AMCON’s Debt To CBN May Hit N7bn By 2024- CEO

Managing Director/Chief Executive of the Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, at the weekend in Abuja said it currently owes the Central Bank of Nigeria (CBN) at N4tr.

Speaking at a two-day Annual Seminar for Justices of the Courts of Appeal which started on Friday, he warned that the debt could spike by as much as 75% to N7bn by 2024, at the current rate of inflation.

This, he stressed, is why there is a dire need for collaboration among sister agencies of the Federal Government to ensure that economic saboteurs do not succeed in crippling the nation’s banking sector.

Kuru reminded participants at the event jointly organised by the National Judicial Institute (NJI) and Legal Academy (LA) and attended by AMCON management, that recovery of humongous debt that is weighing down the Nigerian economy was why the corporation was established.

He however appreciated the nation’s judiciary for sustaining the AMCON Task Force in the four divisions of the Court of Appeal to ensure a fast track of AMCON appeals, stressing that no one can over flog the important role of judges in National Development.

Welcoming participants, Justice Bozimo listed expectations of the judiciary to enable AMCON execute its mandate, which cannot be overemphasised.

“It is through these interactions that the judiciary will be sensitised on the complex role AMCON plays at ensuring the sustenance of the financial system stability in Nigeria. The level of financial stability currently enjoyed in the country is solely attributable to the role played by AMCON in offloading toxic portfolios from the balance sheets of banks thus enabling the banks to perform their intermediating role in the macro-economy.”

According to her, given the peculiarities, uniqueness and the unconventional nature of the AMCON regime, it is evident that AMCON is bound to confront challenges and difficulties in its daily efforts to realise its mandate.

It was in order to assuage these challenges, she continued, that the NJI ensures that the judiciary, especially judges are sensitised and provided with updates related to the AMCON regime at all times.

According to her, “AMCON intervention in the economy at the time it was set up by the Federal Government ensured the integrity of banks and saved their employees from sudden and untimely disengagement. In other words, with the establishment of AMCON, Nigerian banks were saved from imminent collapse and their employees secured from retrenchment.”

Speaking at the event, President of Nigeria’s Court of Appeal, Justice Monica Dongban-Mensem, and administrator of the National Judicial Institute (NJI), Justice Rosaline Bosimo (Rtd), urged the nation’s judiciary to quickly dispense cases involving AMCON and its recalcitrant obligors.

Justice, they maintained, must be dispensed within the ambit of the law, given the negative effects on the national resources.

Justice Dongban-Mensem also recalled that the 2007-2009 global financial crisis had severe impact on the economies of many countries, including developing economies like Nigeria’s, which was why AMCON was set up.

She argued that because the corporation ensured the survival of the financial system, the time has come for all sister agencies of government to ensure AMCON recovers its outstanding huge debt from its recalcitrant obligors who incidentally are exploring judicial technicalities to hold on.

She said, “although Nigerian banks were restructured prior to the financial crisis through consolidation, the restructuring did not shield Nigerian banks from the effects of the crises. In fact, the crisis further exposed other lapses in the system that needed to be addressed in order to prevent total collapse. The Nigerian government responded by establishing AMCON to help in stimulating recovery of the Nigerian banking system through buying non-performing assets of troubled bank.

“Eight factors were primarily responsible for the   crisis in Nigeria. They include macro-economic instability caused by large and sudden capital inflows, major failures in corporate governance in banks, lack of investor and consumer sophistication, inadequate disclosure and transparency about the financial position of banks, critical gaps in regulatory framework and regulations, uneven supervision and enforcement, unstructured governance and management processes at the CBN/and weaknesses in the business environment.”

Insisting that the judiciary must support AMCON to recover the debt, Justice Dongban-Mensem added, “In the wake of a financial crisis, banks found themselves saddled with plethora of defaulting loans. In addition to causing default, the crisis typically led to depreciation in the value of securities created against these defaulting loans thereby leaving banks with an unfortunate inability to recoup their losses. Having tied up large amount of capital in Non-Performing Loans, and having lost confidence in the ability of the borrowers to repay the debts, banks were unable and possibly unwilling to maintain the level of lending required to maintain a vibrant economy. This in turn led to higher interest rates and an inability to perform the bank’s basic function of financial intermediation i.e. the pooling of savings and lending for some interest rate returns.

“Sequel to the crisis and domestic events, the federal government of Nigeria through the operation of Central Bank of Nigeria (‘CBN’) conceptualized the idea of establishing the Asset Management Corporation of Nigeria as an institution that will prevent the looming financial crisis in the country. Thus, the Corporation was constituted pursuant to the AMCON Act 2010, to prevent the systemic collapse of the Nigerian banking sector by the acquisition of -Non-Performing Loans (NPLs) and the recapitalisation of banks, which were imminent to fail.

Photo caption: Standing front row (4th from right), Justice Monica Dongban-Mensem; MD/CEO AMCON, Ahmed Kuru (3rd from right); and other Justices, the staff of the National Judicial Institute (NJI) and AMCON, among others on the opening day of the seminar