The Asset Management Company of Nigeria (AMCON) has taken its debt recovery drive to another level. The bad bank has decided without notice to publish a detailed list of all debtors (and their directors where applicable) that have failed and/or refused to reach settlement resolution with the corporation.
In 2011, the corporation acquired 12,537 non-performing loans worth N1.7 trillion from 22 financial institutions, following the 2009 banking crisis. Banks in the country where hit by a double whammy of oil and gas loans gone bad, as well as margin loans to the capital market.
AMCON made a loss of N16.4 billion in its full year ended December, 2017, but expects to turn a profit this year. AMCON has recovered a total of N731 billion worth of loans since inception.
Why now?
As the tenure of the bank slowly winds down, it has come under increasing pressure to recover all loans. The bulk of recoveries made, consist of properties. These assets seized, have been a bit difficult to offload due to the weak economy.
Data by the National Bureau of Statistics (NBS) show Nigeria’s Real Gross Domestic Product (GDP) growth rate for the quarter ending March, 2018 was 1.95%, lower than the 2.11% recorded in December, 2017.
AMCON is also billed to be wound down by 2020, according to the Act bringing it into power.
Progress on other assets has also been slow. Aerocontractors and Arik Air which were taken over in 2013 and 2017 respectively, are yet to get buyers. A move by Ethiopian Air to purchase Arik fizzled when AMCON denied being in the know.
Little or no effect
The measure may have little or no effect, except for individuals eyeing the forthcoming elections. Commercial banks in the country routinely publish list of delinquent debtors. An earlier list published June, 2016, achieved very little.
The Asset Management Corporation of Nigeria (AMCON) was established on the 19th July, 2010, when then President Goodluck Jonathan signed the AMCON Act into law.
The “bad bank” is owned by the Federal Government but its shares are held by the Central Bank of Nigeria (CBN) and the Ministry of Finance in trust.
Ecobank has also set up its own bad bank to deal largely with legacy loans from its acquisition of Oceanic bank.
A bad bank is one set up to buy bad loans belonging to other banks. In some cases, it may take over loans deemed systemically important.
Critics of the concept have, however, stated that the creation of such vehicles lead to what is known as moral hazard, that is banks taking undue risks since they will be bailed out.
