March 03, (THEWILL)- President Bola Tinubu on February 22, 2024 approved the appointment of a new management team for the Asset Management Corporation of Nigeria (AMCON). The four-man team included Gbenga Alade, Managing Director/CEO and three executive directors, namely Aminu Ismail, Adeshola Lamidi and Lucky Adaghe
The new team succeeded the Ahmed Kuru-led management which had pioneered the affairs of the toxic asset manager since Mr Kuru’s reappointment for a second term by former President Muhammadu Buhari in December 2020.
But questions are being raised as to what the new AMCON management team is going to achieve for the period of its tenure. This can be linked to the altercation between the Senate Committee on Banking, Insurance and other Financial Institutions and top officials of AMCON in December 2023. The face-off led to the angered lawmakers calling for the immediate dissolution of the 13-year-old AMCON.
The federal lawmakers registered their displeasure over AMCON’s unsatisfactory performance when its then managing director, Ahmed Kuru, appeared before the committee on December 13, to defend the agency’s budget for the 2024 fiscal year. They frowned at AMCON’s failure to recover its over N5 trillion liabilities since 2010 the agency came into existence, yet incurring heavy recurrent and overhead costs.
“Most of the loans were owed by individual companies which were never sanctioned. At the end of the day, the same company would go to buy back their assets that AMCON had hitherto taken over. Are we going to continue like this?
“It is not only about defending the budget; it is about seeing the effect of the appropriation. We need to know whether it is working. Or are we just creating a job for those we can’t protect?” remarked Sani Musa, the committee chairman who also queried why AMCON should not be scrapped since it appeared to have lost its statutory mandate.
The positive
Established by the act of the National Assembly in 2010, with an intended 10-year lifespan, there is no doubt that the corporation’s mandate of stabilising the banking sector was immediately felt with the take-over of more than N5 trillion loans and injection of fresh funds into the sector. There is the general belief that some banks are, perhaps, still operating today due to AMCON’s intervention in the industry.
Besides, AMCON has sold assets in excess of N500 billion and has resolved about 5000 Eligible Bank Assets (EBSs). The corporation has till date recovered over N1.8 trillion out of the accumulated liabilities. .
While AMCON is firing from all cylinders to recover the over N4 trillion owed by various entities that are regarded as recalcitrant debtors, the failure of some bank customers to repay their loans has largely frustrated AMCON’s efforts.
The flipside
Although AMCON’s tough stance has earned it remarkable accolades, the flipside is that among the “recalcitrant debtors” are victims of wrongfully classified debts, and toxic loans which constitute a good chunk of AMCON’s debts that may not be recovered.
THEWILL learnt from those familiar with the matter that while some of the debts owed AMCON (referred to as AMCON debts), are real and indisputable, others are not. The latter constitutes part of the countless litigations in which AMCON is either a plaintiff or defendant, or joined as such.
Among the wrongfully classified toxic assets are unsubstantiated, non-existent, disputed and interest capitalisation facilities. Legal and finance experts revealed that AMCON’s debt recovery drive has created casualties of victimisation and high-handedness – those with wrongfully classified debts hung on their neck like millstone.
Wrong steps
A legal practitioner who is vast in AMCON-related matters attributed the anomaly to the faulty procedure in buying the Non-Performing Loans (NPLs). He argued that this has created fundamentally legal and administrative challenges as due diligence was not exercised over the integrity of the toxic assets prior. This, he said, led to AMCON buying “unsubstantiated and disputed loans” that have now created a problem for the system.
“AMCON parades over N4 trillion debts; sadly, this figure includes unsubstantiated debts – debts that never existed; and debts whose figures remain controversial and doubtful. It is therefore futile to engage in the pursuit of such debts. From my extensive handling of AMCON related matters, I would say that a lot of the AMCON debts will never be recovered”, said Victor Ukutt, Principal Partner, Victor Ukutt and Co. (Legal Practitioners) in their Lagos Chambers.
Ukutt told THEWILL that the coming of AMCON revealed deep-rooted rot in the Nigerian banking sector: Some corrupt bank officials used the customers’ accounts for various fraudulent practices. The procedure for acquiring the toxic loans allowed fraudulent bank officials to go free while innocent customers, the victims, suffer.
Among the unsubstantiated facilities Ukutt explained to THEWILL was the case of Bamidele Enterprises Limited (not real name) who applied for a credit facility to invest in their diesel supply business. The application was never approved and no facility was extended to the customer. Surprisingly, Bamidele Enterprises Limited was published in the CBN’s list of banks’ bad debtors.
This led to a prolonged legal action that is yet to be concluded, yet Bamidele’s business has been destroyed, AMCON is yet to recover the debt that it bought erroneously.
THEWILL was shown legal mortgage documents executed as collateral for the loan which Ukutt said were fictitious as no such property existed in Ife Modakeke where it was said to be located.
THEWILL also learnt that some AMCON debts in dispute have to do with faulty processes created by the banks to swindle the customer. This includes the execution of stamp duty to perfect a legal mortgage used as collateral. Some banks were said to have under-declared the value of the mortgaged property so as to pay less stamp duty; but the customer (borrower) is debited with the charges for real/full value of the transaction.
A legal expert said the Supreme Court had ruled that the value declared for the purpose of stamp duty would be deemed to be the value of the facility even where the actual value exceeds the declared value. “There are cases like this; and the client would, through his lawyer, insist on the Supreme Court pronouncement on the matter. How will AMCON be carrying the wrong value of the facility as NPL?”, the lawyer asked.
Case of Suru Worldwide
A particular case of wrongful categorisation as non-performing loan was that of Suru Worldwide Venture, a Lagos-based firm which is into property and hotel business.
The managing director, Mr Edward Akinlade, had in a press conference in Lagos late 2020, narrated his ordeal in the hands of AMCON over a facility his firm had with a third generation bank. Mr Akinlade later spoke with THEWILL to expatiate on the issues he raised at the media chat.
He explained that his firm had a funding of about N13.5
billion from a new generation bank that was later acquired by a Tier-1 lender. He revealed that his firm had drawn down N10 billion and that the facility was performing and being serviced. Yet it was surreptitiously sold to AMCON after the firm had paid over N700 million in the three months preceding the sale of the loan to AMCON.
“AMCON was set up to purchase non-performing loans, but our loan was performing yet they sold it. We sued the bank in 2011 for that action – mismanaging our account”, Akinlade told THEWILL.
According to Akinlade, the company’s business has been destroyed, the facility confiscated by AMCON is not yielding returns and interest is piling on the facility.
Eventually, the Supreme Court, on February 16, 2024 nullified the takeover of Best Western Hotel, Ikeja Lagos, AMCON, ending seven years of legal battle with the toxic asset manager.
In a unanimous decision, a five-member panel of the apex court, faulted AMCON’s action, when it confiscated the five-star hotel that was operated by Suru Worldwide Ventures Nigeria Limited, on September 22, 2017, over alleged failure of the company to pay back a loan that was obtained from the defunct Oceanic Bank
In the lead judgement that was delivered by Justice Emmanuel Agim, the apex court panel vacated an order of the Federal High Court in Lagos, which AMCON said empowered it to take over the property.
While upholding an earlier decision of the Court of Appeal in the matter, the Supreme Court, ordered that the case should be returned to the high court and be heard afresh by another judge.
The high court had on the strength of an application that was brought before it by AMCON, ordered security agencies to offer protection to the agency to enable it to exercise its possessory rights over the hotel, as a legal mortgagee under the Deeds of Legal Mortgage.
Dissatisfied with the development, the defendant, Suru Worldwide Ventures Nigeria Limited, took the matter before the appellate court, alleging that it was denied fair hearing since it was not joined as a party in the suit that led to the order.
The appellate court, in its judgement that was delivered by Justice Ugochukwu Ogakwu, held that AMCON’s failure to join the Appellant in the case, rendered the entire proceedings that led to the takeover order, a nullity.
The appellate court directed that the matter should be heard de-novo (afresh) by the high court.
Affirming the verdict on Friday, the Supreme Court halted the takeover of the hotel, even as it dismissed the appeal that AMCON filed before it.
The managing director of Suru Worldwide Ventures Ltd had told THEWILL that AMCON violated its rights and virtually destroyed its business by illegally taking over its hotel in a manner that had brought the company untold hardship and enormous losses
“How will AMCON recover such debts that cannot be substantiated? Whose debts is AMCON recovering now?” Ukutt asked.
What next?
THEWILL recalls that the Minister of finance and co-ordina
ting minister of the economy, Wale Edun, said in September in Abuja that the Federal Government was working towards ensuring that AMCON wound down as soon as possible.
“On AMCON work is being done to ensure as much as possible that AMCON meets its mandate of winding up in the very near future. So, it is a question of financial engineering, a question of making arrangements for taking care of the liabilities. And those responsible include the banking system which has a portion to pay, as well as the central bank and other stakeholders,” Edun said at a press meeting to discuss the economic agenda of President Tinubu-led administration.
AMCON in a statement by its spokesperson, Jude Nwauzor, said it had recovered over N1.8 trillion. The then managing director/chief executive officer, Ahmed Kuru, insisted that the agency was pursuing real debtors and would leave no stone unturned to recover the accumulated liabilities.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
