The Chief Judge of the Federal High Court, Justice John Terhemba Tsoho has declared that although Nigerian banks were restructured prior to the financial crisis through consolidation, the exercise was not able to shield banks from the effects of the crises.
This he said was due to some recklessness in the banking system, which the Asset Management Corporation of Nigeria (AMCON) is currently battling to correct.
According to a statement, he made the remark while addressing Judges of the Federal High Court at the 36th Annual Judges Conference in Abuja, during an interactive session with the management of AMCON.
Tsoho further highlighted what he called the ‘eight factors,’ that were primarily responsible for the crisis in Nigeria banking system, which led to the creation of AMCON and why the nation must support corporation to recover the outstanding debt and ensure that the financial rascality that led to the creation of corporation was prevented.
He said his concerns for the financial system in the country was premised on the fact that the crisis further exposed a litany of other lapses in the financial system that needed to be addressed to prevent total collapse at the time.
The legal luminary, however, stated that the Nigerian government also responded by establishing AMCON to help in stimulating recovery of the Nigerian banking system through the buying of non-performing assets of troubled banks and recapitalise the banks.
He said, “Eight factors were primarily responsible for the crisis in Nigeria. They include macro-economic instability caused by large and sudden capital inflows; major failures in corporate governance in banks; lack of investor and consumer sophistication; inadequate disclosure and transparency about the financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management processes at the Central Bank of Nigeria (CBN) as well as weakness in the business environment.
“In the wake of the financial crisis, banks found themselves saddled with plethora of defaulting loans. In addition to causing default, the crisis typically led to depreciation in the value of securities created against these defaulting loans thereby leaving banks with an unfortunate inability to recoup their losses.
“Having tied up large amount of capital in non-performing loans and having lost confidence in the ability of the borrowers to repay the debts, banks were unable and possibly unwilling to maintain the level of lending required to maintain a vibrant economy.”
He added: “The corporation was constituted pursuant to the AMCON Act 2010, to prevent the systemic collapse of the Nigerian banking sector by the acquisition of Non-Performing Loans (NPLs) and the recapitalisation of banks, which were imminent to fail.
“The corporation is expected to achieve the following objectives: promote financial recovery by addressing the debt overhang of banks occasioned by NPLs; acquire, restructure, manage and/or dispose NPLs in the banking system; recover and sell off collaterals for NPLs as quickly as possible and maximise recovery value to reduce public cost.
“To effectively and efficiently accomplish the foregoing, the corporation necessarily requires complementary radical powers. Powers that are disconnected from common sense but prescribed by the AMCON Act-thus legal,” adding that the 2019 amendments to the AMCON Act stipulated for the fast tracking of the hearing and determination of AMCON cases; checkmating debtors’ legal gymnastics and exploitation of the legal technicalities to frustrate debt recovery, among other important aspects.
Earlier in his submission, the Managing Director/Chief Executive Officer, AMCON, Mr. Ahmed Kuru, urged the Chief Judge to in compliance to the new amendment of the corporation set up the AMCON Task Force and approve the AMCON Procedure Rules.
Kuru pleaded that such bold steps if taken, would have significant impact on the speed at which AMCON matters are heard and concluded at the Federal High Court, in the spirit of the amendment in particular and in national interest in general.