Ahmed Kuru

Asset Management Corporation of Nigeria (AMCON) has the legal, but onerous task to recover bad debts from chronic debtors after buying them from banks. In discharging its lawful duty, there is no doubt that the ‘bad bank’, as AMCON is otherwise called, has had a bumpy ride in the last seven years. With three years remaining to wind down as provided in the Act establising it, AMCON’s Managing Director, Mr. Ahmed Kuru, shares with THISDAY team comprising Kunle Aderinokun, Bamidele Famoofo and Bayo Akinloye, the challenges of recovering debt from recalcitrant debtors as well as the nitty-gritty of asset disposal as he reveals the next moves by the corporation. Excerpts: 

Recently you came up with a resolve not to negotiate with debtors because you have not achieved your targets. Don’t you think that will create more problems for you?

Already, we are inside problems, whether we negotiate or we don’t negotiate, it’s already a problem. However, the law that sets us up has anticipated those issues. The law encourages that we negotiate and that we have done in the last seven years. But you may want to know what negotiation means? Negotiation means you sitting down with somebody, he tells you stories. He tells you lie, and you know he is actually telling you lies, but you must still continue with that talk. Meanwhile, some of the obligors are truly facing challenges, while others are just unwilling to pay. Now negotiation means somebody telling you what he is anticipating. But we must not forget the fact AMCON has a time period when it is expected to fold up. Originally, you will recall it has a period of 10 years for it to exist. So the assumption is that within a period of 10 years, we would have liquidated and wound up our operations. This is the seventh year. Now, if somebody comes to tell you that l want to pay you in the next 10 years, that is a story. Even the Act recognises the fact that, if obligors are not in a position to pay, you should have recourse to the collateral. The Act also recognises that if you are going to have recourse to the collateral, there is a process; and first thing is to go to Court, and if the Court gives  an order and takes over the property and hands it over to you. That is what we are saying, but it does not mean that, if an obligor walks into my office l will shut my mouth and just looks at his eyes. If an obligor enters my office to say, l’m going to pay you this amount today or tomorrow and then, this is guarantee or additional collateral or something tangible, it makes sense. So what we are saying is that, we would not repeat what we have done in 2011 today. It does not make any sense. In 2011, you can tell us stories because we had 10 years  to hear your story out, but we have heard these stories out for  seven years, and based on those stories, the performance is less than 10 per cent in the last seven years. So, if l continue to play out that it’s either l am foolish or stupid because l know it has not worked, and the Act anticipates something like that, which has nothing to do with AMCON as an organisation. The Act anticipates that when you are getting closer and things are like this, then you are under obligation to call up the collaterals through court process. So we are now going through court process.

 Could you please tell us how much has been recovered so far?

You know there are different types of recovery, but so far, we have recovered about N759billion out of the original N3.7trillion which is now around  N5.4 trillion. However, substantial part of that is through assets seizure, forfeiture or outright cash payment, not through story telling. The ones that have gone through storytelling, and there is no performance around them is more than N2 trillion. These are people that have given you proposal to say they will do A, B, C and D. They say they are anticipating something and nothing has happened. So tell me if you are in our position do you continue to sit down to have conversations when you know it has not worked. You must change your strategy.

Okay, you changed strategy; don’t you think it is high time the Act was amended?

Yes, you just took the word out of my mouth because we are now in the process of amending the Act because the obligors are getting smarter and more desperate. So under that kind of situation, based on past experience, we now proposed to the National Assembly areas we believe we need to amend. You know in other climes, what happens is that, for you to hold the assets, you go to the court and the law says the asset automatically belongs to AMCON on transfer. But here you still have to go through the process of converting the assets to yourself and based on that, somebody can lock you up in the court for 20 years. But if the law says,  this loan that l have purchased have this underlining collateral, and the collateral belongs to me (AMCON),now you are obligated to come and talk to me .But l have the discretion to either sell it to you or him. There are so many amendments that we are proposing. We are proposing that the Act recognise that our case  must be heard at the federal high court, we are proposing that … so that we accelerate the process because we are running out of time, and some of the obligors, like you rightly mentioned are aware of this, and are buying time using the court process. So that after that there is nothing we can do and the only option left for us would be to go to the National Assembly to extend the period. But tell me something, you are financial journalists; before the loans were transferred to AMCON, they would have gone bad with the financial institutions; the financial institutions would have provided for them, and in certain instances, they would have even written them off their books; then suddenly, there was AMCON and so they transferred the loans. So, you find some of those that have been with the financial institutions for a minimum of five years, now you transfer them to AMCON, and AMCON has been here for seven years, you add that five to seven years and it gives 12 years. Now tell me, even if you lend money to a neighbour and you have not collected the money within three to four years, and you come and you start asking him, he will think that something is wrong with you. You will hear things like, “Hey! What is happening now? This money you gave me over four years, so what is the problem? Is there any issue? In this case it is 12 years, how can you tell me that l should still be going through this process in 12 years? What l have is the collateral which is the security, and the security unfortunately for me has depreciated. Over a period of time, some of them have been vandalized, but that is my only recourse. And quite a lot of these obligors have left those primary businesses to move into some other things; but the law also recognises that. The law says that even if you decide to move into another business, we can go after you in that business. That is number one.

Number two, the law also recognises the fact that even when directors of the company, those who are directly related to the day-to-day running of the business, we can go after them in their personal businesses. We can  go after their houses , we can go after their other assets. So, it has nothing to do with us, it is the law, because the law recognises that we will reach a point, where it is going to be very hard, and so, the only thing now for us to do is to forget  recovery. And if we forget the recovery, who is going to pay the N5.4trillion, the tax payer? Because it is real, it was not concocted, it is funds given to banks to buy loans from them, and it has to be recovered. It is a real issue. Even if you are very successful, when you operate a system for three or five years, you will need to change your strategy, talk less when you doing something that is not working anymore, you know it, and somebody else knows it’s not working anymore; and he is happy it is not working anymore, you must be stupid not to change your strategy.

We have to change our strategy now into what the law anticipated at the beginning. Recovery is one of the most difficult things you can do.

In reviewing the Act, how far have you gone?

The bill is with both the Senate and the House of Representatives (National Assembly) at the moment and l can tell you they have been very supportive because they recognise the fact that this is a national issue and they are worried. So, they are working with us. We have gone very far and hopefully before the end of this year, we will get the Act amended. We are actually at the last lap of the journey. I may not be here but the journey must be completed.

AMCON is winding up in the next three years as originally proposed by law. How are you preparing?

This is what l have started doing. I’m changing my strategy to ensure that l meet that deadline. And even l don’t meet the deadline, it should not be out of not doing anything. All our strategy now is focused around our deadline. At least, we know it and we are working towards it. So, by the time we are approaching we will know what to advise government to discuss with the National Assembly as to the outlook of things.

 Don’t you think it’s too late for you to change your strategy now?

It is not too late because if you would recall, your first question was “won’t changing your strategy result into a problem?” And now people are saying, what is the problem? Three years is not too late for us to change our strategy, and you don’t want to keep an Asset Management Company alive forever because you will be encouraging rascality. So, three years is not too late. There is no proposal that requires installment payment that will work. The only thing that can work now is asset disposal. The underlining assets must be surrendered to us and we must sell it to meet our obligations . Remember, AMCON has basically three major mandates: Number one, to purchase the loans from the banks and give them live support that they can on-lend; number two is to provide financial accommodation to those banks so that they are stable because of the global economic crisis; number three, is to recover the debt or loans that was given during this process and pay the obligations. Nobody complained about the first two but now that we are on the third, the process of recovering, everybody is complaining, isn’t it? This is after we gave them money and picked the loans. If you would remember, at the beginning, some obligors were coming to us, urging us to go pick the bad loans from the banks, because once you buy the loans from the banks, it comes with discounts. Everybody was celebrating that AMCON was buying the bad debts from the banks because it takes pressure off them,  and it also reduces the loan amount. But now that we are in the recovery mode, we are bad guys. You push and somebody says it is personal. You are supposed to pay me N10 billion but you say you only have N1 billion, so what happens to the remaining N9 billion? But it is not a question of what you can afford, but what your obligation is. If it’s about what anybody can afford, we can finish within three months. You have to meet up with your obligation because we also have an obligation to meet. It’s not easy but unfortunately someone has to do it.

 There is this proposed bill at the National Assembly for the creation of the National Asset Management Agency. What impact will that have on AMCON?

 l don’t think it will have any impact because it is targeted at government assets. They are some of those assets that must have been confisticated by the EFCC, which people have bought with government money, or some of the assets that government have that are currently lying fallow in certain locations. I think the proposal is about creating an agency that should manage government assets. Our assets (AMCON)in the real sense of it are not appropriated government assets. Our assets are to be sold to meet certain obligations, to pay back loans, so it will not affect our operations.

What’s the impact of AMCON on securitisation in the banking sector?

You see AMCON is a big bad bank. In terms of size, it is the biggest financial institution. Whether you are talking about securitisation in the capital market or the financial institutions, we are a major player because, if today l decide to unleash all my assets to the market, l would spoil the market. Obviously,  if we over-supply the market with existing assets, the market will crash. So, this organisation works very closely with the CBN, SEC and some of the regulatory agencies. We try to create products together, sometimes whether it is Writs or shares, so that we  can manage how our assets come into the markets. We do it in such a way that we don’t overburden the market. The CBN has created platform for everybody to go there and access information.

 Is AMCON still considering publishing the names of debtors?

We have done it before and we will still do it again. You will see it this week. We are going to publish the names again. Maybe not the 350 key people at the same time, but by installments. Already, last week we advertised, advising people to come and talk to us so we can have an understanding. But we are already compiling the lists and we will release the first batch this week, and we will continue to release them. As an organisation , we are not under any obligation to keep anybody’s exposure in secret. The only way we can keep it secret is if you come and negotiate with us, otherwise, we are going to publish it. Those who honour the invitation to come, won’t  have their  names published, but those who refuse to come will have their names published.

 What about AMCON’s plan to create a market for its assets?

You know what we trying to do is that anybody that is coming to buy AMCON assets is assumed to be coming for a good deal because if they are going to pay for market going price, they don’t need to come to AMCON. So anybody coming to AMCON is actually looking for a deal. Now, if l ask anybody to value this building today (AMCON head office), he will tell you it’s worth N1billion.But if l ask that same person to sell it, if he is a very aggressive seller, maybe he will sell it for N450million. That is the reality because there is a gap between the reality and actual cost. If you, therefore, say you want to sell all your properties based on market price, you will not be able to sell them. That is why we have assets worth over N128billion in the market and nobody is buying because we are insisting that they must pay the valuation prices. If we continue to insist, nobody will buy them. So, we have brought together all the stakeholders to say, how do we deal with this matter professionally because we want to sell? If l’m hoarding an asset, l have not adjusted the liability because my debt is running, meanwhile, I’m holding a house for which an obligor has given me a value of N1billion and left, leaving me with the asset and l have not sold it. It means there is a N1billion loan with the CBN that is running with an interest rate of a minimum of 10 per cent. Meanwhile, the asset is depreciating because of the economic situation every day. If l take it for N1billion, in the next two years, l will get N800million, if I’m lucky. Meanwhile, my loan is increasing also. By the time l realise l’m leaving in a fool’s  paradise,l have already taken an increase of 50 per cent without even realising it.So,l’m better off today to give the discount based on the real economic situation. It’s better to just sell it at N800 million and find a way of dealing with the N200 million balance. Because if l don’t, l will have to deal with a worse situation.

So, we brought the professionals to look at it and then we designed a scheme. We are now liaising with CBN so that we get an approval as to how to deal with those assets – some of these assets you have to employ security guards. That costs money. You seized a vessel and leave it on high sea: every day it depreciates. You have a dredger; you leave it there, if you’re not careful, after three years, they will tell you it has sunk. Now somebody says devaluation is N500 million and somebody comes to you to say he will only pay N300 million for that asset, that’s what the market can take. You said it’s N500 million. You refused to sell because you know that you couldn’t sell it. After two years, it’s down the ocean. Nobody queries you. It’s a problem for you. But if you sold it for  N300 million, somebody will say, ‘devaluation was N500 million why did you sell it N300 million?’ There must be a “deal”.’ But if something happens to it, they’ll say, ‘no, that one is nature – a natural phenomenon.’ We have to change that mindset and that’s why we brought everybody together this is the challenge we’re having. I have some rigs by the marina; the sea wolf in my book, maybe it’s around N150 billion. If I value the asset and I’m lucky I may get N30 billion. Let me attempt to sell it at N30 billion, there’ll be issues raised. But if I don’t, its value will continue to go down. 

You said if an asset is N1 billion, it is possible to sell it at N450 million. One of the reasons you gave is current economic situation. What are the other factors?

It is an accumulated perception about property value. The values of properties over the last six years have gone down but people have refused to accept that. Before this administration (President Muhammadu Buhari’s) when a lot of people had a lot of funds to dispense, if somebody sees this building and he likes it, you tell him it’s N1 billion, he’ll pay you without any valuation. So, developers have built their own framework around that. Go to Ikoyi; go to Maitama in Abuja; go to Asokoro; go to Victoria Island; and go to Lekki; somebody sees a building he has ‘free’ N500 million and likes the building, he’ll just pay for it. He doesn’t care what the valuer tells him. Somebody buys a land at N80 million, spends N100 million to build a property on it; he won’t sell it below N500 million. If the property is well built, he’ll find somebody to get him that N500 million during that period (before the current administration). Developers and valuers have that mindset. Now, if you ask that person to sell that property for N230 million, he will not sell. He’ll tell you that three years ago somebody was ready to pay N500 million – but that wasn’t realistic. It’s all about their mindset. The market has shifted, but the industry hasn’t recognised that shift – that’s a major issue. Even when exchange rate was inching towards N400, people were still importing building materials. Now, exchange rate is going down but I can tell you that the prices of the materials haven’t changed. That affects the cost of building – but that’s not the realistic value of that building. So, a valuer will give you the realistic value because when he comes to tell you that ‘this window costs N10; this tile is N20.’ It’s upon that basis they do their valuation – because if you go to the market that’s what you’ll pay to get those materials. And, they’ll tell you your property is worth N1 billion. But if somebody wants to buy he doesn’t look it from that angle. No valuer has sold a property at that rate: they come with what they call open market value, forced sales value, and sometimes they come with average market value. Ask the same valuer to sell the property, he tells you, ‘Oga, you know the market isn’t booming, I think I’ve found somebody that can pay 70 per cent of what I valued the property.’ He was the one that valued the property; that property was acquired in exchange for cash (by AMCON); so, somebody is supposed to pay me N1 billion. I called my valuer and he looked at the property and agreed it is worth N1 billion. So, I asked him to sell it and the valuer tells me it is N700 million. What happens to the N300 million? But if he tells me the real market situation – you tell me, ‘no, this property in the market is not more than N400 million. I’ll tell the obligor, you either go and bring N1 billion or you go and find somebody that can buy the said property at N1 billion; or, you give it to me at N450 million. Somebody brought one land around this Eko Atlantic; he said AMCON should take it in exchange of about N6 billion. I said nobody is buying the land. He said it’s ‘hot’. So, we told the person if it’s ‘hot’, sell it and give AMCON the money – now it’s almost two years (the property hasn’t been sold). We need the money more than the assets because AMCON has no business holding any assets. We hold assets because we couldn’t sell them. Any assets we have are supposed to be for the market, because our debts are not in assets; they are in cash. 

AMCON planned some divestments in Aero Contractor, Arik and Peugeot. What’s the update on that since the corporation needs money?

For Aero, we’ve gone very far – we’re almost concluding. For Arik, we’re almost 55 per cent (near completion). Like I always say, if the owner as of today, comes to tell us, ‘OK, take this money,’ we’ll give consideration to that. What’s important to us in AMCON is number one: it is important to us that the business survives. Number two: it is important that we collect our money. So, we have to find a balance. We’ll not take over any business and give it to somebody that we know will just rubbish it. However, we believe that there are certain businesses based on the amount that the people will pay for those businesses they won’t play with it. Therefore, it is important to us that Arik and Aero survive because they’re very strategic airlines. That is why we’re ensuring that we get very good buyers – people that are strong in the industry; people that can add value to it. We’ve gone very far. For Aero, we’ve gone 90 per cent; for Arik, we’re around 55 per cent. 

Did you say, for Aero, AMCON is looking at the end of this year?

Definitely; it’s in the best interest of the business. AMCON isn’t going to put any money into those airlines (anymore); we’ve put enough. Therefore, if I don’t do that, it puts the business in serious, uncompetitive position because the industry is evolving. Somebody needs to come with fresh capital, which is very key and the only way to do that is to bring fresh investors. AMCON has no business anymore to put money into anybody’s business. 

In view of that, your plans to dispose of the airlines would appear to be in sync with the federal government’s plan to float a new national carrier by the end of the year amid a speculation that Aero and Arik will be merged to form the national airline. Does that mean AMCON is working in concert with the ministry of aviation?

Nigerians like conspiracy theories. We love conspiracy theories. If today AMCON is going to use Arik and Aero to create a national carrier there won’t be any apology around it because the assets belong to AMCON. Such plans won’t be hidden and it will be in the interest of the organisation. However, there’s never been any discussion – formally or informally – about converting those assets into a national carrier; nobody has ever invited me or called me to talk about the idea of the national carrier or bringing AMCON’s assets to establish a national carrier.

Number two, even if I had been called I’d have advised against it. You don’t want to create a national carrier with all the problems you have in Arik and Aero. How can you set up a national carrier from crisis? AMCON isn’t part of any national carrier plans. It’s not even in the national interest to do that. 

How transparent is AMCON now in terms of sales of acquired assets against the backdrop of alleged shady deals?

AMCON’s process is well defined by the Central Bank of Nigeria. Because we can sell any asset there must be a process: first, we must advertise. There’s what we call asset committee; we must value the assets by professional valuers. After advertising, then we must have a transparent process, we go and open it. Frankly speaking, regardless of how close you are to me, if you want to buy AMCON’s advertised asset I can’t help you. This has created a lot of problem between me and my friends or associates. They believe I can sell a property to them, but it’s not possible. Let me give you a scenario: you want to buy this building and it’s valued at N500 million. Internally, AMCON agreed – because we have a fixed price internally – that our reserved price is N450 million and we advertised. Normally, we open it with all the bidders coming together under one roof. I called you and told you to bid for N455 million; I’ll even tell you our valuation is N500 million and our reserved price is N450 million. Unless you stole your money before you even come with your bid you’d have taken your valuer to check the asset. He’d have told you what the property looks like and might have advised you to even buy it at N600 million. Then, you decided to bid for N600 million. Then, I go ahead and open it and there’s a dude there that doesn’t know anybody (at AMCON), because his valuer said this property is worth N700 million and he made a bid of N700 million. Then, I opened his bid and found that his bid is N700 million and yours is N600 million. How can I say no to the dude? It’s not possible for me to say no to him. All our properties go through due process – that’s the requirement of CBN. However, it’s not every property that you can sell through bid. There are so many properties that we’ve advertised repeatedly but we couldn’t get to sell them. Therefore, for those properties, the AMCON law allows to go and look for buyers – that’s the willing buyer and willing seller situation based on valuation. Even at that, we can’t sell the properties below our reserved price. The properties were advertised along with prices. For instance, if we advertised a property for N1 billion and you come to me, there’s a possibility I can sell it to you at N950 million because I know that if I keep it for one year the interest I’ll pay will be more than N50 million. 

The only thing we need to do is to write CBN, showing them efforts AMCON has made to dispose of the asset – letting them know that we’ve gone through bids and the asset had been advertised. We let CBN know we’ve gone through all the necessary process, but we couldn’t find a buyer. This man has come and this is what he has offered.