The Asset Management Corporation of Nigeria (AMCON) means different things to different people. To some, it is the financial sector’s stabiliser, reducing bad loans from over 35 per cent to less than five per cent. For its over 12,000 debtors, this may not be so. In this interview with COLLINS NWEZE, AMCON Chief Executive Officer Mustafa Chike-Obi insists that the firm’s coming has changed the sector’s outlook.
On December 30, last year, AMCON re-deemed N1 trillion out of its N5.7 trillion bonds. What does that portend for the economy?
That’s correct. Well, first of all, when we planned for AMCON, we believed that the first three years will be a period of building the corporation. That was why we did zero coupon bonds. The original plan was to refinance the N5.7 trillion after three years and in the next seven years, make recoveries and pay down over the next two years.
We are pleasantly surprised that we have been able to recover faster than we thought, and we thought that as a show of good faith, given the amount of money we have recovered and the amount of money held, we should pay down a significant portion of our bonds.
So, we started with N1 trillion last December, which we did not expect that we would be able to pay when we started. We would be able to pay down additional N1 trillion in October this year, and we are certain that we have the funds to do that as well.
By December this year, we will be talking about reduction of the outstanding from the N5.7 trillion to approximately N3.6 trillion to N3.8 trillion.
On the impact on the economy, there are many things. I think one, the money has been sitting with AMCON for a while, so, I don’t think we will use it to buy treasury bills, and I expect that the recipients of this money will invest it. I don’t think there will be much of monetary impact.
But I think it sent a very positive message to Nigerians and other people across the world that we are serious with what we are doing, and that any money we get will be used to retire our liabilities and will not be diverted. I think this is probably the first time, a Nigerian institution, has returned this amount of money and reduced its liabilities voluntarily and willingly.
How will you assess the performance of the three-bridged banks after you acquired them?
Well, let me say that before we took over these banks, they were losing an average of $2 billion per month. I think they are all profitable. Last year, we don’t know the results, but I think it was a difficult year. We think they are clearly stabilised, and are valuable institutions.
We are very confident in the managers we have there and feel that there is a lot of value in those banks. We have managed, again, saved all the depositors in those banks, and most of the employees in the banks. Had we not done what we did, the depositors would have lost everything and all the employees would have been fired. So, we think that we have done what government should do. We have saved all the depositors and saved most of the workers.
However, we sometimes get to a point, where the banks have to lay off some workers, but it is like any business. In business, sometimes, you need to rationalise your workforce, but we are talking about very small numbers which could have been higher, if we had not intervened.
What stage is Enterprise Bank sale?
We have received expressions of interest, from about 20 prospective buyers. Those expressions of interest are being right now evaluated by the financial advisers to determine who is actually, a qualified buyer.
Once, those people have been shortlisted, then, they will have access to what we call, the data room of the bank. It is on the basis of the data room and their due diligence that they will start bidding. So, we are at the stage where people are saying they are interested but we need to know they are serious people. Once we know they are serious people, we can give them access to information so that they progress to bidding stage. So, there are few more steps to go.
But people are actually thinking that the process is rather taking much longer than projected?
It is taking time, that’s correct. But it is the same people saying that it will turn around and say, they were handed to our friends and relatives and some special interest. So, we are making sure that it is done in a very transparent manner. We are giving every person that come in equal chance. And when you are evaluating 20 to 30 expressions of interest, it takes time.
So, what we are doing is taking longer than we want. We are making sure that everybody in the process will say they got equal opportunity and that there was no special interest or any one given special advantage. So, it will take long, but we will make sure that it is done properly.
The last result of AMCON showed that it made over N800 billion loss. Could you put in perspective, what this result means?
AMCON inherited a loss. This is the money that was lost before AMCON came into existence. Those losses are not because AMCON did something and lost money. There was a loss in the system of over N3 trillion depositors’ fund. What AMCON did was to take that loss, and it is managing the loss. So, every year, you will see some loss, but it is not loss that AMCON created.
The alternative is to allow depositors lose N3 trillion. But we didn’t want to do that. This was why AMCON was created to manage these losses in a way that will not devastate the economy. So, it is like an accounting firm. We are recognising a loss that occurred before AMCON was even created. So, when you say, AMCON lost money, you create an impression that AMCON did something and lost money. The money was lost even before AMCON was created.
This is the result of activities from 2004 to 2010. What we are trying to do is take those loses, manage them and through recoveries and the Sinking Fund, retire our obligations over a 10-year period.
And it is the proper role of the government to take a problem and solve it. Those losses are not due to activities of AMCON. If you look at the activities themselves, that is, the non-performing loans we bought, we are actually profitable.
And please make this point it is the banking system through the Sinking Fund, that is paying. That is why we have the Sinking Fund, and that’s why the banks are paying 50 basis points of their total assets.
We could have told the banks to pay it immediately, but we have to do it gradually, and it is going to take us 10 to 12 years. But the amount of money that government has directly given to AMCON is N10 billion. And as you know, N10 billion is a lot of money, but it is insignificant compared to what we are dealing with now.
Talking about the Sinking Fund, banks’ contributions were raised from 0.3 per cent to 0.5 per cent of their total assets. There have been some complaints, especially by the shareholders that the contributions are high. What is your take on that?
Let me say this to you. Show me any bank in Nigeria that made more money in 2009 to 2010 than they are making? Even with the 50 basis points. If there is no AMCON, most of those banks will not be in existence today. So, any shareholder that is complaining, it almost like, somebody goes to the hospital and you cure him. And the doctor said, here is your bill, and he says, why are you asking me to pay, now that I am healthy?
These banks, most of them would have died, the shareholders would have lost everything. We have banks making over N100 billion profits today, no bank ever dreamt of it before AMCON was created.
Even with the fee. I don’t even think the banks are complaining. It think it is fringe people, shareholder activists that want to eat their cake and have it. I think bank today, is better off because of AMCON, even with this fee. And the alternative was to let the banks fail, and the same shareholders will complain that we let the banks fail.
I am not sympathetic to any bank that says the 50 basis point is too much. I want to see the bank that says it was making more money in 2009/2010 than it is making today. Tell me that bank.
The Non-performing Loans (NPLs) were over 35 per cent in some banks before AMCON came on board and today, they are less than five per cent. Could you explain what actually happened?
We bought them. AMCON bought all the NPLs from all the banks. That’s why they are below five per cent now.
The Central Bank of Nigeria (CBN) and AMCON last month, signed agreement on the refinancing of AMCON bonds. What is it all about?
The refinancing agreement was to ensure that the CBN will be the only holder of AMCON bonds in the furure. It makes a lot of sense because one, CBN regulates AMCON, and regulates the banks. And the source of repayment of those banks is largely through the banks. So, the CBN as a creditor and regulator would have been in a position to make sure, that AMCON is doing the right thing.
So, number two, CBN could refinance AMCON, what I consider, a better rate than what we could actually get from the market. So, the agreement that was signed was between AMCON and CBN so, that AMCON will pay off every non-CBN holder of AMCON bonds, and it is only CBN will holder of AMCON bonds.
And that agreement is a little bit complex than you think, because we are paying it down every year. So, it may be N3.6 trillion this year but by the time we get to 2015, it may be very small amount that is left.
We are in 2014, what will AMCON’s strategy be in terms of loan recovery because we are used to hearing that the corporation has taken over one property or the other?
When we bought those loans, it was based on value of the collateral. We don’t want to go there and seize everybody’s collateral if there is a chance, that the business will survive.
So, we negotiate with customers and only when that has failed do we seize, take possession or appoint a receiver over the asset. But people must pay their debt, and if they cannot reach an agreement with us, than we seize their property and sell it. Simple.
We want to pick up our pace of recovery, we want to make sure we have fund to retire another N1 trillion next year and we want to conclude with the AMCON Amendment. We always had three objectives every year.
Has such practice paid off?
What do you mean by has it paid off? We paid off N1 trillion last year and we are paying off another N1 trillion this year.
What is the position of Capital Oil in relation to what AMCON is doing?
Capital Oil is one of our debtors. We are working with Capital Oil. There are 12,000 other debtors. I don’t think Capital Oil should command any special treatment one way or the other.
We are dealing with them as we deal with other debtors. Capital Oil owes money and will pay it, one way or the other, like every other debtor. There is nothing special about Capital Oil.
The 12,000 debtors could be spread across different sectors of the economy. Now, which of the sector is giving AMCON the biggest concern?
All of them are giving us headache. You understand, these are bad debts. These were the debts that the banks could not collect. So, everyone of them, has a unique problem, there is a reason they have not paid. They are all difficult. It is not industry-specific.
If you want to know what gives us the most problem, it is when the debtor is not cooperating. And uncooperative debtors are across board. But it is not an industry thing. They are all very difficult situations.
There are allegations of high-handedness against the management of the three bridged banks. We just ran a report that Keystone Bank fired 52 top managers at once. One would have thought that by now, these banks would have got it right than what we have now?
I don’t know what you mean by far-right. But all the banks that we know of are doing better today, than they were doing two years ago. So, I don’t know what you are talking about. They are doing better than they were in 2009/2010. That’s a fact. Now, whether they fired 52 managers at one bank or the other, I can assure you that it is not only Keystone that fired managers.
I believe that some managers were fired also by other banks. Now, it is unfortunate that people look at Keystone, Enterprise and Mainstreet differently. They are just banks like any other banks. If they have too many senior managers, they will fire some of them.
If they have to reduce their staff, they reduce their staff. They are commercial institutions. They are not charitable institutions. They are not public institutions that are supposed to provide employment, they are commercial institutions.
So, if you do your research, you will see that it is not only Keystone Bank that laid off people. I guarantee you that other banks have been laying off people, because that’s what banks do. That is what every capitalist enterprise does. Sometimes they lay off workers, sometimes they hire.
Anytime you work in a company, you know you run a risk that the company may downsize, or the company may grow. And it is amazing to me that people go to banks, earn those high salaries, and as soon as something happens and they can’t pay anymore, they start screening for the union.
Bank people have the highest average salaries in this country. I think bank workers and oil workers, and I don’t think that they should be unaware that the job is not guaranteed.
Now, someone who wants a guaranteed job, I suggest to them they shouldn’t work in a bank, they should go and work in a school. I Think there is much more job security in the schools, but they have lower salary. That’s the sacrifice.
For two years, the IMF, has advised that AMCON be gradually wound down. What is your take on that?
Have you read them?
Yes, I have read them.
What they said last year was that AMCON, having accomplished its objectives, should start winding down, over a period of seven years. We think it is 10 years, they think it is seven years. We agree. That is why we are paying down N2 trillion in the next two years. I think there is no need for disagreement.
This year, they said again that AMCON should reduce its activities. We agree. But they didn’t put any time this time. I do not think it is a big difference between the philosophy of IMF and our philosophy. What we object to, is the IMF giving us a timeframe because they don’t understand the Nigerian market.
They don’t understand how hard it is to dispose of N300 billion of listed securities. They don’t know how hard it is to dispose of a real estate in Nigeria. They don’t understand how hard it is to dispose of two of the largest airlines in Nigeria. I don’t think they should be giving us a timeframe. But the philosophical direction that AMCON should get smaller and smaller, I have said in day one, I hope I don’t have a job in five years. So, I don’t want you create some disequilibrium between us and IMF. I disagree with their timeframe.
There are factors responsible for NPLs in the past. Now, the CBN has talked about poor skills in the banking sector. Can this also be part of reasons the NPLs were up in the past?
Many things led to the NPLs crisis. AMCON is not the regulator. AMCON’s job is to take a bad situation and stabilise it. We have done so. We believe that the issue of regulating banks and making sure that this does not happen in the future lies with the CBN which is the regulator. And so, if we see something we think is a red flag, we should inform the regulator, as you should, or any other institution should tell the regulator, we see something happening here, please look at it.
But it is not our jobs to tell banks what to do, how to do it and when to do it. We came up to cleanup a specific situation, we are in the process of doing that and we are going to focus on that entirely.
The AMCON Act is under amendment to include the Sinking Fund as part of the Act. How far have you gone with that?
We are working on that, and I think that the National Assembly has been terrific. I think we are almost there. The reason why we are doing that is to ensure that the Nigerian public does not end up with the burden of this resolution. So, we want to ensure that the banks that created the problems, solve the problems through their contributions to the Sinking Fund. What we are doing is giving them time to pay over a long period of time, instead of asking that they pay immediately and create another bigger problem.
The last time we talked, you said the Sinking Fund is about N500 billion. Are we putting the fund into any kind of investment?
The Sinking Fund is managed by the CBN and very shortly, there will be a Board of Trustees set up to manage the Sinking Fund. It is not managed by AMCON.
How soon will that be?
It is not managed by AMCON, so you should ask the Central Bank about that.
But, would you suggest the best use of such a huge amount?
The Sinking Fund is established solely to pay down AMCON bonds. It is not designed for any other reason. As soon as AMCON bonds are fully repaid, there will no longer be a Sinking Fund. When you talk about investing it, I don’t know what you mean. It is designed to pay up AMCON bonds. That’s why it is there. It is not there to build bridges or anything else. It is designed for AMCON bonds, only.
It has been three years since you took over AMCON. What has the experience been?
Very challenging.
What makes it challenging. Is it the environment?
The job is challenging. The environment is fine.
What are the issues that make it challenging?
We have 12,000 debtors that we are dealing with. You must support them, but you must get your money back. Each one has a different story, each one has a different treatment. Each one you have to deal with toughness, fairness and wisdom. That makes it challenging.
It is challenging and you are still doing it?
I think your job is challenging and you are still doing it.
What were your objectives last year?
The objectives last year were to finance N1 trillion, get the AMCON amendment, and restructure up to 40 per cent of our NPLs. We succeeded in the first, we are 90 per cent on the AMCON Act amendment but that depends on the National Assembly. And the third, which is to restructure up 40 per cent NPLs, I think we are almost there. By the end of this year, we would want to get 75 per cent of the NPLs restructured.
Is loan restructuring better than recovery?
When you deal with NPLs, there are three things that happen. The first is to restructure and get the loans performing. That is the highest chance of recovery. The second thing you do is appoint a receiver. The final thing is that you foreclose and repossess. That has the lowest rate of recovery. So, we try to restructure first, if we can’t, then you appoint a receiver, and if that doesn’t work, then you foreclose. That is the global best practices.
What is the timeline for disposing the three bridged banks?
As soon as practicable. But as long as it takes to make sure it is a transparent process.
Is it not proper for AMCON to keep running the banks, after all, they are profitable?
We are a government-owned institution. It is not government policy today to be involved in running banks. We did it as an emergency, we have stabilised them, and we think the banks are best run by completely private entities. Until, somebody changes the policy, that’s what we are going to be doing.
The three bridged banks have about N100 billion Net Asset Value. What does that mean?
Net Asset Value means the banks’ assets are more than their liabilities by that amount.
How much do you think the banks are worth?
I don’t know. It is when people go to the data room and look at the banks. They will tell us what they think, and we will decide. I have no number.
So, it is when they go to the data room that you will know the value of the banks?
No, it is then they will tell us what they think is the value of the banks. Then, they will give us a bid, and when we look at the bids, that we will decide, who has the highest bid, who can run the banks best. Who will the CBN allow to run the banks? All of that stuff. We will find all that out after they have done their due diligence.
There is so much work to do. How do you find time to relax?
There is plenty of time to relax. My phones are turned off by 10 pm every day. There is plenty of time to work, and plenty of time to relax.
Do you play golf?
No, I don’t play golf.
Do you want to play golf. Are you thinking about that because most people in your class will always want to play golf?
Which class? If I have time to do that, I will play draft.
