The Asset Management Corporation of Nigeria (AMCON) said that it had recorded more than 70 percent recovery rate of the N4 trillion bad debts from debtors amid worries of interest rate elements.
AMCON was established on July 19, 2010 to revive the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy.
“We have so far recovered more than N3.9 trillion both from the sinking funds, which is a contribution from the banks and for the recovery we have made almost N1.4 trillion and the recovery rate is more than 70 percent,” said the Managing Director/CEO of AMCON, Mr. Ahmed Kuru.
“Unfortunately, because the loans were purchased with bonds, as you are recovering, there are also interests to be paid averaging around 11 percent.
“The situation is that as we are recovering, there is also interest element. The loans that are purchased at N1.8 trillion are attracting interest averaging around 11 percent. The rate of interest accumulations sometimes goes faster than the recovery.”
Kuru, who was speaking during an interactive session with journalists in Lagos, noted that the original funding plan of AMCON was 10 years and that there was assumption that the banking industry would grow at the rate of 20 percent.
He however said that for the past seven to eight years, growth in the banking sector was far less than 5 percent.
“There is the general feeling that AMCON is killing businesses but that is not true. We have put in money in some businesses that we felt could survive but some didn’t work out. A lot of recovery has been made but it looks like there is no impact because of the interest rate on the loans,” he said.
“From about 12,000 accounts, we focused on 350 which represents 84 percent of all the cases we have and out of this, 264 cases represent N3.64 trillion is what is owed, so, we focused on the 350 because over 12,000 represents less than 20 percent,” he added.
Meanwhile, AMCON said it had sold the process of renewing the Air Operating Certificate (AOC) process to an investor as the expiry date of the AOC draws near.
Kuru said in a bid to recover the over N300 billion debt accrued by Arik Air under Joseph Arumemi-Ikhide, its founder, AMCON had to set up an independent airline, NG Eagle, and moved the assets into the new airline.
He said it took AMCON almost two years to follow the process but got frustrated by allegations that the airline was set up for national carrier and this stalled the kick-off of the airline despite getting the AOC.
“We branded three aircrafts that sat on the tarmac for two years. AMCON had no business with the national carrier. We were not encouraged. So, we found a way to sell the process of renewing the AOC process to someone who would continue flying it. If they do not meet the process of the AOC renewal, then it’s up to them,” he added.
Kuru however hinted that AMCON is ready to negotiate ownership with the leadership of Arik.
He said: “The Arik issue looks like a situation where there is no way out. There is always a way out. It is just a question of give and take. What is important is for us to sit down with the owner of Arik, if he is ready and agree on what makes sense to him and to us and then we go back to the Central Bank and the Ministry of Finance and share the resolution.
“The two parties must have an understanding that they want to have a resolution but sometimes, we let go where we want the business to survive where you have more than 1,000 people working. Sometimes, when you look at the feasibility of keeping the business going, it also makes you give more concessions. But the other party must come with a mindset that they are ready for a resolution.”
He disclosed that when AMCON took over Arik Air, there were seven aircraft on ground, which means the aircraft were not serviceable as they were either cannibalised or vandalised.
Kuru said: “Based on the record that we have, Arik was supposed to have more than 30 aircraft. Some of them had been cannibalized such that if you went to the hangar, you would see many aircraft parked and you would think that you would start the engine and fly them out. Most of the aircraft belonged to lenders like Afriexim, Access Bank, and others.
“Even when they tried to seize the aircraft, they realized that the body would be for one organisation and the engine would be for another. The man that set up Arik had a good idea but he got it wrong. We still believe that if there is a lot of money and good intentions, some of those aircraft can be fixed.
“We made it very clear that we don’t have any experience in aviation but the government at the time really wanted Arik to be saved, because based on the security report they had at the time, the airline would not have lasted more than two weeks and Arik was very fundamental to the government.
“We then brought in aviation experts to run it and also Aero Contractors. We made sure that AMCON is not involved in the day to day activities and the only time they come to us is when they need money. Some of the businesses that AMCON took over were already dead.”