Following the threat of its N4.6 trillion toxic loans to the economy, the levy on deposits in money banks, and the lean purse of the Federal government, calls for a scrap of the Asset Management Corporation of Nigeria (AMCON) which has exceeded its life span have again heightened.
The calls for AMCON’s scrap are from shareholders of banks, coming, ten years after the International Monetary Fund (IMF) in 2013 recommended the closure of the toxic loan corporation. The Fund, in the summary of its Article 4 consultation report of the year recommended the scrap of AMCON, a subsidiary of the Central Bank of Nigeria (CBN) set up to buy off toxic loans from deposit money banks.
AMCON was set up by National Assembly Act 2010 in July 2010 with an intended 10 years lifespan. It was formed on 11 July 2011, and reported a N2.37 trillion loss after tax, three years after it was set up to absorb the toxic debts of banks in the aftermath of a financial crisis.
However, after two years of operations in 2013, the IMF recommended the closure of the agency established to restore financial stability after the 2009 banking crisis, stating it constitutes “moral hazard and fiscal risks”.
Ahmed Lawal Kuru, its managing director also declared the obvious at the recent London training of judges stating, “Our debt is in the balance sheet of the Central Bank of Nigeria, and therefore, a threat to the economy. After recovery and disposal, funds are paid directly into our CBN account. Recovery and disposal of assets have so far contributed about N1.6tn towards settling our obligations.”
In essence, out of a total of N4.66 trillion debt, the Corporation has so far recovered about N1.6 trillion in the more than 10 years of its existence. Kuru stated further that 350 obligors accounted for 84 percent or N3.96 trillion of the total outstanding amount.
Worrisome however, despite the lean Treasury that has forced several cost-cutting measures, the federal government, having guaranteed it, must provide N4.6 trillion to pay off the loans in the AMCON book which will mature by December 2023.
This huge liability on the government is outside the nation’s N77 trillion debt which includes the N23.7 trillion CBN’s “Ways and Means’ loan. This, together with the levy on deposit banks has forced shareholders to consider a legal battle against the toxic loans corporation. They want an end to the annual AMCON levy on deposit money banks which the shareholders claimed, has negatively impacted returns due to them on their investments for too long.
One of the arrowheads of the lawsuit confided in InsideBusinessNG over the weekend that the legal battle will mark the beginning of scrapping the Corporation, insisting that its continued existence is very injurious, not only to shareholders of banks but also to the Nigerian economy generally.
The coordinator of the Progressive Shareholders Association of Nigeria, Boniface Okezie, a vocal shareholder activist, confirmed the development but refused to give further details, promising the details would be out at the appropriate time.
“Yes, we shareholder groups are perfecting plans to sue AMCON. All Nigerian shareholders in the banking industry will take AMCON to court when we finalise our plans”, Okezie confirmed.
AMCON last week, again came to the front burner following a raging ethical controversy over the training of Nigerian judges in London. Although the Federal High Court has denied that the Asset Company sponsored its training, Nigerians, however, frowned at the offshore training and the attendance by the corporation when about N4.5 trillion is “hanging loose on its neck like a giant’s robe upon a dwarfish thief.”
Commercial banks operating in the country fund the operations of AMCON by compulsorily paying an annual AMCON levy of 0.5 percent of the value of their total assets, into a sinking fund which shareholders are now kicking against and calling for a probe into the Corporation’s claim that it had recovered only N1.6 trillion since its inception.
Taiwo Oderinde, the National Coordinator of Proactive Shareholders Association of Nigeria (PROSAN) also confirmed the move to file a lawsuit against AMCON, adding that all shareholder groups of like minds are involved in the showdown.
“We shareholder groups of like minds are together in this fight for our rights, and it is not only in the interest of shareholders but also the generality of Nigerians. We have to fight this course and recover what rightly belongs to investors”.
“AMCON has outlived its usefulness and has to be disbanded. They cannot continue to milk dry the returns on our investments,” the shareholder activist told our correspondent over the telephone.
However, AMCON spokesman, Jude Nwauzo, faulted shareholders’ claims, wondering where they were when shareholders’ funds in the rescued banks were being eroded in the financial crisis of 2008 – 2009 which necessitated the creation of AMCON by the CBN as an intervention vehicle to stabilize the banking industry.
He said “AMCON was not created as a profit-making organization. It was created as a debt resolution company. And AMCON publishes its annual report every year, and to the best of my knowledge, has never defaulted for once.”
When reminded that the amount of money so far deducted from banks as AMCON levy is missing in the AMCON reports, and therefore not in the public domain, he replied thus, “It cannot be in the public domain because when CBN and AMCON were raising the bonds to bail out those banks, it was not in the public domain”.
“Those banks could have gone under and more than 14,000 jobs would have been lost. But we saved all those banks and thousands of jobs,” Nwauzo contended in a telephone conversation from London where he is currently on vacation.
Kuru, however, in a statement, warned that the Corporation’s indebtedness to the Central Bank of Nigeria (CBN) was a significant threat to the economy although he did not explain how, and the nature of the threat.
“Our debt is on the balance sheet of the Central Bank of Nigeria, and therefore a threat to the economy. After recovery and disposal, funds are paid directly into our CBN account. Recovery and disposal of assets have so far contributed about N1.6 trillion towards settling our obligation.”
Shareholder groups and financial market analysts have criticised AMCON’s attendance at the London training for judges who also adjudicate over AMCON’s lawsuits against debtors.
“It is part of the dubious ways in which Nigerian public enterprises are managed. It is a classical example of financial recklessness. AMCON is still carrying huge debts. The Corporation requires every amount of money to settle that huge debt. For management to be involved in this kind of recklessness beats every imagination,” says David Adonri of the Lagos-based Highcap Securities Ltd. The senior dealing member of the Nigerian Exchange described AMCON as a huge failure, stressing that it should be scrapped because it has failed to deliver on its core mandates.
Also commenting, Barrister Ralph Udo, said “For a government agency that claimed a high level of indebtedness and failed target in debt recovery, it does not make economic sense, therefore, attending an offshore training that ought to be facilitated locally. Not at a time when the country is in dire need of a scarce foreign exchange,” said the Principal Partner of Ralph Udoh Chambers.
The senior lawyer noted that AMCON should have nothing to do with the training of Judges who are potential arbiters in their litigations, pointing out that it raises ethical and integrity questions.
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