AMCON’s tough routes to recover N5.4tr debts

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AMCON’s tough routes to recover N5.4tr debts
February 26, 2020

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The Asset Management Corporation of Nigeria (AMCON) Managing Director/CEO, Ahmed Kuru is pushing for the recovery of over N5.4 trillion debts owed the corporation by obligors, mainly billionaires. The corporation has taken  steps to ensure that more debts are recovered through negotiations and resolutions, using cash recoveries, asset forfeitures and capital restructuring. It is also deploying joint ventures for asset operations and land development while there are plans to input bankruptcy tag on recalcitrant obligors, writes COLLINS NWEZE

 

The Asset Management Corporation of Nigeria (AMCON) is doing everything possible to recover over N5.4 trillion debts from bad debtors.

The corporation, among other moves, is planning to declare recalcitrant debtors to the corporation bankrupt based on advice from Senior Partner, Olaniwun Ajayi, Muyiwa Balogun, to the agency.

The legal consultant had challenged AMCON and Judges of the Federal High Court of Nigeria (FHC) to leverage the 2019 Amended AMCON Act and declare AMCON obligors who are holding public office bankrupt.

The new  Amended AMCON Act, which was signed into law by President Muhammadu Buhari, provided AMCON with sweeping powers,  intended to help the corporation recover the debts owed it by obligors.

AMCON was created in 2010 as a result of the global economic crises of 2008/2009, which nearly crippled the financial sector.

Speaking at a seminar for judges of the FHC in Abuja, Balogun argued that the only alternative to the recovery challenge was for the judges to take the matter as a national assignment and explore all the powers of the new amendment.

“Once you are declared bankrupt, you cannot hold public office. Today, we have AMCON debtors making laws for the Federal Republic of Nigeria.

AMCON, with your support, needs to go to court and declare such individuals bankrupt. Given the sunset period of AMCON and the fact that the debt we are talking about is the commonwealth of Nigeria, it would not be out of place to take the full advantage of the bankruptcy power, among other special powers in the new amendment,” he said.

AMCON Managing Director/Chief Executive Officer, Ahmed Kuru, said though obligors have been working hard to stretch the corporation to the sunset period, the corporation is determined to achieve its mandate within the limited time available (and within the law).

The amendment of the AMCON Act, he stated, could only be as effective as the judiciary pronounces on its provisions within the interpretative powers vested by the Constitution of the Federal Republic of Nigeria 1999.

After over eight years into its operation, and ahead of 2021 sunset period, AMCON has recovered N1 trillion through assets seizure, forfeiture or cash payment.

Data from AMCON showed that of the recovered funds, cash assets account for 60 per cent and non-cash assets, such as properties and equity securities, account for the balance of 40 per cent.

The recovered cash represents 18.51 per cent of the total sum. Financial pundits have, therefore, expressed doubts on the possibility of the corporation recovering substantial  part of the debts in the next three years even as the interest accrued to the debts has continued to rise, bringing the total obligation back to N5.4 trillion, despite the N1 trillion recovered.

The big question is: what happens to the outstanding debts owed the corporation and who inherits them after the sunset period? It was such a question that made many debtors adopt a wait-and-see plan, hoping that their debts would be forgiven when the corporation’s 10-year timeline ends.

Kuru said the corporation had taken steps to ensure more debts were recovered through negotiations and resolutions, using cash recoveries, asset forfeitures and capital restructuring for short to mid-term exits, including deploying Joint Venture arrangements for asset operations and land development.

He said AMCON has done enough of negotiations with its obligors who have remained not just difficult but recalcitrant in the last eight years.

The AMCON chief also disclosed that Ernst & Young (multinational financial advisory firm), the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) are pushing to end the operation of corporation.

He said: “AMCON is working with the three institutions to ‘tinker things a little’ and then at certain point in time liaising with the National Assembly to draw a line.”

 

New asset take over

Recently, AMCON had taken over Cedar Oil & Gas Exploration and Production Limited over N29 billion bad debt and appointed Receiver/Manager to oversee the firm.

Justice C.J. Aneke of the Federal High Court Lagos Division has granted an injunction against Cedar Oil & Gas Exploration and Production Limited on the application of AMCON over the debt.

AMCON subsequently took possession of the assets of the company promoted by Olajide Omokore and others as ordered by the court through Godwin Nwekoyo, the Receiver/Manager who also received protective orders from the court.

Kuru said the corporation would continue to sustain its high tempo of recoveries, by strategically focusing more on enforcements especially since AMCON’s top obligors have resorted to hiding under all manner of technicalities of the law to delay the repayment of their debt to the detriment of the economy.

The assets, which are under AMCON are Block A, No. 46 Gerrard Road, Ikoyi Lagos State, comprising 26 flats; Plot 1236, River Niger Street, off River Benue Street, Maitama, Federal Capital Territory (FCT); as well as Marion Apartment, Block 8, No. 4 & 5, Onikoyi Estate, Banana Island, Lagos State, consisting of 43 units of apartments.

AMCON is also in possession of No. 33A, Cooper Road, Ikoyi, Lagos State; No. 8, Gerrard Road, Ikoyi, Lagos State as well as Manson Apartments, No. 6, Gerrard Road, Lagos State comprising 60 units of three-bedroom apartments.

Justice Aneke gave the orders following the failure of the company as well as Omokore, Alhaji Isiaka Mohammed, Joseph Bazuaye, Silas Ode and others to pay AMCON over N15 billion out of the total outstanding indebtedness of N29 billion owed the recovery agency.

 

AMCON powers

The 2009 banking crisis was triggered by the poor quality of bank assets because then, many banks suffered from an overhang of “non-performing loans”, also described as “toxic assets” or “troubled assets”.

To contain the crisis, AMCON was established as a bank resolution vehicle through the AMCON Act.

The Amendment Act, 2019 empowers the agency to access the financial details of debtors. The agency can place bank accounts of debtors under surveillance.

The law empowers AMCON to bypass any legal or procedural restriction, specifically those protecting banking details of debtors, so that the debt-mopping agency could gain access to such records.

AMCON can establish the location of debtors’ funds at home or in the Diaspora. The law also empowers AMCON to furnish government Ministries, Departments and Agencies (MDAs) with a list of debtors, and advise government to deny contract awards to such defaulting firms and persons.

As a complement to the new law, Vice President Yemi Osinbajo has set up a task force to facilitate ways to recover over N5 trillion debts owed AMCON.

The agencies are the Economic and Financial Crimes Commission (EFCC), Nigeria Financial Intelligence Unit (NFIU), the Independent Corrupt Practices and Other Related Offences Commission (ICPC), and the Federal Ministry of Justice.

Also, Section 48 of the AMCON Act empowers AMCON to either act as, or appoint a receiver for a debtor-company whose assets have been charged, mortgaged or pledged as security to AMCON.

This in itself is a unique provision. First, AMCON may act as a receiver, which is a departure from the provisions under the Companies and Allied Matters Act, thereby enabling it to throw its resources, to ensure quick recovery of debts.

The issue of AMCON’s debt recovery drive has become complex. It touches on the thoughts and deliberations of policy makers, AMCON executives, and even the average citizen as AMCON oversees funds that trace their roots to the taxpayer.

“For those of us in the judiciary, we are partners in ensuring that AMCON meets the mandate conferred upon it by the AMCON Act, which we are called upon to interpret, from time to time. Besides, task to strengthen AMCON’s recovery drive is of national concern.

“The provisions are further strengthened when dealing with a situation where AMCON or a receiver appointed by it, opts to manage the affairs of the debtor company.

In such an instance, the enforcement of judgements, claims, debt enforcement procedures existing or being pursued before the publication of the notice of the receiver to manage the affairs of the debtor company stands suspended and unenforceable against the debtor company and corporation’s receiver for a period of one year from the notice or the period that the receiver continues to manage the affairs of the obligor company,” the judge said.

“There are concerns as to whether the provisions on receiver management as contained in the AMCON Act are actually fit for purpose or whether they introduce business rescue legislation into Nigeria by the back door.

In the event that they do in fact introduce a form of business rescue, it is evident that this may be a clog in the wheel of AMCON’s recovery drive. Further analysis on this point is provided in paragraph 39 below”.

In addition to receivership, AMCON is also empowered under Section 49 of the AMCON Act to, through an application ex-parte; seek a forfeiture order against the assets of a debtor.

This is a particularly important power as it enables AMCON to move stealthily without tipping off otherwise crafty debtors.

The forfeiture order vests the control and possession of the assets in AMCON, pending trial and judgement. Upon a favourable judgment, the assets in question are permanently forfeited to AMCON.

“What is clear is that these powers serve as a form of security for AMCON in litigating appropriate cases, comforted by the fact that at the end of trial, the fruits, in the form of the forfeited assets would flow to AMCON.

This is clearly a better position than a situation where AMCON successfully prosecutes a case in court but is left to subsequently undertake the ordeal of enforcement post – judgment with the risk that the assets in question may be dissipated by the time of enforcement.”