As Empowered AMCON Goes after Recalcitrant Debtors

Focus

Louis Achi

On Wednesday, April 28, 2021, the Senate passed an Asset Management Corporation of Nigeria (AMCON) Amendment bill that empowers the corporation to, among others, take possession, manage or sell all property traced to debtors.

This is notwithstanding whether or not such assets or property were used as security/collateral for obtaining the loan in particular.

The passage of the crucial bill followed the consideration of a report by the Committee on Banking, Insurance and Other Financial Institutions. AMCON is also being empowered to access the Special Tribunal established by the BOFIA, 2020 for dealing with financial related matters.

Chairman of the Committee, Senator Uba Sani (APC, Kaduna Central), in his presentation said the Committee engaged with stakeholders such as AMCON, Federal Ministry of Finance, Budget and National Planning; Central Bank of Nigeria; and Nigeria Deposit Insurance Corporation (NDIC).

According to Sani, the stakeholders in their submissions asked that AMCON be empowered to take possession, manage, foreclose or sell, transfer, assign or otherwise of property used as security for eligible bank assets among others, adding that, “this will provide for a quicker, easier and legitimate process of assets disposal.”

It can be recalled that AMCON, established on the 19th July 2010, was conceived to be a key stabilising and re-vitalising tool aimed at reviving the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy.

But sadly since its establishment, the success story of the corporation has been a mixed bag with dodgy debtors pulling all known tricks in the book to evade repayment of bank loans they had accessed to supposedly grow their businesses. So inevitably, a parliamentary tweak to the subsisting legislation was inevitable.

Significantly, President of the Senate Ahmed Lawan succinctly captured the necessity for the tweak to empower AMCON: “When we come to legislate, we all come here with very clear mind, that we are doing this for our country. We don’t have any interest but the national interest. Our hope and desire is for AMCON to be able to recover huge sums of money – trillions that people have taken and now is on the head of Nigerians. And, it is criminal, really.”

A key novelty of the committee’s recommendation is in clause two, which empowers AMCON to take possession of assets outside of those used as collateral in obtaining a loan request. This fundamentally means that all dodgy debtors who zoom around in private jets and live in unseemly luxury no longer have a hiding place.

This current legislative tweak is crucial because after the financial crisis of 2008-2009, the high rate of Non-Performing Loans (NPLs) in Nigerian banks led to the liquidation and bail out of some banks by the central bank. AMCON was subsequently established as a special purpose vehicle with the mandate to efficiently resolve and manage the non-performing loan assets of banks thereby stabilising the sector.

However, rather than reduce the number of NPL’s, 10 years onwards, AMCON has acquired more liabilities thereby increasing NPLs and has about 3,000 cases in court. The consensus by experts is that this scenario is totally unacceptable.

It’s no secret that Nigeria’s ‘rich list’ boasts of many billionaires. But many on the fancy list are make-believe.

Former Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, had shattered this contrived wealth bubble when he came down hard on bad bank debtors – naming and shaming them in newspaper publications.

Many of them were indeed chronic bank debtors who lived on borrowed depositors’ funds and almost borrowed some banks into extinction with no desire to pay back.

For instance, it could be recalled that after its formal merger with mid-tier rival Diamond Bank Plc in April 2019, following due regulatory approval, Access Bank Plc acquired all the assets and liabilities of the defunct banking entity.

This positioned Access Bank to pursue recovery of all outstanding debts including the $85.8 million owed it by Cardinal Drilling Limited, a company linked to Seplat Petroleum Development Company Plc, whose chairman is billionaire business mogul, Dr. ABC Orjiako.

This legitimate move by Access Bank to recover the outstanding $85.8 million owed by Cardinal Drilling Services Ltd in effect, has spawned all shades of seemingly adroit maneuvering by the upstream exploration and production entity which has distanced itself from its sister entity (Cardinal Drilling Limited) and ultimately is denying responsibility for the loan which it said it never took. There are so many instances of this scenario.

Deploying corporate filibustering or subterfuge to frustrate the debt recovery will negatively impact the critical banking sector and defeat the essence of granting such facilities to aid business growth. For Access Bank, the lender in this instance, as well as other banks, it is a costly project.

The cost covers time for debt recovery and the need to make greater loan provisioning, which reduces profitability and capital resources for lending. Access Bank and Seplat are currently locked in legal battle whether Seplat’s assets can be seized since it was said to be a direct beneficiary of the loan granted Cardinal Drilling, its sister company.

Analysts are of the view that it’s time to go after personal assets of recalcitrant debtors who remain a threat to depositors cash in banks. Particularly those who borrow with no intention to pay back.

The rise in NPLs remains a significant drag on effective financial intermediation in Nigeria. It is highly unconscionable to borrow depositors’ money from the bank, to ostensibly enhance business growth but only to conceive strategies to evade repayment on the terms agreed.

Exploiting the new legislative empowerment of AMCON, the corporation can now resolutely go after the private jets and fancy mansions, cars and assets of defaulters – outside the collateral assets reflected in the terms of the loans they sourced.

This will also send an enduring signal to all future borrowers that the age of financial responsibility has dawned as the empowered AMCON goes after dodgy debtors. Kudos to the Senate.

•Achi, a public affairs analyst, writes from Abuja.