Kuru: Timing Essential in Polaris Bank Sale

Ahmed Kuru

The Managing Director and Chief Executive Officer, Asset Management Corporation of Nigeria, Mr. Ahmed Kuru, in this interview speaks about the effects of the COVID-19 pandemic on the corporation’s debt recovery drive and provides insight into the planned sale of Polaris Bank Limited. Obinna Chima brings the excerpts:

How will you assess the country’s response so far to the challenge posed by the coronavirus?
Honestly, personally I think they have done very well. Don’t forget our environment and don’t forget what was the situation in this country before this pandemic surfaced. We had budget deficit, the price of crude oil was also low and other challenges. And you saw that immediately the virus came into the country, the Central Bank Governor mobilised the private sector and they immediately raised substantial amount of money. Along the line, people were motivated, some were sensitised and even brought in to see the extent of the challenge the country was faced with. You can see that everybody in his or her on little way has contributed to this fight.

We saw how very hard decisions such as closing the airports, stoppage of inter-state travels, lockdown and others were taken. Again, look at the palliatives by both the government and private sector. Even the National Assembly, despite the pandemic, they were still sitting almost every day. We also saw the engagements between the National Assembly, the CBN Governor and the Ministry of Finance, just to ensure that the economy doesn’t suffer. Really, if you look at what has happened outside this country and compare it with what the federal government has done so far, I think the Nigerian government has done very well. We also see daily, all the efforts by the Presidential Task Force as well as the state governors. Honestly, I think they have all done well.

Has this pandemic in any way affected AMCON’s drive for debt recovery?

It has and I can explain that to you. There are two types of obligors. We have the willing obligors that we had arrived at settlement with and they have a payment plan and they have been paying. For example, somebody has a brewery at Aba and he is paying let’s say N100 million monthly and now because of the pandemic, the factory is closed and he cannot meet his obligation. Or someone that has a factory and is producing roofing sheets in Kano and was paying us N200 million monthly, but because of the lockdown, the factory is closed, you don’t blame such persons.

That is because when we entered into a resolution with him, we knew his sources of repayment and we now know that the sources of repayment are challenged. Obviously, for those kind of obligors, just like what is happening in the banking industry, we have to give them respite and a moratorium of about six months. And if in six months this virus doesn’t go away, you may have to extend it. So, we have to give such persons moratorium to the extent that this pandemic is addressed. This is one angle. Another angle are those obligors that have refused to sit down with AMCON to negotiate. Those ones, you have to continue fighting them, regardless of the pandemic. That is because, even when there was no pandemic, they were hiding. So, we have to continue pursuing them.

If it is their assets or anything we can hold on to, we would seize them through the legal system. We have to pursue such persons up to the extent that in our judgement we now discover that such persons have been challenged by the pandemic, before you can turn back and then give him respite. So, for those categories of people, we would continue to pursue them as if there is no pandemic. When their businesses were booming, they were not listening to us, which means that they never intended to pay. We have quite a lot of court cases going on and the courts have been very cooperative and they have been giving us priority hearing. So, generally, like every other thing, the situation is affecting everybody. It is affecting the judiciary, the physical visits to assets, valuations and every other thing. And you must understand that recovery is primarily driven by the human element. But we still go to work to look at the cases and we now do meetings with wider group of our staff. What this pandemic has also done to us is that it has shown us that we can hold a meeting and have a larger number of staff. We are now running training programmes online and everybody will be involved. We now have more engagements with our staff than it used to be before.

So, far how much has AMCON recovered?
So far we have recovered N1.1 trillion as at the end of first quarter 2020 and that was before the lockdown was announced. But, even within the lockdown, we have recovered between N5 and N10 billion. There are some people that are still meeting their obligation and there are assets that were forfeited that we have sold. So, even within this period, money is still coming in.

AMCON wholly-owned bank, Polaris Bank Limited recently released its first full year financial statement which was positive. I remembered last year you spoke about commencing the sale process for the bank. How far have you gone with that?

It is work in progress. Like I always tell people, once you put money in a bank, the most fundamental is that you try and see how you can improve the financials of the bank. This is because those that would come to buy the bank would not be buying it based on the money that you put in there, but they are buying the value that has been created in the bank. So, you try to see how you can improve on the financials. But once you improve on the financials, you don’t keep it too long because nobody wants a temporary situation. The staff would not want a temporary situation; the board would not want a temporary situation; the exco and even the customers. And you know banking is a highly competitive sector, if the tag, ‘AMCON Bank’ hangs around you, it becomes a challenge, even in marketing. So, we are hoping that very soon something would happen.

The positive figures they just churned out shows that this is a good time, but again, you can’t ignore the global economic situation. You don’t sell your assets in a distressed economy. If you have a house that you wanted sell last year, but you couldn’t sell it then and you now want to sell it, you must know that by default you want to give the buyer special discount. So, timing is very important. I believe that any asset that is of value at this stage, you should extend it because there are very few people that want to take risk now. So, what they would do is to price in the risk because nobody knows how this pandemic is going to end and if they don’t know, they would price the asset lower because of the risk of the pandemic.

So, this is not the best time to sell any asset really. As expected, people would want to hold on to cash to know which of the industry or sector would pick up and where to invest before any decision. So, on the issue of the sale of the bank I would not be too categorical. Left for me, really the sale should be concluded this year, because the longer you keep it, the more problematic it becomes because it is a competitive industry. So, what will determine it would be how we are able to manage this COVID-19 pandemic.

If this pandemic prolongs, do you foresee a situation whereby some banks may have to go back to AMCON to sell their bad debts?
No, I don’t foresee that. AMCON is not an undertaker. If they do, then the whole essence of the asset management framework is defeated. We shouldn’t have a situation whereby if any bank has a challenge it would come to AMCON, because that comes at a cost and doesn’t make sense anymore. A bank is a business. Unless there is a general global kind of situation that government needs to strongly intervene, then a case would be made. Otherwise, we shouldn’t have a situation whereby if any bank has a challenge it should just walk up to AMCON.

Compared to what we saw in 2008 that led to the creation of AMCON, do you think the banking system today is more prepared to absorb the shock that this pandemic is going to create?
The previous crisis was economic-based, but this one is health-based. So, they are totally different situations. With this pandemic, quite a number of people are learning how to walk around it and some pundits have said we may come out of it in the next 12 months, some have even said it would take two years for us to come out of it. So, there are so many things that are not known. But people are now strategising on how to operate within this framework.

Now, some people have taken loans from banks and some of the banks have given moratorium for six months or one year, because of the situation. Obviously, it is affecting the economy. But one cannot sit down at this stage to compare both crisis because they came with different challenges and different situations warranted them. It is always good to make such comparison towards the end. Really, that is why you see in some developed countries that in spite of the fact that they couldn’t control the pandemic, they were very eager to open the economy because they don’t want to have an economic crisis in addition to a health crisis.