AMCON stopped buying bad loans to discourage corporate rascality—Kure

Asset Management of Corporation of Nigeria (AMCON) has been prominent in the news in recent times due to its aggressive efforts to recover the N5.1 trillion bad debts transferred to it by banks between 2010 and 2012. In this interview, AMCON Managing Director/Chief Executive, Alhaji Ahmed Kure, spoke of factors influencing the operations of the Corporation as well as its future existence in the financial sector. Excerpts

By Babajide Komolafe

You indicated that the N136 billion contributed by banks into the AMCON Sinking Fund last year was inadequate. Is there possibility of increasing the contribution of the banks to the Sinking Fund?

It is going to be difficult in the next one or two years because what is happening now is that they are contributing a percentage of their balance sheet, which means that even if they are making loss, they will still contribute. And some of them are contributing more than the profit they are making because it’s tied to their balance sheet. But the law is very flexible, to the extent that CBN, based on the law, has the discretion to tweak with the contribution rate. But I am sure if the industry picks up, at certain point in time and the banks are doing well, I am sure it will be visited but all of us know what is happening in the banking industry today, so we have to be careful so that we don’t overburden them with contributions, and at the end of the day it will come back and create another problem.

How unpleasant or otherwise is the job of AMCON CEO? 

Generally speaking, people have issues if you put pressure on them to pay back particularly with the kind of measures we have introduced in the last one or two years. But for us we believe it is God that gives and takes. Of course there are unpleasant things, but we like what we are doing, it is not a pleasant job because sometimes you enforce under certain circumstances that are  very difficult for anybody but you have to do it.    For example you go and foreclose a residence and there is a family in the house, and it has to be done. As a human being, it touches you. Sometimes someone has gone deep to go and hide his money, or his business somewhere, and you dig it up, it is a challenge.

There are speculations that the government wants to merge Arik and Aero to form a national carrier. How true is this?

It is going to be suicidal for government to do. A national carrier out of Arik and Aero? The problems they will confront will be very huge. The problems that are embedded in Arik and Aero for anybody to say I want to do a national carrier out of Aero and Arik; What is an airline? An airline means an operating licence and aircraft. And you can go and lease the aircraft. For the government, you can go and get 50    aircrafts from anywhere and issue yourself an operating    license. Why do you want to go and put yourself in the problem of Arik and Aero that you will be in courts for the next 20 years? So, all these speculations are gist. It is not part of the plan. It has never been discussed and I don’t think I will even advise or encourage it. I don’t think it is even viable.

Why did you not adopt the debt to equity method in the case of Arik, like you did in the case of Aero?

The conversion of debt to equity is on the table because we are just in Arik to stabilise Arik. We did not convert our debt to equity with Aero from day one. We tried to do restructuring; it was only when we realised that the interest money is too high for them that was when it was converted. All options are also on the table with Arik. Whatever it will take to make Arik to continue and survive are being considered. I think very soon we will look at that option.

 

AMCON inherited many tank farms from bank debtors; with the challenges in the petroleum sector, how are you going to dispose of these tank farms?

Presently, we don’t have many tank farms. Most of the tank farms we had, we have disposed of them because people are still looking for tank farms as at today. The remaining two tank farms we have, we have people who are interested in buying them if we are able to resolve one or two issues.

I believe that even if    you stop importation of petroleum products, you will    not have pipelines that will go directly into    car tanks or into filling    stations. We will still have to store the products in tank farms, we will still have to have distributors, you still need to have dealers. So tank farms will continue to be relevant in the business. If you go to Dubai tomorrow, even America or Instanbul or Europe, they still have tank farms. It may not be as common as it is in our environment but I strongly believe, because I have seen the analysis, they would still need tank farms. Even by the time Dangote finish his refinery, they will need tank farms because it is necessary for storage, because as you are refining, you have to store the products.

 

Is AMCON still injecting money into businesses it took over from their debtor owners?

No, we stop putting money in businesses in the last two, three years. We don’t inject money into businesses. The only exception that we have is the issue of Arik, and I explained to you why we have to do that because it is important that they continue to fly otherwise AMCON does not put money into anybody’s business anymore.

What is the impact of AMCON’s intervention on the economy especially in terms of employment?

Yes, we have saved a lot of jobs and the simple example I will give you is that of Arik. If we have allowed Arik to go down, you are talking about up to 2000 workers that are working for Arik up till today. If you allowed Aero to go down, Aero has about 1,200 workers. And there are quite a lot of businesses here and there, where 50 workers, 30 workers would have gone, but we supported them in terms of restructuring. You know that the Minister of Finance recently said that  we must, as a matter of priority, look at the cost first. If we have to bend down, we have to allow little persuasion to protect employment. She said that should be the priority and I think that has been the guiding principle for us.

Recently the Managing Director/Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC) said that there is discussion among the regulators about the possibility of creating another AMCON. Are you aware of this and what is the update?

I don’t know anything about it. I know it is not possible. I read it and my understanding, what he (NDIC MD) is talking about is a kind of private sector initiative, where the private sector will come together and look at some of the non-performing loans of banks and then invest in them. But not as the Asset Management Company of Nigeria kind of arrangement, I don’t think that is possible anymore.

Is AMCON still managing the businesses it took over from debtor owners?

No, usually when you take over, you know some Nigerians can be very funny, you have to push them before they react. So sometimes when we take over some of those businesses, it becomes very easy for the solution process. They (the debtors) come around, they sit down, and then you do terms of settlement, then you go ahead and file it. In fact there is the paper of one customer on my table as I was coming here. We have pursued that guy for the last five years; and then last week, we had a possessing court order, and then we took over his companies, took over his houses including the one that he gave his new wife. Now he has come with the resolution proposal. This is somebody we have pursued for the last five years. So once we are able to resolve between today and tomorrow, and then go and file it in court,  then we will leave his premises. So the takeovers help us in our resolution process. Because we don’t like it, we were not set up to manage any business and we don’t want to do it. Because when we takeover a business, it becomes an expense for us, so we try as much as possible to avoid it unless it becomes absolutely necessary.

Is AMCON still buying loans from banks? 

We don’t buy loans anymore. AMCOM has stopped buying loans more than four or five years ago. And I don’t think we should buy loans. If any bank has any challenge, it should be done from the prudential perspective, they should be looked at strictly as a business because if you continue to buy loans you are encouraging rascality. That time I understand AMCON was bailing out, during its creation, it helped to stabilised the industry, and I think it was very important. But I don’t think any issue with their non-performing loans should result into loans being sold to AMCON, otherwise you will encourage people to be booking all manner of loans; I don’t think we should encourage it.

 

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