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Amcon Approaches Debt Recovery With Human Face, Says Chike – Obi

29 Dec 2012

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Mustafa Chike-Obi


THE RUNNING BATTLE BETWEEN COSHARIS/ACCESS BANK AND CAPITAL OIL/ IFEANYI UBAH ON THE ALLEGED FRAUDULENT DIVERSION OF PRODUCTS JOINTLY FINANCED BY ACCESS BANK AND COSHARIS IS YET TO ABATE. SO ALSO IS THE CRISIS BETWEEN THE ASSET MANAGEMENT CORPORATION OF NIGERIA AND CAPITAL OIL OVER THE LATTER’S HUGE UNPAID DEBT. LEGAL FIREWORKS ARE GOING ON IN SEVERAL COURTS IN NIGERIA AND IN THE UNITED KINGDOM OVER CAPITAL OIL’S HUGE DEBT TO AMCON AND SEVERAL BANKS.  SOME SAY THAT IT IS AN INTRICATE TRIANGLE OF DEBTS, DECEIT AND OUT-RIGHT BETRAYAL OF TRUST. THE STORY GETS MORE COMPLICATED WITH DIFFERENT NARRATIVES FROM THE PROTAGONIST AND ANTAGONIST, BUT WHAT IS NOT IN DENIAL IS THAT CAPITAL OIL IS HEAVILY INDEBTED TO AMCON TO THE TUNE OF N65 BILLION AND HEAVILY INDEBTED TO COSHARIS/ACCESS BANK TO THE TUNE OF N21 BILLION. SHAKA MOMODU RECENTLY SPOKE TO MUSTAFA CHIKE-OBI THE MANAGING DIRECTOR OF AMCON ON THE CAPITAL OIL IMBROGLIO and other issues


Were you surprised by the vacation of the order by the Federal High Court forfeiting Capital Oil and Ifeanyi Ubah’s assets to AMCON?
Yes I was. We felt that the law was very clear. We felt that when somebody or anybody owes N53 billion for 2 years and has refused to come to discuss it, that the law should be on the side of the creditor. For any society to function, if people owe that kind of money, they have a duty to pay. So, after 2 years of owing N53 billion and not paying a kobo of interest, we were quite surprised that the judgement came that way. But let me be frank, we do not like to question judges but he did not rule on the substantive issue. He just vacated his early order of possession. He said that he would have another hearing on the 15th of January 2013. Be that as it may, I was surprised at that decision.

The judge curiously said you should go and talk to him. What is your interpretation of that and does that not diminish your ability to go after debtors who are unwilling to pay their debt?
I don’t want us to over dramatize what the judge said. The judge withdrew an order of possession, and said we should go and talk and settle the issues and come back on January 15th. He did not say anything about collecting our money and not paying our money. If the judge had ruled that he shouldn’t pay or that he didn’t owe, that would be a different matter. So, let’s not over dramatize what he said.

Was shutting down Capital Oil the right approach to debt recovery?
I think it is. Let me give you the chronology of events. We acquired these loans in December 2010 and we have been talking to this gentleman since then. He has signed three agreements with AMCON and he has reneged on all of them for various reasons. He was on the news recently over some civil dispute with Coscharis/Access Bank for which they had gone to the UK and obtained a freezing order worldwide. Some of the assets that were under that freezing order were assets that AMCON has the legal mortgage to for the debt it possesses. So, we felt it was important for us to protect or indicate to the world our interest in those assets and that’s what we did.

With the order now vacated, what are your options?
We have many options. The first option that we pursued is that since we have appealed, the legal position is that the status quo be maintained. In order words, we can stay there until the court of appeal rules. For example, in the case of Lagos State where the court declared Obanikoro the winner of the Local Government elections, the ACN appealed and pending the appeal, Obanikoro cannot take his mandate or act on that decision. So, it is a well-established principle of law that when you appeal, the status quo remains. However, we decided to vacate the premises and we had a number of considerations in mind. The first one was the public interest. There was an explosion of a pipeline recently and we do not want AMCON to be associated in any way with shortage of petroleum products during the holiday season. So, even though we believe that the impact of Capital Oil is minimal, we still want to make sure that we are not associated in any way with anything that has to do with scarcity of petroleum products. The second reason we vacated the premises was that we don’t want a situation where we are there and people are saying we are not obeying the court order. Even though our legal position is strong, we don’t want to be seen as somehow defying the court decision. Another reason is that we were also worried about liability. So, having considered all the issues, we have decided that while pursuing every legal action available, we will vacate the premises until we get another order that is specifically asking us to take over the property Then we will take action.

When you say you vacated the premises, does that include all the assets of capital oil or just the depot?
Everything that was covered by the earlier exparte order that has been indicated we will comply. In spite of our strong legal position, we will comply.

When that earlier order was given, it was reported that you entered into a discussion to reopen the depot. Why was it necessary to do that?
I have in front of me here the agreement duly signed by me and Ifeanyi Ubah. We agreed to reopen immediately. He signed it and again he reneged. So, we have a history of dealing with him where he signs something and he reneges. But this document is self explanatory and very detailed.

Can the value of Capital Oil and Ifeanyi Ubah’s assets pay the company’s debt obligations?
We believe so but we cannot be sure until we get the full extent of the assets and value. The Capital Oil assets are impressive. He has trucks and depots all over the country, a jetty that is world class; it includes vessels. But he owes other people and so we do not know how all of that will sort a but we hope we can recover much of our money one way or another.

Does the N53 billion include the accrued interest?
It is now N65 billion. It was N53 billion plus N12 billion of interest accumulated over the last 2 years and the interest is accruing at the rate of about N800 million to N900 million a month. This is a situation where people owe that kind of money and I am  not passing judgement but the lifestyle of the person that owes does not demonstrate that they are indebted to Nigerian depositors. It was the Nigerian depositors’ money that was used to build those facilities and it is AMCON’s responsibility to the depositors to get that money back.

Give us a sense of what you gleaned from two years of talking to Capital Oil; is there a willingness to pay or a lack of it or a sheer lack of the capacity to pay?
I will make a judgement here. We have a lot of other debtors in the oil & gas downstream industry. In fact, many of them have come and have settled in good faith and they have been restructured. We have found Capital Oil& Gas to be recalcitrant, reluctant and unwilling to pay. I believe that his case is more of an unwillingness to pay than inability to pay and that is very unfortunate.

Now let’s go to the loss you declared. You declared a N2.37 trillion loss in 2011; can you clearly tell the public how this came about?
Let me say a few things about the loss. It was expected; it was anticipated and it did not come as a surprise to AMCON because it was planned for. The loss came about because we had to restore the depositor’s funds that had been lost in the banks. So, 90 per cent of that loss is a one-time event based on the restoration of deposits to the banks and that was N2.1 trillion of the loss. The rest of the loss came as a result of accounting. We issued bonds to buy the non-performing loans and replace these depositors’ funds and I most point out that there were 10 million people whose funds were saved including up to N2 trillion for the public sector such as governmental agencies and state governments’ deposit which would have been lost. Now, because accounting wise, we cannot take interest on the loans until they are restructured because they are non-performing loans, we pay the interest on the bonds and we do not get interest on the loans but as we restructure more and more and as time goes by, we will start to show a profit. The extraordinary loss of N2.1 trillion, which was as a result of restoring depositors funds, will be paid for through the sinking fund arrangements. In fact, right now, we are comfortable and confident that that will be enough to offset that one-time event.

Can you tell us how much you have recovered from debtors and how much debt you have restructured since AMCON became active?
We had a plan and our plan was that we would recover no debts in 2011 and we will then recover over the next six years all of the debt because these are difficult, recalcitrant debts that the banks have been unable to recover. However, we are ahead of our target. We recovered about 10% of our debt and we expected zero and by the end of this year, we would be close to 25%-30% and I think that the numbers would not give you the true story because we have 13,000 individual loans but the top 1,000 account for about 80% of the amount. So, we are working hard and we are ahead of schedule but there is no magic solution. It’s going to get tougher and we are going to use tougher measures in the next year and I sincerely hope the public and the court are sensitized to the fact that a society where people borrow money from banks which are depositors funds and think they can get away without paying will not survive.

There have been criticisms that AMCON is a cesspool of corruption, while others have described it as a time bomb waiting to explode. Is it borne out of ignorance of the AMCON act or is there any substance to the criticisms?
The allegations, I ignore. When you have an institution as large as AMCON come into being, I expected reactions to it. There are people who are genuinely concerned and there are people who have genuine questions and those ones we work on. We try as much as possible to answer them and try to explain to them. But when people throw around ‘cesspool of corruption’, I challenge anybody in Nigeria to provide any evidence of corruption in AMCON today. We have been examined thoroughly by CBN on two occasions and we welcome honest scrutiny of what we do. The IMF has come here; the World Bank has come here; S&P has come here; Moody has come; Fitch has come and they’ve all looked thoroughly at what we are doing and the result is that Spain has copied what we are doing. I am not sure which one but there is another country in the Middle East that is copying the AMCON model. This AMCON model and what we are doing will be the way banking crisis will be resolved in the future and that is the biggest endorsement that we can have. You have people who come here and after they leave upgrade Nigeria’s credit rating because they are so pleased with what AMCON is doing. So for those who have genuine questions and concerns we welcome them. For those who throw around all these things when they should be proud of what we have accomplished and proud of their country, what can we say to them? We can never convince them so the best thing is not to waste energy trying.

Send a message to your debtors for 2013
If you owe AMCON, we approach debt recovery with a very human face. We are interested in keeping your company alive and we are interested in keeping your employees employed and we are interested in you contributing to the Nigerian economy. Come and talk to us and we will support you in every possible way we can. The worst thing you can do is to avoid, obstruct or be recalcitrant because we have a duty to the depositors and the Nigerian people to recover these monies, so we will come after you. So come talk to us and you will see a very human face and let’s discuss the issues.

Tags: Nigeria, Business, Featured, Mustafa Chike-Obi

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