- Vows To Ensure Corporation’s Founding Objective Is Realised
Caption: AMCON MD/CEO, Ahmed Lawan Kuru (left), Senator Adetokunbo Abiru, and other members of the committee chatting at the interactive session.
The Chairman Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Adetokunbo Abiru, on Wednesday expressed worry that the time-frame for the winding up of the Asset Management Corporation of Nigeria (AMCON) may be unrealisable, judging by the interest rate charged on the loans by the Central Bank of Nigeria (CBN).
Abiru who spoke during an interactive session with the Management of AMCON led by its Managing Director/Chief Executive Officer, Mr Ahmed Lawan Kuru at the New Senate Building, National Assembly Complex, Abuja.
The decision was taken after the committee listened to a presentation by Kuru who reminded the committee that AMCON purchased 12,743 NPLs or EBAs worth N3.797tr from 22 Eligible Financial Institutions (EFIs) for a purchase price of N1.8tr.
The purchases, he said are covered by various collaterals, adding that the corporation had to inject a total sum of N2.2tr into 10 banks, both bridged and owned (intervened banks) – bringing Net Book Value (NAV) to Zero. The N2.2tr, he added, was not backed by any collateral, which made recovery extremely difficult. AMCON, he said capitalized three EFIs and provided financial accommodation to five others.
The Corporation he stated took over Skye Bank (now Polaris) under the bridged back concept of the CBN and NDIC. The bank, he continued had been stabilized, and since transferred to its new owners by the CBN. The corporation, he noted, is now battling with some of the oil and gas facilities acquired from the bank.
According to Kuru, AMCON’s intervention activity was funded by debt obligation of N4.65tr as of December 31 2018, which is to be repaid, from internal and external sources, to the CBN by 2024.
He recalled that at conception, and being a loss minimization entity, it would repay 30% of the obligation, with the balance to be offset from the Banking Sector Resolution Cost Fund (BSRCF).
Caption: AMCON MD/CEO and his team during the interactive session.
Some of the assumptions underpinning the funding model included that the banking sector was projected to grow at 20% per annum; while each bank would contribute 0.5% (initially 0.3%) of total assets per year to the fund, while CBN contributes N50bn per year.
However, the reality according to the statement, has been that the assumptions did not materialize, following which actual growth rate of banking sector total assets from 2013 to 2017, with 2013 being the commencement year of contribution, has been approximately 8.4%, even as not all DMBs have contributed to the fund.
In monetary terms, AMCON put the actual total contributions to the Sinking Fund contribution from 2013 to 2017 at N1.13tr, as against the target N1.45tr, representing a shortfall of N0.32tr; while actual recovery on recapitalized banks and intervened banks amounted to 23% and 10%, respectively.
Furthermore, AMCON said its bonds were refinanced by the CBN at 6% a rate higher than those rate payable by other intervention funds; stressing that the cash shortfall from internal and external sources meant that there was less funds to invest at the stated reinvestment rate.
“The expected variance between forecast and estimate for 2018 to 2024, assuming a compound annual growth rate (CAGR) of 8.4%, is N1.56tr. The total shortfall gap in Sinking Fund is N1.7tr. Bear in mind that the Sinking Fund was meant to contribute 70% of the funds required to settle AMCON’s obligations, Kuru added.
The AMCON boss, who was accompanied to the Senate by the Executive Director in charge of Asset Management, Dr Eberechukeu Uneze among other senior officials of the agency, noted that for the corporation to succeed in its assignment, there is need to engage with stakeholders like the Judiciary, CBN, and the federal Ministry of Finance, among others particularly with reference to the exit plan.
Responding, Abiru promised that his committee will engage the CBN, and all relevant stakeholders to take a second look at the AMCON funding model, the interest elements and all other processes that would hasten the resolution of the huge burden that AMCON presently carries.
He vowed that the 10th Senate of the Federal Republic of Nigeria would ensure that the reason for setting up the corporation by the Federal Government in 2010 are achieved, lamented that AMCON pays as much as six percent, and then adds some percentage charged on obligors whose businesses were already challenged before the AMCON intervention.
The committee chairman who until his election into the Senate was Managing Director/Chief Executive of Polaris Bank Limited, is responsible for AMCON’s estimated N4.7tr current exposure for which it is currently chasing obligors.
A statement by Jude Nwauzor, spokesperson of the corporation, quoted the Abiru as expressing the happiness of the 34-member committee that AMCON is up to date with its budget and records, besides remaining a government institutions the committee did not have to chase about before submitting its records for review.
He urged the management to sustain such ethical practice, he also expressed delight that AMCON has submitted its audited accounts up to the financial year 2022.
According to him, members of the committee were satisfied that even before the convening of the interactive session, which is the first the committee was holding since its inauguration by the Senate, AMCON had forwarded a copy of its performance as of September 2023, which he said was very impressive record by a government agency.
“I will also believe that the role of AMCON is further underscored by the fact that it was set up using a model that would help us tidy up the challenges that we had in the financial system dating back to the global financial crisis of 2008/2009. That gave rise to the institution and equally the model that also well suited for the agency in terms of the Eligible Bank Assets (EBAs) that they acquired.
“The only challenge that we have today remains the sunset date, which is to say we should as a government have a definitive time to make sure that we wind down – meaning that all the obligations that are hanging in the books of AMCON must be redeemed. The conclusion is that we (the 10th Senate) will continue to work with AMCON and the apex regulatory agencies to make sure that AMCON is wound down within the shortest possible time.”