Like it did in 2018, the Asset Management Corporation of Nigeria is set to publish names of some recalcitrant debtors in major national dailies when the deadline given to them to sort their debts expires on January 6, 2022. Observers, however, doubt if the naming and shaming tactic alone can compel this category of debtors to fulfil their debt obligations, reports Festus Akanbi
One story that trended for the most of last week was the January 6, 2022, deadline given some categories of bank debtors by the Asset Management Corporation of Nigeria (AMCON) for them to pay their debts or risk their identities being exposed in a syndicated advertorial in major national dailies.
The corporation, which came under the scrutiny of the National Assembly, resorted to the naming and shaming tactic against some recalcitrant debtors, as exposure to non-performing loans hit N4.4trillion.
An All-Out War against Delinquent Debtors
The drive to recover the debt is coming at a period of falling revenue and increasing pressure on the federal government to balance its book. Incidentally, the debt recovery campaign was given a fillip with the inauguration of an inter-agency committee to speedily resolve the challenges in recovering the debts.
Vice President Yemi Osinbajo, who inaugurated the committee, charged its members to turn the tide in what has been a difficult process where debtors have continued to default in their payment obligations.
Senior Special Assistant on Media and Publicity to the vice president, Laolu Akande, explained that about 67 per cent of the outstanding N5trillion debt is being owed by just 20 individuals/entities.
He pointed out that following the challenges encountered in the debt-recovery processes and the very limited results recorded so far, the committee is expected to consider other options, including taking enforcement measures in actually recovering the debts.
Members of the committee to be chaired by the Chairman, Independent Corrupt Practices and other related offences Commission (ICPC), Prof. Bolaji Owasanoye, include heads and representatives of agencies such as AMCON, the Economic and Financial Crimes Commission (EFCC), Nigerian Financial Intelligence Unit (NFIU), ICPC, Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), and the Federal Ministry of Justice.
The panel, among other related tasks, is expected to review the status of debts owed to AMCON, deliberate on practical, legal and other strategies for the recovery of the debts, and prepare a report, which will include a debt recovery work plan with specific timelines for completion.
AMCON’s Deadline to Debtors
Following the directive of the Senate Committee on Banking, Insurance, and other Financial Institutions, AMCON had hinted of a 30-day grace that expires on January 5, 2022, to come with a payment proposal to offset their outstanding debt obligations. Failure to do that, the commission said all is now set for the publication of a new list of recalcitrant debtor individuals, and institutions, as well as their directors on its Non-Performing Loans (NPLs) portfolio in national newspapers.
The committee chairman, Senator Uba Sani (Kaduna Central), had directed AMCON to publish the names of all debtors including prominent Nigerians who are frustrating efforts at fulfilling its debt recovery mandate.
Like 2018, Like 2022?
However, critics of AMCON’s naming and shaming tactics of debt recovery explained that it was disingenuous of the bad bank to adopt the roadmap handed over to it by the national assembly without offering any experienced-driven alternative.
They argued that given the fact that a similar tactic deployed in October 2018 had failed to compel these delinquent debtors to meet their obligations, it is astounding that AMCON could hope to win the battle with a similar tactic this time.
On October 24, 2018, names of popular businesses, promoters, and politicians were published in major national newspapers for a debt put at N906billion.
“I wondered why AMCON still resorted to this failed tactic three years after. What happened then was a flurry of activities by the indicted persons and organisations and after what came like a media war, everybody returned to the status quo. It showed the corporation is either bereft of new ideas to carry out its assignments or it just decided to play to the gallery,” a commentator who spoke under the condition of anonymity said.
As all eyes are on January 6 deadline, financial analysts said unless the corporation shows more determination, the campaign for the winding down of its operations by those going about with the narratives that the corporation has outlived its usefulness will continue to fester. This is because, despite two amendments to the law establishing the corporation, the issue of non-performing loans in the nation’s banking industry is still a source of concern.
Non-performing Loans in Banks
AMCON was established by the Act of the National Assembly of Nigeria in July 2010 with an intended 10-year lifespan. Its core task was to stabilise and revitalise the financial system by efficiently resolving the non-performing loan (NPL) assets of the banks, free up valuable resources and enable the banks to focus on their core activities.
The Act establishing the body permits, as part of its operation to set aside a sinking fund with an annual N50 billion contribution by the CBN and 0.3 per cent of total asset value of all commercial banks over the useful life of the corporation.
This money from the fund would be used to purchase federal government securities and the returns from the investment will be returned and then redistributed among the contributing commercial banks. The fund is administered by a consortium of members from the participating banks which will be rotated annually to allow even participation among participating banks.
But in 2013, the management of the International Monetary Fund (IMF), through its report advised the federal government to stop the operations of AMCON to avoid future financial challenges.
AMCON’s excess debt accumulation in 2015 was queried in its submission by the National Assembly and most recently has been queried by shareholders of these banks for the same reason.
A Cocktail of Debt Recovery Measures
When confronted with these positions, spokesperson for AMCON, Mr. Jude Jude Nwauzor dismissed some of the submissions as misconceptions.
On why the corporation has failed to come up with other debt recovery tactics other than naming and shaming, he stated that there are a lot of measures that the Corporation has put in place to hasten the recovery of its huge outstanding debt of N4.4trillion. He stated further that AMCON after many years of supporting businesses, restructuring the debts, and negotiations changed its strategy to enforcement because of the recalcitrant nature of the debtors.
“Upon the establishment of AMCON in 2010 by the federal government of Nigeria through the Act of Parliament, some 12,743 Eligible Bank Assets (EBAs) from 22 eligible banks for a purchase price of N1.8 trillion was acquired by AMCON; the Corporation capitalised three Eligible Financial Institutions (EFIs) and provided financial accommodation to five others.
“AMCON also injected N2.2 trillion to 10 intervened banks – bringing their Net Book Value to Zero. AMCON has over the years supported businesses in manufacturing, real estate, oil and gas, aviation, automobile just to mention a few. The whole idea was to stabilise the financial sector to keep it up and running while AMCON goes about the recovery drive.”
According to him, about 5,000 accounts, which is about 38 per cent of the total number have been fully settled, through which the Corporation has recovered over N1.4trillion. Significant recoveries were achieved at the early stage of debt recovery due to the ‘fear of AMCON’ at the initial stage.
He explained that as it is today, AMCON is dealing with recalcitrant obligors and over 90% of negotiations with these debtors have failed to materialise. AMCON, therefore, is not just using the strategy of naming and shaming to recover debts, it is exploring all the powers granted to the corporation by the Act establishing the agency.
He listed other recovery methods to include asset tracing, which is a situation where the corporation is mandated by its Act to trace uncollateralised assets of an obligor and obtain a court order to attach as collateral; Continuous engagement with regular stakeholders such as the judiciary because AMCON has over 4,000 cases in court and therefore make a lot of recoveries through that channel. As a matter of fact, because of the number of cases the corporation has in different courts in the country, the Judiciary has become very central to the recovery activities of AMCON.
The corporation, he noted, also introduced a scheme, which it christened Asset Management Partners (AMPs) that were engaged to join AMCON in the recovery drive. AMPs are consortiums with specialist skills required to ensure recovery and debt resolution, with experience in banking, legal, valuation, and accounting.
Dismissing the call for the winding down of the corporation, the spokesman said AMCON has performed better than its peers as far as debt recovery is concerned.
“It will interest Nigerians to know that AMCON has outperformed other AMCs around the globe with a 60 per cent recovery rate even with the huge outstanding debt that is yet to be recovered, saying that AMCON will continue to find ways to deliver on its mandate and provide support to the Nigerian economy by injecting funds into and stabilising businesses of national interest such as in the cases of Arik, Aero, and Skye (now Polaris Bank).”
He admitted that the corporation is not supposed to operate in perpetuity because there is a sunset, which, according to him, is why there is a need for speed in our recovery drive.