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Debt issues

AMCON can adopt global standing instruction of CBN to fast track debt recovery — Stakeholders



By Kayode Tokede

Stakeholders in the financial sector have expressed that Asset Management Corporation of Nigeria (AMCON) can adopt the Central Bank of Nigeria global standing instruction to speed up its debt recovery and sustained the nation’s economy.

With operational guidelines on global standing instruction – Individuals, banks were given the power to debit loan and accrued interest due from bank accounts of loan defaulters across the Nigerian banking system.

The issued guideline that commences August 1 aimed at reducing non-performing loans in the banking sector and to monitor chronic loan defaulters.

The Managing Director/Chief Executive Officer, AMCON, Mr Ahmed Kuru had reiterated the fact that if at sunset AMCON is unable to recover its outstanding huge debt of over N5trillion, the debt burden would automatically become the debt of the Federal Government for which taxpayers’ monies will be used to settle in the long run.

The Corporation is a body established by the Act of the National Assembly of Nigeria in July 2010 with an intended 10 years lifespan.

Stakeholders who spoke with Nigerian NewsDirect noted that AMCON needed to be aggressive in its debt recovery, noting that the new guidelines by CBN is the latest method  the Corporation can adopt.

A former minority leader in the house of representatives, Dr. Wunmi Bewaji in a chat with Nigerian NewsDirect on Tuesday, said, “A lot of AMCON debtors have huge deposit in their bank accounts. Everyone including the CBN and FG are looking at the money. This money can be attacked by the government from debtors account.

“AMCON can sell debtor collateral used to collect the loan and realize the credit. Also, I think AMCON can securitize these loans, take it to Nigerian Stock Exchange and sell it to Nigeria- I think that will solve the problem that will remove the hand of government from taxpayers.

“Securitization is the best possible means that would remove the hand of government from debt recovery in this country.”

Bewaji who is also finance expert suggested that Nigeria needed an agency that its duty is to hold government assets recovered from debtors and dispose it.

“Even when EFCC recovers stolen funds from corrupt individuals; it is not EFCC that will be selling those assets. It is moral bankruptcy and I have not seen any country that does that except Nigeria. Nigeria should have a national asset commission that tends to handle government assets and that agency would have the power to dispose government assets. At the process of selling these assets, it is backed by transparency and the law.

“I’am only trying to contact EFCC operations to AMCON duty on assets recovered.”

Reacting also, the Chief Economist/Head of Research, Pac Research, Mr. Moses Ojo, said, “The tenure of the current AMCON will end by 2021 and the law that set up AMCON in the first instance to deal with debtors.”

According to him, AMCON should start planning on transferring all recovered properties to the federal government.

He also suggested that, “Another way to go about debt recovery before 2021 is also to use the combination of security agencies to recover those loans.

“But you know we’re in a democracy. The cases are in court and since it’s in the court and AMCON has nothing to do about it.

“Another way is for the executive to have a rapport with the judiciary so that they can pass judgement in time for AMCON to recover these loans faster.

“That could have been an option but that policy also has it own flaw because when it is decided in the law court.

“The CBN now does not have power on a contractual obligation between an individual and a banker. That policy has to be tested in the court of law first in other to be sure of efficiency. For individual, the policy must work but for corporation, most especially Limited liability companies, it might be contested in court.”

Speaking at the first seminar for AMCON Receivers/Receiver Managers in General Enforcement recently,  Dr. Dr Francis Agbu SAN, at the Senior Partner, Lexavier Partners who was also represented by Mr Mohammad Sani Umar described receivership as the most effective debt recovery tool within the current insolvency/debt recovery regime and challenged AMCON to leverage it to the maximum to help Nigeria especially now that the federal government needs a lot of money to bridge Nigeria’s financial challenges that have been heightened by the outbreak of the dreaded coronavirus pandemic.

He said, “Receivership, as a debt recovery strategy, is arguably the most effective debt recovery tool within our current insolvency/debt recovery regime. This is primarily because of the control, which it gives to the debenture holder/creditor over the assets, or the assets and business of the debtor company. By virtue of section 393(4) of CAMA, upon appointment of a Receiver and Manager, the powers/control of the directors over the debtor company become immediately suspended. Even where the Receiver is not empowered to act as Manager, he retains executive control over such portion of the company’s assets, which have been charged.”

Narrowing down to how AMCON can apply the powers of receivership, the senior advocate of Nigeria added, “With respect to AMCON Receivership, the AMCON Act has further extended the powers/rights of AMCON-appointed Receivers beyond the scope of CAMA and the general principles on receivership. Firstly, pursuant to Section 48(3) of the AMCON Act, the Receiver’s powers to assume control over the assets of the company is not limited to the assets, which have been charged under the Eligible Bank Asset (EBA), but also included unpledged/uncharged assets.

“This extraordinary provision bestows a far-reaching advantage on AMCON in the realisation of outstanding EBAs by enabling AMCON to sustain maximum pressure on the debtor company (including its officers and shareholders) and increasing the pool of assets from which AMCON may realise the indebted sum.”

Debt issues

FG’s debt service to revenue soars to 183% in Q1, 2023



The federal government’s debt service to revenue ratio has increased to 183 percent in the first quarter of 2023.

This information was revealed in the budget implementation report for the same period.The report highlights that the government had initially budgeted for a revenue of N2.16 trillion, but the actual revenue generated was only N1.21 trillion.

This is a significant decrease compared to the N1.48 trillion revenue generated in the first quarter of 2022.The rising debt service to revenue ratio is a cause for concern as it indicates that a larger portion of the government’s revenue is being used to service its debt obligations.

Failure to do so could have severe implications for the country’s overall economic stability and development.

Meanwhile, debt service in the first quarter of 2023 was N2.2 trillion compared to N1.6 trillion budgeted for in the first quarter of the year.

This represents a debt service to revenue ratio of 183 percent.

Nigeria has been grappling with acute fiscal shortfall since the ruling APC government took over failing to meet its revenue targets while increasing its debt service.

In 2022, the total debt service was N5.65 trillion, which was an alarming 97.4 percent of the budgeted revenue.

During the same year, the federal government received a total revenue of N5.8 trillion down from N6.7 trillion received in the same period in 2021.

The government recorded a fiscal deficit of N7.5 trillion or 129 percent of actual revenue collected.

The trend appears to be continuing in 2023 with the government failing to meet its revenue targets but blowing past its expenditure targets. Its total expenditure (excluding GOEs) was N3.4 trillion higher than the N3.3 trillion budgeted.

However, recurrent non-debt expenditure was just N1.2 trillion compared to budgeted revenue of N1.63 trillion. The major contributory factor to the wider fiscal deficits remains the government’s rising debt service obligations.

A breakdown shows that while total debt service rose slightly to N1.3 trillion (budget N1.2 trillion).

However, Ways and Means, which is the overdraft lent to the government by the central bank recorded a debt service of N912 billion versus a budget of N300 billion.

Capital expenditure was N175 billion versus N841 billion targeted.

The government also performed poorly with its financing activities achieving just N2 trillion from domestic debts versus N2.695 trillion budgeted. Thus, it ended the first quarter of the year with a net deficit (excluding GEOs budget and project-tied loans) of N2.3 trillion.

Meanwhile, the federal government announced on Monday that it is proposing a N26 trillion budget for the 2024 fiscal year.

This compares to the N21.8 trillion budget currently running and approved under the administration of President Muhammadu Buhari.

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Debt issues

NDIC pays N1.084bn to 29,573 depositors of MFBs, MPBs



The Nigeria Deposit Insurance Corporation (NDIC) has revealed that it has paid an insured sum of N1.084bn to 29,573 depositors of MFBs, MPBs.

The payment follows the revocation of licenses for 179 Microfinance Banks and 4 Primary Mortgage Banks by the Central Bank of Nigeria (CBN).

The Managing Director of the NDIC, Mr Bello Hassan speaking at the Abuja International Tradefair said the NDIC immediately commenced liquidation of the banks and began disbursing insured sums to depositors within just 7 days of the closure of these banks.

“It’s important to note that as at 22nd September 2023, the Corporation had paid a cumulative insured sum of N1.084 billion naira to 29,573 depositors of the closed MFBs/MPBs.

“It is however instructive to let you know that payments are still ongoing and depositors with funds exceeding the insured limit will receive liquidation dividends after recovery of debts and sale of physical assets of the closed banks,” he revealed.

Speaking further, Bello added that “indeed, Nigerian depositors are our priority and our foundation is built on ensuring the safety and security of their deposits.”

“This ideal is encapsulated in our strap line; ‘Protecting your bank deposits!’ This is crucial for financial inclusion because it gives Nigerians the assurance that their money is safe and accessible when needed.

“Furthermore, the Corporation’s activities through the supervision of banks, continuous monitoring and oversight serves as consumer protection for depositors which enhances confidence in the financial system. This acts as an incentive for the unbanked to access financial services of licensed banks.

“Over the years, we have grown stronger in fulfilling these responsibilities and have significantly enhanced our public policy objectives of establishing a robust deposit insurance scheme in Nigeria,” Bello noted.

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Debt issues

Nigeria’s 87tn total debt still moderate — IMF



By Sodiq Adelakun

The International Monetary Fund (IMF) has stated that Nigeria’s total debt of over N87 trillion is still at a moderate level compared to other countries.

The IMF Resident Representative in Nigeria, Ari Aisen, emphasized the need for Nigerians to address the underlying issues driving this high debt situation.

A recent report by the Debt Management Office (DMO) revealed that Nigeria’s total debt reached N87.4 trillion as of June 2023, causing concern among both Nigerians and foreigners who fear a lack of significant development amidst the country’s economic challenges.

Aisen highlighted the importance of implementing fiscal policies to reduce the government’s financing needs.

“As for now, the debt-to-GDP ratio is still at a moderate level in Nigeria. It is very important that policies are put in place, particularly fiscal policies, to reduce the financing needs of the government,” Aisen said.

“The removal of fuel subsidy was a very important step because fuel subsidy cost 2 percent of GDP last year and were adding to the financing needs and the stock of debt of the country.”

He urged that this new administration focus more on containing the needs of the government so that the debt stock does not rise any further.

Meanwhile, on President Bola Ahmed Tinubu’s GDP growth target of 7 percent annually, Aisen admitted that achieving that growth target may be very challenging, especially as the economy continues to face so much stress as a result of high living costs caused by the removal of fuel subsidy and higher prices of commodities.

“But we are in a transition period, and the initial move of the reforms shows that we are in the right direction. The removal of fuel subsidy and the unification of exchange rates,” he praised.

“These reforms need to continue to reach what we will call macroeconomic stability because if inflation can get lower and the exchange rate is more predictable, then investment can actually start coming to Nigeria.”

He advised that the reforms have to be well managed to avoid any reversal of subsiding fuel and controlling the exchange rate.

He explained that these reform transitions will, in the long run, lead to a better economy. Aisan reminded all that the Nigerian economy has in the past grown into double digits, and such growth can be repeated if the government continues with its right policies and provides a lot of support to the business sector. Growth of 7 percent can be achieved, he emphasised.

“We are going to see Nigeria again double its growth rate,” the IMF representative said.

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