07 times for what it paid for them, above its 80 per cent target, he said.
Modelled on organisations including Ireland’s National Asset Management Agency Limited and Korea Asset Management Corporation, AMCON used bonds to bail out 10 lenders and bought more than 12,000 loans from industries including aviation, gasoline marketing and manufacturing for about N1.8 trillion ($9 billion).
A clean-up of the industry means Nigerian banks are better able to withstand shocks even as non-performing loans rise following the latest oil slump, Chike-Obi said. It is unlikely that lenders will be offered another bailout, he said.
“If the central bank, whose decision it is mostly, did ask us, we’d have to think very seriously about it,” he said in an interview in Lagos.
“But there’s not much appetite from the central bank, AMCON or the nation for this. Nobody wants it.”
While non-performing loans stood at 2.9 per cent at the end of December, they are rising, the central bank said in April. The ratio will climb will to between 5 percent and 10 percent by the end of 2015, Fitch Ratings said last year.
Brent crude’s 39 percent drop since June is making it harder for oil companies, which account for about a fifth of lending in Nigeria, to repay loans, Fitch said. Local companies are also battling to pay for imports and service foreign-currency debt after the naira’s 18 percent depreciation against the dollar in the last 12 months. Dollardenominated loans made up 45 percent of the total in Nigeria last year, according to Exotix Partners LLP. Chike-Obi, a former Goldman Sachs Group Inc. mortgage trader, also wants to sell the last of AMCON’s bank holdings. It owns Keystone Bank Limited and has stakes in Unity Bank Plc and Wema Bank Plc.
Keystone, the biggest of three banks nationalised after the 2009 crisis, will probably be sold this year, he said. AMCON’s shares in Unity and Wema will be disposed of “as soon as is practical,” Chike-Obi said.
Based on the experience of selling Mainstreet Bank Limited and Enterprise Bank Limited last year to domestic investors, interest in the new offerings could be high, he said.
“The prices we got were much higher than we expected,” he said. “There was a lot of international interest in both banks. In the end, the local banks were the highest bidders.”
While banks are now bettermanaged and more adept at gauging loan risks, they are “running into danger of overregulation,” said Chike-Obi, without being specific.