Kunle Aderinokun

Kuru

Last week, AMCON released the list of delinquent debtors to the public. That was not the first time AMCON published names of such companies and individuals, who may be termed as chronic debtors- it did in 2012, 2014 and 2015. And even some of the debtors in the new list were listed in the earlier publications. On top of the debtors’ list were Seawolf (N160.09 billion), Capital Oil and Gas Industries Limited (N104.80 billion) , Tanzila Petroleum Ltd (N49.23 billion), Resort International Limited (N36.30 billion), Home Trust Savings (N25.749 billion); Suru Worldwide Ventures (N24.41 billion); Roygate Properties (N23.261 billion); Ziklagsis Network Limited (N20.334 billion); Lexcap Partners (N18 billion).

Others include: Anyiam Osigwe Limited (N17.247 billion); Iorna Global Resources Limited (N15.873 billion); Hosanna Properties Limited (N14.983 billion); Unudike Enterprises Limited (N14.16 billion); Bulk Pack Services Limited (N13.493 billion); Global Haulage Resources Limited (N11.472 billion); Taka Continental Limited (N11.378 billion); JAG Global Resources Limited (N11.108 billion); Felshade International Nigeria (N10.979 billion); AFRIJET Airlines Limited (N10.886 billion); Hotel De Island; Kasmal, Island Autos & Nacoil (belonging to Senator Buruji Kashamu and family) (N10.797 billion).

In announcing the names, AMCON stated that it decided to name and shame the listed companies because they failed to respond to its repeated calls for discussions on their repayment plans. But beyond the ‘naming and shaming’, it is not clear what next action AMCON will take.

While it suffices to say that AMCON has done well, for at least having the audacity, once again, to publish the names of chronic debtors, who have been described as ‘big guys’, it is, however, yet to be seen if the corporation’s intention this time is a clear departure from the past. Just as mentioned in the foregoing, some of these debtors or obligors are not just making the list for the first time.

Nonetheless, these delinquent debtors and obligors, who are the category of debtors owing N1 billion and above, are effectively barred from taking any further loans from any bank. Apart from the ‘name and shaming’ and the ban placed on them, AMCON is, however, silent on further action against some of them (especially the recalcitrant ones) to enable it recover the debts.

In an apparent show of proof that most of the loans are well secured and would be recovered, AMCON Managing Director, Ahmed Kuru, said:“For some assets, we paid 80 per cent, some 90 per cent, some 100 per cent. The ones we paid 80 - 100 per cent means that there was something tangible for us to hold on to.”

Does it mean the corporation may not be able to hold on to some things or would only hold on to something little regarding some of these delinquent debtors ? What further action would be taken against such debtors or obligors?

Financial experts and economic analysts have reviewed the strategy adopted by AMCON and wondered what impact it would have on debt recovery.

To the Executive Director, Corporate Finance of BGL Limited, Femi Ademola, naming and shaming strategy to recover loans from delinquent debtors is not a sustainable way to go. “In my opinion it would soon become a “de javu” if continuously adopted.”

He, however, stated that “the most appropriate strategy for reducing non-performing loans is the deployment of a strong and effective risk management framework which should include capacity building for technical projects and project management in some cases.”

“A complete understanding of the business model and cycle of obligors, including the very technical businesses will limit loan default due to loan diversion and overly optimistic expectations usually presented by business operators. AMCON may also need to take a more structured approach in the management of the debtors including taking active roles in their operations,” he added.

Be that as it may, Ademola regarded the issue of publishing debtors’ names as always controversial. According to him, “on the one hand, customers information are confidential information that can only be released to third parties with the customers’ consent except in cases of regulatory oversight function or criminal investigations by law enforcement agents. The release to the public therefore will require customers’ consent unless a criminal intent or activities can be proved against the customers; otherwise it may be illegal.

“On the other hand, a loan agreement is a legal contract between the banks (and by extension AMCON) and the customers, a breach of which may be considered illegal. The failure of the customers to repay agreed debts is therefore a breach of contract and therefore illegal.”

However, he added,” since the failure to repay may be due to so many reasons including economic circumstances but not limited to criminal tendencies, it becomes difficult to justify the publication of the debtors’ name. There is need for a symbiotic relationship among AMCON, the banks and the customers; hence the publication of debtors may lead to frosty relationships among them. However, I don’t expect it to last for a long time.”

“It may therefore be necessary for the CBN and AMCON by extension to seek a legal backing for the action by approaching the court and obtaining an order to do so. If after all the arguments, the court agrees to the publication of the list of debtors, the controversy is resolved.

However, since it has become a usual occurrence nowadays, I believe that the parties have considered that it is an appropriate action to get the customers to pay. And as a moral warfare strategy, it may help in pushing some of the debtors to repay the debts.”

Also speaking along the same line, the CEO of Eczellon Capital, Diekola Onaolapo, said he did not believe naming and shaming of chronic debtors was impactful. Even though he acknowledged AMCON’s recent move was in line with CBN’s directive, he, however, doubted the effectiveness of the exercise.

“The purpose of this is to “name and shame” the corporation’s debtors just as it did recently, albeit it’s difficult to gauge the effectiveness of this exercise (“name and shame”) in the recovery of bad loans from serial borrowers,” he said.

This, according to him, is because” most of the names on the list can be found in a similar list published by the Corporation in 2014 when it embarked on a similar name and shame exercise.”

Onaolapo, who frowned on the quantum of the unpaid loans, said, “the outstanding debt of c.N1.2 trillion (about 20.0 per cent of the 2016 budget) does not augur well not just for AMCON but to the nation’s financial system.”

Supporting his point on the ineffectiveness of the exercise with statistics, Onaolapo stressed that the loans may not be repaid any time soon. “A breakdown of the debtors list depicts that the Oil & Gas sector constitute about 27.0 per cent - the largest chunk - of the Corporation’s total loan exposure. This is followed by General Commerce, and Capital Market with 19.0 per cent and 18.0 per cent respectively. Thus, the current down turn in the international oil market, capital market and general economic climate in the country does not provide any form of comfort that some of these loans may be repaid anytime soon.”

Given this scenario, the chief executive believe “the corporation may have to go beyond the current “name and shame” exercise if it seeks to achieve any significant recovery in the current year.” This, he pointed out, could involve “compelling debtors to renegotiate existing loans, and intensifying its in-house recovery process.”

“The need to secure the assistance of regulators like CBN, law enforcement agencies as well as the judiciary (if need be) to compel existing debtors to pay up cannot be overemphasized. A case in point here is the recent move to bar debtors with obligations of over a billion naira from accessing further credit facilities from the nation’s financial system,” he therefore advised.