November 23, 2021/CSL Research

Recently, the Managing Director of the Asset Management Corporation of Nigeria (AMCON), Ahmed Lawan Kuru, submitted a list of its top 1,000 obligors to the House of Representatives Committee on Banking and Currency. Speaking at the meeting, Ahmed Lawan disclosed that the progress of the debt recovery process heavily depends on the swift judgements of the Judiciary. Currently, the corporation has over 4,000 pending court cases challenged by several issues, including unperfected title documents of some properties from Eligible Financial Institutions (EFIs), which either hinder or drag the completion of the sale of some assets. The MD also complained about the significant fall in the market value of many of these assets caused by the current macro conditions, making it unattractive to effectuate the sales transactions. Added to this, many buyers believe the assets should be bought at a discount. According to him, the total current exposure on all Eligible Bank Assets (EBAs) stands at N4.4tn.

AMCON had adopted several methods to recover the loans, such as publishing the names of debtors in the print media, appointing Asset Management Partners (a consortium with specialist skills required to ensure recovery and debt resolution). More so, forming a task force comprising the Economic and Financial Crimes Commission (EFCC), Nigerian Financial Intelligence Unit (NFIU), the Independent Corrupt Practices Commission (ICPC). Despite these measures, the corporation has not seen a significant improvement in debt recovery. To make the matters worse, there is a high concentration of AMCON’s debt in the hands of obligors who are regarded as political “big wigs” and can use their influence to elongate the judicial process.

The Asset Management Corporation of Nigeria (AMCON) was established in July 2010, when the President of the Federal Republic of Nigeria signed the AMCON Act into Law. AMCON was created to revive the financial system by efficiently resolving the nonperforming loan assets of the banks in the Nigerian economy following the 2008 economic crisis. In three purchases between December 2010 and December 2011, AMCON acquired loans with a face value of N4.02 trillion for N1.76 trillion. Meanwhile, President Muhammadu Buhari recently signed the Asset Management Corporation of Nigeria (Amendment) Act, which amends the AMCON Act No.4, 2010. Among other things, the amended act extends the tenor of the Resolution Cost Fund (RCF) and grants access to the Special Tribunal established by the Banks and other Financial Institutions Act 2020.

In our view, the signing of a new act with additional clauses may not be sufficient to address the current enormous debts. Despite the persistent calls by the legislative and executive arms of the government to assist AMCON in the loan recovery process, recovery has been very slow, and the banks continue to bear the burden. Banks were to contribute an annual levy equivalent to 0.3% of their total assets. This contribution was later increased to 0.5% to secure sufficient funding, and with increasing banks’ assets, the amcon charge has become a huge part of banks’ operating expenses