As the Senate Committee on Banking, Insurance and Other Financial Institutions begins a public hearing on proposed amendment to Asset Management Corporation of Nigeria (AMCON) Act of 2010 tomorrow, economists believe the corporation has fared well and that the proposed amendment will enhance its debt recovery drive, reports Festus Akanbi
For obvious reasons, attention of key players in the nationâ€™s financial sector, including banks, delinquent debtors, and the media, will tomorrow morning shift to the public hearing on the planned amendment of the Asset Management Company of Nigeria (AMCON) Act of 2010 by the Senate Committee on Banking.
Tagged: â€œA Bill for an Act to Amend Asset Management Corporation of Nigeria Act 2010,â€ the bill, among others, seeks to establish a corporate entity with a well constituted Board of Trustees (BoT) drawn from CBN, eligible financial institutions, National Deposit Insurance Corporation (NDIC) and the Federal Ministry of Finance to make regulations for the supervision and management of AMCON fund.
Specifically, the proposed legislation is an act to amend Sections 2,16(5),34(1),34(2),35,46(2),48,60,61and 62 of the AMCON 2013 Act.
The nature of the amendment clearly showed the resolve of the upper chamber to insulate AMCONâ€™s activities from corrupt tendencies. One of the new clauses being introduced is that a member of the board or any employee of the corporation shall not either directly or indirectly be involved in the purchase of assets acquired by the corporation as part of, or in pursuance of, the acquisition of an eligible bank asset or the enforcement or realisation of any rights relating to an eligible bank asset acquired by the corporation.
Tomorrowâ€™s event is therefore packaged by the National Assembly to listen to the view of other stakeholders on the proposed amendment.
The amendment is said to have been informed by the need to build a cordon around the action taken by AMCON, including the agreement between the banks and the CBN to contribute to the AMCON sinking fund.
Sponsor of the bill and Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Bassey Otu listed some of the high points of the amendment to include the need to empower AMCON to acquire assets that are already subject to litigation if there is no valid court order restraining it from doing so.
Therefore, as AMCON officials, a number of consultants and other stakeholders converge on the senate chamber tomorrow, there is no doubt that the discussion will essentially dovetail to the achievements of the corporation and ways to strengthen its operations.
Speaking on the amendment of AMCON Act, the corporationâ€™s chief executive, Mr. Mustafa Chike-Obi, said the motivation behind that is a singular one, which is to put the sinking fund agreement into law so that nobody can come five years from now and say he wasnâ€™t there when the agreement was reached.
According to him, â€œA new Central Bank of Nigeria (CBN) governor or managing director of bank can come tomorrow and say he or she wasnâ€™t there. The reason is to protect the Nigerian people because we have rescued the banks, we have rescued depositors and they have agreed to pay for a period of 10 years and you must hold them to do that.â€
Dismissing pockets of criticisms over AMCONâ€™s activities since inception, Chike-Obi said from all indices, the corporation has done excellently well. â€œNow that they are all saying the levy is killing their incomes, go and look at the incomes and taxes paid by banks in 2010, 2011, 2012 and 2013 and tell me that they have reason to complain about AMCON,â€ Chike-Obi was quoted as saying.
A member of the Senate Committee, Senator Ita Enang, had sought to know the sum of N5.7 trillion allegedly made available to AMCON was dispensed during the period. However, Chike-Obi told THISDAY that the corporation, which he said had raised N12 trillion over the last two years, spent N1.7 trillion to buy Non-Performing Loans while N2.3 trillion was spent on banksâ€™ recapitalisation so that the affected financial institutions could return to profitability.
Chike-Obi explained that AMCON, like similar bad banks elsewhere, was set up for three main purposes. The corporation, he maintained, was set up to buy non-performing loans, a role he said AMCON has delivered excellently well.
He listed the second role as recapitalisation of banks. Chike-Obi said the corporation has so far deployed N2.3 trillion in that regard.
Third, AMCON also has the responsibility of recovering all non-performing loans and to get the best achievable result. For this, the chief executive of AMCON said the corporation has scored 100 per cent.
The corporation, he said, has also spread its tentacles to other sectors of the economy which it had one time or the other bailed out in the course of its operations in the past two years. These include the stock market, aviation, banks and industry.
AMCONâ€™s intervention, according to him, has saved over five million Nigerian depositors from losing their deposits in banks.
On the concerns raised in certain quarters that the increase in AMCONâ€™s levy from three per cent to five per cent, Chike-Obi said the increase was not a surprise.
He explained that the increase was an â€œattempt to make sure that AMCONâ€™s activities are concluded within a reasonable time and we think 10 years is a reasonable time. The banks were part of the consultation and they are all very responsibly and graciously agreed to the increase.â€
He admitted that banks would have made more monies without the levy, saying however that â€œwe must stop back and look at banksâ€™ earnings as a whole. The activities of AMCON made banksâ€™ earnings to where they are today. Before AMCON, no bank in Nigeria made N100 billion profit, but now some of them are doing that. So, I think it is responsible thing for everybody to bear the burden of the rescue and while we accept that it affects banksâ€™ earnings, we think that for the economy as a whole, it is a very positive thing.â€
Debt Recovery Drive
In his opinion, Head, Research and Intelligence, BGL Plc, Mr. Olufemi Ademola, believed the proposed amendments to the AMCON Act 2010 will have positive effects on AMCONâ€™s operation. The amendments is expected to enhance the corporationâ€™s debt recovery drive and also to improve governance and transparency in the corporationâ€™s asset acquisitions and the management of such assets, and especially codifying the management and governance of the Resolution Cost Fund – a sinking fund jointly funded by the CBN and the commercial banks.â€
Ademola believes that the proposed bill seeks to empower the corporation by removing contradictions relating to the purchase agreements between AMCON and eligible financial institutions, especially as they relate to legal impediments to acquiring assets that are sub-judice, except specifically prevented by a court order. In other words, the amendments are in reaction to the realities of AMCONâ€™s operation and should therefore have very positive effects.
A Good Performance
On the performance of the corporation, the BGL chief said as regards the resolution of the banking crisis and putting the banks in good standing, AMCON had done relatively well.
â€œAccording to the corporation, its intervention in the banks took the banksâ€™ earnings to where they are today and may also have contributed positively to the recovery of the capital market. On the other hand, I think the corporation should also receive some knocks for the length of time it takes to resolve issues with debtors on some of the assets taken from the banks. In addition, some members of the National Assembly also believe that the activities of the corporation do not justify the amount of money pumped into it. â€œThis criticism, I believe, is due to the slow pace of work at the corporation. However, this seemingly slow pace of work may be due to legal obstacles, which prevents AMCON from taking full possession of debtorsâ€™ assets and hence delay in the resolution process, which the amendments seek to overcome. Overall, based on expectations, I think the corporation can be rated as average in its activities so far,â€ Ademola stated.
An Abuja-based development economist, Odilim Enwagbara, believes AMCON has done well so far.
He said, â€œWithout recognising the immense difficulties AMCON finds itself in its efforts to recover NPLs in a country with loose laws against financial defaulters and delinquent, it is easy to simply blame AMCON for lacking the magic wand needed to recover banksâ€™ NPLs.
â€œLooking at AMCON as an institution that only buys NPLs makes one to lose track of the fact that the corporation combines buying NPLs with debt restructuring and financial institution recapitalisation. That is why besides restoring investor confidence in our financial institutions and capital markets, by bringing to an end the widespread fears about the state of the countryâ€™s financial economy, these healthy banks have since begun to lend to the real sector; even when government borrowings seem tilt their lending to government crowding out the real sector.
â€œThat is why I have always disagreed that AMCON should be wholly blamed without the amendment of the same laws that allow these delinquents and defaulters to move freely to the extent of going about borrowing more even when their debt overhangs continue hemorrhaging the banks.â€
Tightening the Noose on Delinquent Debtors
Enwagbara belongs to the school of thought who believes that a law to compel the hitherto untouchable members of the society is urgently needed.
He said, â€œThat is why imagining that AMCON should succeed in forcing these mighty and powerful to pay up loans, loans they connived with bank insiders to hype with the goal of making them walk out from repayment. That is why one shouldnâ€™t overlook the toxic assets valuation difficulty AMCON encounters considering how most of the collateralised NPLs were fraudulently hyped. That is why with AMCON discovering how most of these assets are far worth less than their actual value, disposing them has become huge loss to AMCON.
â€œOr how have we forgotten the limited political power with which AMCON goes after these fraudsters with enormous political, economic, and legal clouts? Does AMCON have some extra-judicial powers to confiscate assets of the defaulters beyond the original collateral used in obtaining the NPLs? Or are they not going as far as employing imperialist organisations like the IMF to champion AMCONâ€™s premature wind up so that business as usual can return?â€
He is of the opinion that the corporation needs to be empowered in order to effectively carry out its duties.
â€œSo, I think to be fair to AMCON, the senators insisting that the AMCON management has not recovered more than 15 per cent, should stop making AMCON the scapegoat by giving the corporation full police power, the power to arrest, detain, take to court, and confiscate defaultersâ€™ assets beyond collaterals used in obtaining the NPLs. We need the amendment that will make AMCON boss also the countryâ€™s toxic assets inspector-general, with the full power to rid banks and other financial service providers of their nonperforming loans. Unless we are bold to force these fraudsters to return the so-called â€˜legallyâ€™ stolen money, no one in his right mind should just blame AMCON.â€
Calling for a drastic action to ensure all those who have cases to answer are brought to book, Enwegbara stated, â€œLet the ongoing AMCON Act amendment include giving it the power to declare these defaulters bankrupt in ways that make them lose all assets as well as the right to engage in financial transactions with banks or financial service providers. AMCON should be given the power to publish and advertise names of delinquents and economic saboteurs. Besides, let the amendment mandate AMCON to submit names of citizens and companies they associated with, with the goal of refusing them the opportunity to contest any public office until they and the companies settle the debts.â€
â€œLike most public establishments, AMCON too is yet to fully put in place measures to rid itself of the messy corruption baggage all government establishments carry in Nigeria. While no one expects a corruption-free AMCON, doing everything to minimise corruption is what I find important in the Amendment Bill, which insists on preventing industry capture and revolving door, which occurs when regulators and public servants get too close to private organisations as they use public platforms to promote private interests in ways that they are later rewarded by being hired by the private companies once they leave or retire from public service. That is why in countries like the US, a minimum of five years out of office is required before someone is allowed to take up a job in such a private sector one regulated or had oversight. That Mustafa Chike-Obi is bringing such international best practices to AMCON is worth commending, which I strongly recommend for government establishment as a demonstration of their sincerity to eradicate corruption.â€