Chinwendu Obienyi
Recent rumours making the rounds that Asset Management Corporation of Nigeria (AMCON) was lobbying for an extended lifespan after its tenure comes to an end is unsettling some stakeholders.
AMCON was established by the Act of the National Assembly of Nigeria in July 2010 with an intended 10-year lifespan and tasked with the responsibility of stabilising and revitalising the financial system by efficiently resolving the non-performing loan (NPL) assets of the banks, free up valuable resources and enable the banks 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 FG 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.
At the time of the establishment of this corporation, the body identified 10 banks with crisis in system asset and responded by injecting N736 billion-liquidity to buy their assets. Among the 10 banks, only three were unable to meet up and were finally acquired by AMCON and tagged as Bridge Banks and they include Mainstreet, Keystone and Enterprise banks.
But in 2013, the management of the International Monetary Fund (IMF) through its report advised the Federal Government of Nigeria to stop the operations of AMCON in order to avoid future financial challenges.
AMCON’s excess debt accumulation in 2015 was queried in its submission by the House of Assembly and most recently has been queried by shareholders of these banks over the same reason. Shareholders who spoke to Daily Sun revealed that AMCON ripped their money through its regulatory cost from these banks, adding that as a result of that, they went home with meager dividends.
According to these shareholders, its recent lobbying for extended lifespan should be vehemently refused by the National Assembly as AMCON has derailed in its duties. However, market operators are disagreeing with the view of the shareholders as they believe AMCON should be given more time to recover loans as the government cannot absorb the winding up of the corporation.
In a telephone chat with Daily Sun, Chief Executive Officer (CEO), Cowry Assets Management Limited, Johnson Chukwu, said: “The economy cannot absorb the cost of winding up of AMCON today. AMCON has an asset base of more than N5 trillion because many of the assets may not have been realised instantly. So, if you wind up AMCON, you have to find a way of liquidating the mandate AMCON has with CBN. This is because CBN funded most of AMCON’s acquisitions and so winding up AMCON will require a process of recoveries and the sinking fund which is coming from financial institutions is the source of winding down AMCON, the reality of it is that the economic system cannot absorb a sudden winding up of AMCON”.
He, however, urged the corporation to find creative ways of disposing the assets that are in its possession. “What AMCON can do is to find more creative ways of selling some of the assets that are in its possession, that is key to increasing the amount of recoveries and they can also give lifelines to companies. For example, if a company has challenges with funding, then AMCON can consider giving lifelines to such companies instead of winding them up so that the likelihood that they will pay back their loans is improved.” Chukwu explained. Corroborating, CEO, Highcap Securities, David Adonri said the corporation has a mandate to recover those debts and explained that the reason shareholders went home with small amount of dividend was because these banks were owing AMCON.
His words: “ If a company owes AMCON a lot of money and they have not paid then it will be difficult for them to pay dividend. So, AMCON has a justification for extracting a lot of things from the company. The mission of AMCON is not complete yet so they will still need to stay longer to complete whatever mandate has been given to them.”
However, the National Co-ordinator, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, believes that the corporation has outlived its usefulness and should stop lobbying for an extension.
Hear him: “In terms of loan recovery, AMCON has not done well; they are just taking assets that people use as collateral in blue-chip companies and are earning so much from them.
Since inception, they have not declared profits but have been posting losses. AMCON has not been operating for the best interest of any average investor and that is why we are clamouring they should wind up their exit.”
“I hear they are going to the National Assembly to extend their lifespan and if they want to keep existing, then banks should stop funding them, Instead, CBN and Ministry of Finance should fund them because the profit paid to AMCON belongs to shareholders.” Okezie thereafter called on the government to establish a credit bureau system which will do better than AMCON, pointing out that the economy is not growing because the banks have slowed down in giving loans to the real sector.
On his part, Founder, Independent Shareholders Association of Nigeria (ISAN), Sunny Nwosu said: “AMCON should just go; whatever they have done is enough because it is not a statutory body, rather it is an ad-hoc body that is given a 10-year lifespan and we have not derived any benefit. When something is established on ad-hoc basis and wants to extend its existence, there is something that is interested to those who are managing it that may not be interesting to the people they are managing.”
“Some companies are paying huge sums to AMCON while the shareholders are going home with meager amount of dividend. AMCON takes away some of these companies’ assets and will now go and re-sell the assets not at the rate these assets cost but more than the amount which it was taken away from the institutions. So, as long as the banks continue to progress, the higher the charges paid to AMCON.”