The deteriorating macroeconomic environment and some earnings-constraining policies from both the monetary and fiscal authorities has seen a lot of businesses in the country gasping for breath. From banking to oil and gas, down to manufacturing, a lot of firms have been struggling to record decent profit.
Clearly, the prolonged slump in the price of crude oil as well as the incessant attacks on oil installations have continued to impact negatively on the economy, with attendant spillage on firms in the country. In fact, going by the present situation, the federal government has hinted that implementing the 2016 budget, a very important fiscal policy document, whose execution a lot of people had thought would help reflate the economy, is now a mirage.
This followed recent comment by the Secretary to the Government of the Federation (SGF), Mr. Babachir David Lawal, that the N6.06 trillion budget for this year will only be partially implemented as a result of revenue shortfall. He had blamed the decline in economic activities on the militant group, the Niger Delta Avengers, which has claimed responsibility for the wave of attacks on oil installations in the oil-rich region.
These, coupled with the foreign exchange crisis, which has seen a lot of volatility in the naira, as well as a looming recession, are all sources of concerns.
Nevertheless, despite the weakening macroeconomic outlook, the Asset Management Corporation of Nigeria (AMCON), a key government agency that was created to be a key stabilising and re-vitalising tool in the economy, has continued to parade itself as an enemy of businesses with overall negative bearing on the economy already in dire straits. The government agency that was set up to efficiently resolve the non-performing loan assets (NPLs), appears to be working in the opposite as its activities have continued to injure businesses.
AMCON was set up primarily to address the financial crisis of 2008/2009, with specific respect to what the Nigerian banking system were going through. AMCON was set up to provide liquidity by purchasing the NPLs of these commercial banks. By doing that, it freed liquidity so that they could lend to the real sector. At that time the NPL ratio was as high as 60 per cent and the industry average in the prudential guidelines stated that it should be around five per cent.
So, AMCON was set up to free the liquidity and reduce the NPLs to five per cent. Secondly, AMCON was also encouraged to provide financial accommodation to some of the financial institutions, including some of the obligors in the industry that were considered strategic. What people try not to understand is the fact that quite a lot of those facilities that were bought from financial institutions were facilities that were bad ab initio. They were facilities that had been restructured severally and some of these banks had already put them in memorandum account. What it means is that they had fully provided for them.
On Tuesday, August 8, 2015, President Muhammadu Buhari dissolved the executive management team of AMCON and approved the reconstitution of a new team.
To this end, Mr. Ahmed Lawan Kuru was named the Managing Director. Kuru was the Group Managing Director of Enterprise Bank Limited, an institution that was previously owned by AMCON. Kuru had in an interview said when AMCON was set up, quite a number of the facilities it acquired were restructured and in the first couple of years of AMCON establishment, they were able to make some recoveries from those facilities.
“But five years down the line, with the economic situation that is challenging the global financial system, with the price of crude oil down, obviously a lot of our obligors are having challenges meeting their obligation. Also, we are having challenges regarding the valuation of our assets.
“We are not able to get the true value of our assets because of the economic situation based on the drop in the price of crude oil. If we say we are going to offload our assets based on market realities, we may not get 60 per cent of the value. So, what we are trying to do is to find a way of restructuring some of these facilities,” he had disclosed.
But feelers from AMCON showed that Kuru’s AMCON may be doing the opposite of what he promised on assumption of office.
In an interview with CNBC Africa, he had also promised that AMCON will not in the process of loan recovery allow any company indebted to AMCON go under. But AMCON has since employed draconian tactics to shut down businesses. From Aero Contractors Limited, Bi-Courtney Limited and Capital Oil Limited, the list is endless. Last month, AMCON sealed the Abuja premises of Silverbird Galleria belonging to Senator Ben Murray Bruce. The galleria currently houses the Abuja studio of the radio and television stations of the senator as well as his other business interests. Apart from Bruce’s companies, the seven-storey building also houses other business interests such as Shoprite, United Bank for Africa, Standard Chartered Bank, Mango boutique, and Etisalat office, among others. The building was sealed by AMCON through the assistance of law enforcement agencies around 8am following a court order secured by AMCON. Conspicuously written on the fence of the building as well as other strategic locations was an enforcement notice by AMCON which says, “Possession taken by court order 26/06/16.”
The same was done to NICON Group which is owned by Jimoh Ibrahim. In this case, the corporation froze the account of the billionaire. But the ruling which empowered AMCON to take the action against AMCON has since been upturned.
A Federal High Court sitting in Ikoyi, Lagos ordered the de-freezing of the accounts. Hon Justice Seidu gave the order following the hearing of a case brought before the court to discharge the freezing order hitherto obtained by AMCON.
After listening to the arguments to discharge the freezing order, counsel to AMCON led by Mr. Yusuf Ali, SAN could not respond to the applications for the discharge but asked for an adjournment to exploit settlement and reconcile accounts in dispute through their respective accountants.
Ali conceded to an immediate vacation of the freezing order in the face of the applications against it with damming and unassailable facts and for unfettered settlement discussions to take place.
The court agreed to the application to discharge the freezing order and the matter was subsequently adjourned to August 1, 2016.
Also, a recent case at hand is that of MRS Holdings Limited, which AMCON claimed is indebted to it. Contrary to AMCON’s claims, the company has maintained that it is not indebted to AMCON.
In a statement, the company stated: “Our attention has been drawn to a recent publication by the Asset Management Corporation of Nigeria alleging that MRS Holdings Limited is indebted to it in the sum of N81 Billion and that the Corporation has instituted Suit No: FHC/L/CP/923/2016 to wind up the company over the inability of MRS to pay the alleged debt.
“MRS challenges in the strongest possible terms the false claim by AMCON that MRS is indebted to AMCON in the sum of N81 Billion or any sum at all. The correct position is that MRS obtained a loan from a consortium of banks in Nigeria for a viable project. AMCON took over the loans. However, it became clear to AMCON that MRS was paying down on the loan and agreed to restructure the loan on agreed terms of N74 billion. The said debt has since been fully settled. The terms of settlement was entered as Judgment of Court on 29 June 2015, in Suit No FHC/L/CS/1365/2015.
“MRS is shocked that in spite of having fully settled the debt, AMCON has decided to re-litigate an already concluded matter. MRS Holdings Limited understands AMCON’s statutory function to recover debts but by no stretch can this mean harassment of companies. AMCON has declared a new aggressive debt recovery drive. MRS has no problem with that but this does not give AMCON a licence to embarrass and harass companies. It is not a crime to obtain loans for viable projects. Execution of viable projects leads to job creation and growth of the economy. However, when companies obtain loans for legitimate businesses are being harassed and embarrassed in the name of aggressive debt recovery, it signals danger for economy growth.”
MRS said it had taken notice of AMCON’s frivolous recovery cases against many companies on similar issues to MRS, “Not surprisingly all the cases were dismissed by the courts.”
“MRS is taking legal advice to clear its good name and bring necessary actions to seek damages for the embarrassment and damage caused the company’s reputation and goodwill by AMCON’s publication and action.
“MRS assures all its customers and business associates that the newspaper report will not affect the company and its subsidiaries’ high quality services that it has always been known for and would seek redress for the damages caused by the publication. MRS further assures the general public that MRS Holdings Limited and its subsidiaries will continue to transact their businesses with the highest ethical standards and in accordance with the extant laws of the country, “it stated
It is in light of the adverse implications on the image of M.R.S, that its management quickly moved to reassure its customers and bankers of AMCON’s spurious wind-down statement robustly debunking the claim of indebtedness and warning it to get its act together instead of stumbling from one defeat to another.
Beyond the reputational damage AMCON’s approach has inflicted on companies it claims are owing it, is the larger implication on the economy already heading into recession. This is the worry of many who are concerned that the agency is operating in isolation of its environment. According to an investment analyst who prefers not to be named, AMCON should adopt a new approach that takes note of the current economic realities of the country.
“I cannot understand the rush to wind down companies in the name of debt recovery when every business and government across the country is facing difficult times. Now if it winds down these businesses what will happen to the workers? Will AMCON employ them? The International Monetary Fund, IMF, just released its forecast on Nigeria warning that the country is heading into recession. This is hardly surprising considering the fact that the price of oil, our main revenue earner, has slumped on the international market. At the moment many states can’t pay workers salaries while the federal government is grappling with a major financial crisis, that it now even borrows to pay its workers salaries. So I think AMCON is being unreasonable by compounding the crises in the general economy,” he declared.
- Ibrahim wrote in from Abuja