The AMCON debts

RECENTLY, the Federal Government inaugurated an inter-agency committee to recover the N5 trillion debts owed the Asset Management Corporation of Nigeria (AMCON). Members of the committee include the heads and representatives of agencies such as AMCON, the Economic and Financial Crimes Commission (EFCC), Nigerian Financial Intelligence Unit (NFIU), Independent Corrupt Practices and other Related Offences Commission (ICPC), Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC) and the Federal Ministry of Justice.

While inaugurating the committee in Abuja, Vice President Yemi Osinbajo said: “One of the terms of reference is for the committee to prepare a report, giving us a sense of what the timelines will be. About 67 per cent of the outstanding N5 trillion debt is said to be owed by just 20 individuals/entities.” Earlier, in July this year,  the Federal Government had indicated that it was setting up a task force to recover the outstanding debts. Osinbajo, during a meeting with the board of AMCON and some heads of Federal Government’s ministries and agencies at the State House in Abuja, indicated that a special task force comprising the heads of AMCON, EFCC, NFIU, ICPC and the Ministry of Justice would be working to develop and implement new strategies that would ensure that the determination of the Federal Government to recover the debts was speedily achieved. He noted that the new approach to be adopted was part of the Federal Government’s renewed effort to ensure effective recovery of outstanding debts, adding that all the relevant agencies needed to re-strategise in order to achieve the desired results.

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On the task of the committee, Osinbajo said: “The key is collaboration. We need a small team comprising these agencies to look at the next steps that we need to take, especially the criminal aspect, forfeiture and all of that.” On his own part, the AMCON’s chairman, Mr Muiz Banire (SAN), reiterated the fact that 67 per cent of those owing the N5 trillion were just 20 individuals and entities. He added that AMCON was trying its best to recover the money through the civil judicial process, but had encountered several challenges.  There is indeed no doubt that recovering the AMCON debts is a task that must be done. Ordinarily, the country is not expected to have this kind of problem given the institutional mechanisms put in place for the money deposit banks to recover debts. However, they failed in this responsibility and in order to prevent them from going under, the Federal Government had to buy over the debts through AMCON.

AMCON took over toxic assets through issuance of bonds, while the banks were restrained from granting further credit to potential borrowers with unserviced facility exceeding a certain amount or  any amount of delinquent facility that was taken over by it.  As the folding up of the banks would have meant job losses and associated socioeconomic problems, the government indeed did the right thing. However, if the statement by the AMCON chairman is anything to go by, recovering the debts has been a difficult exercise, no doubt because of the spillover effects of the wrong processes through which the  loans that eventually went bad were taken in the first place.

It is true that the factors that predispose to non-performing loans include lack of credible information on borrowers and trading in the dark. But then there is also the question of fluctuations in the economy, namely short-term inflation and high lending rates, factors which affect the earning power of banks and hence their return on capital. These factors must be addressed decisively. In other words, the AMCON debts are far from a case of the government and the regulatory agencies doing everything right and the defaulters doing everything wrong.

In addition, however, we feel that the larger social questions, including the conduct of politically exposed persons, need to be addressed. Truth be told, a number of the affected individuals and entities failed to repay the loans they took not because they did not have the capacity to do so, but because they wanted to exploit the loopholes in the system using their political connections. With honest, conscientious and decent individuals in political office and with very strict regulatory frameworks, the propensity for such dark practices will be greatly reduced. Indeed, since the government began tightening the noose on them as it were, some of the defaulters quickly paid up their outstanding debts. That explains a lot.

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