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High interest rate, non-collateral interventions, others hindering recovery of N4.7trn debt — AMCON
The Asset Management Corporation of Nigeria (AMCON) has blamed high interest rates, non-collateral interventions as some of the factors hindering the recovery of N4.7trillion debt owed to the corporation.
At at an interactive session with the Management of AMCON led by its Managing Director/Chief Executive Officer, Mr Ahmed Lawan Kuru OFR at the New Senate Building, National Assembly Complex, Abuja yesterday, he said that the Corporation had to inject a total sum of N2.2 trillion to ten (10) Banks – Bridged and Owned Banks (intervened banks) – bringing Net Book Value (NAV) to Zero.
This N2.2trillion was not backed by any collateral, which made recovery extremely difficult. AMCON, he said, capitalised three EFIs and provided financial accommodation to five others.
The Corporation he stated took over Skye Bank (now Polaris) under the bridged back concept of the CBN and NDIC. The Bank had stabilized, and since transferred to its new owners by the CBN. The Corporation is battling with some of the oil and gas facilities acquired from the bank.
“AMCON purchased 12,743 NPLs or EBAs worth N3.797 trillion from 22 Eligible Financial Institutions (EFIs) for a purchase price of N1.8 trillion. The purchases are covered by various collateral,” he said.
According to Kuru, AMCON’s intervention activity was funded by a debt obligation of N4.65 trillion (as at 31st December 2018), which is to be repaid, from internal and external sources, to the CBN by 2024. It is worth knowing that, at conception, it was envisaged that AMCON being a loss minimisation entity would repay 30 percent of the obligation. The balance of the AMCON debt was to be offset by the Banking Sector Resolution Cost Fund (“BSRCF”).
According to a release by Jude Nwauzor, the spokesperson of the Corporation, the Chairman Senate Committee on Banking, Insurance and other Financial Institutions, Senator Adetokunbo Abiru vowed that the 10th Senate of the Federal Republic of Nigeria would ensure that the best objectives of setting up the Asset Management Corporation of Nigeria (AMCON) by the Federal Government in 2010 are achieved.
Abiru who frowned at the huge interest rates that AMCON pays to the Central Bank of Nigeria (CBN) said if that is allowed to continue would practically make it impossible for the much-touted AMCON sunset to be realised. He said a situation where AMCON pays as much as six per cent to the CBN and also charged some percentage on obligors whose businesses were already challenged before AMCON intervention was not a healthy practice as AMCON’s current exposure stands at about N4.7trillion.
He therefore said his committee will engage the CBN, and all relevant stakeholders to take a second look at the AMCON funding model, the interest elements and all other processes that would hasten the resolution of the huge burden that AMCON presently carries.
Summarising the essence of the interaction to the media at the end of the in depth discussion, Abiru said the 34-member committee was happy that AMCON is up to date with its budget and records and remains one of those government institutions that the committee did not have to chase up and down before they submitted their records for review. While praising the leadership of AMCON and calling on the Management to sustain such ethical practice, he said the committee was happy that AMCON has submitted its audited accounts up to the financial year 2022.
According to him, members of the committee were satisfied that even before the convening of the interactive session, which is the first the committee was holding since the inauguration of the Committee on Banking, Insurance and other Financial Institutions by the Senate, AMCON had forwarded to his office a copy of their performance as of September 2023, which he said was very impressive record by a government agency.
He added, “I will also believe that the role of AMCON is further underscored by the fact that it was set up using a model that would help us tidy up the challenges that we had in the financial system dating back to the global financial crisis of 2008/2009. That gave rise to the institution and equally the model that also well suited for the agency in terms of the Eligible Bank Assets (EBAs) that they acquired.”
“The only challenge that we have today remains the sunset date, which is to say we should as a government have a definitive time to make sure that we wind down – meaning that all the obligations that are hanging in the books of AMCON must be redeemed. The conclusion is that we (the 10th Senate) will continue to work with AMCON and the apex regulatory agencies to make sure that AMCON is wound down within the shortest possible time.”
Abiru who is representing the Lagos East Senatorial District at the 10th Nigerian National Assembly was a former Group Managing Director/Chief Executive Officer of Polaris Bank Limited, Nigeria. The bank was formerly Skye Bank Plc before AMCON intervention through the directive of federal financial regulators such as the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC) amongst others.
Earlier in his submission to the committee, Kuru who was accompanied to the Senate by the Executive Director in charge of Asset Management, Dr Eberechukeu Uneze among other senior officials of the agency reminded Abiru and his committee that some of the assumptions underpinning the funding model were: i. The banking sector was projected to grow at 20 percent per annum
- Each bank would contribute 0.5 percent (initially 0.3 percent) of total assets per year to the BSRCF. CBN to contribute N50 billion per year to the BSRCF.
The reality is that, the above-mentioned assumptions did not materialise, for instance:
- The actual growth rate of banking sector total assets from 2013 to 2017, with 2013 being the commencement year of contribution, has been approximately 8.4 percent (as against the target of 20 percent), and not all DMBs have contributed to the BSRCF. In monetary terms, the actual Sinking Fund contribution from 2013 to 2017 was N1.13 trillion as against an expected N1.45 trillion. This is a shortfall of N0.32 trillion.
- The actual recovery on recapitalized banks and intervened banks was 23% and 10 percent, respectively.
iii. AMCON bonds were refinanced by the CBN at 6 percent and this is higher than the rate payable by other intervention funds.
- The cash shortfall from internal and external sources meant that there were less funds to invest at the stated reinvestment rate.
The expected variance between forecast and estimate for 2018 to 2024, assuming a compound annual growth rate (CAGR) of 8.4 percent, is N1.56 trillion. The total shortfall gap in the Sinking Fund is N1.7 trillion. Bear in mind that the Sinking Fund was meant to contribute 70 percent of the funds required to settle AMCON’s obligations.
In conclusion, Kuru informed the Senators that to enable AMCON succeed in its national call to duty, AMCON solicits the support of this esteemed Senate Committee Members in the following areas: the engagement with the Judiciary, and engagement with other stakeholders like CBN, the federal Ministry of Finance etc, particularly with reference to the exit plan.
The Nigerian Railway Corporation has announced the suspension of services between Delta and Kogi due to the unsatisfactory nature of the track conditions from Ujevwu in Delta State to Itakpe in Kogi State.
This was disclosed in a notice titled “Public Announcement” which was sent to customers, indicating that the agency plans to resume operations on Monday, July 8, 2024.
The suspension, effective from Friday, was attributed to an obstruction on the track.
“This is to officially notify our esteemed passengers that the Warri-Itakpe Train will not run today Friday, 5th July 2024 due to the obstruction we have on our track.
“We shall resume our normal train services on Monday 8th July 2024. Passengers who already booked their tickets online will be refunded.
“All inconveniences are highly regretted. Thank you,” the statement added.
Ogun State Head of Service, Mr. Kehinde Onasanya has said that the State is leading other states of the Federation in Ease of Doing Business, owing to the provision of requisite infrastructural facilities through the Public Private Partnership (PPP) projects in the State.
Onasanya made this known while delivering a keynote address at the launch of a book titled “Practical Guide to Public Private Partnership Arrangement in Nigeria” authored by Pastor Adebisi Sogunle and held at the Waterfalls Events Centre, Ikeja, Lagos.
According to him, since the State passed the PPP law in 2019, the initiative has facilitated projects with road networks rehabilitated and expanded as well as reconstruction of the Ijebu-Ode-Epe Expressway among others.
He explained that the collaborative agreement between the public and private sectors was predicated on the strengths of both sectors to achieve outcomes that neither could effectively accomplish alone.
“Under the visionary leadership of His Excellency, Prince Dapo Abiodun, Ogun State has harnessed the potential of PPP to drive significant developments and give Ogun State focused and qualitative governance and as well create the necessary enabling environment for a public private sector partnership.
“This is fundamental to the creation of an enduring economic development and individual prosperity of the people of Ogun. Let me, therefore, highlight some of the notable projects of the State Government and their impacts through PPP:
“The Ogun State Agro Cargo Airport: Developed in partnership with the private sector, the Agro Cargo Airport is designed to facilitate the export of agricultural products, thereby boosting the agro-industrial sector.
ii.Ogun State Housing Development Projects: Several housing projects, including the Prince Court Estate, have been developed through PPP arrangements to address the housing deficit.
iii.Ogun State Energy Generation Projects: Lisabi Mini Power was developed in partnership with the private sector to generate 4.5mw Power for transmission and distribution within the State to Government core areas.
“Other projects of the State Government in the pipeline through PPPs include the Olokola Deep Sea Port, Sagamu Trailer Park, Sagamu Stadium, Hillcrest Estate, PMB Estate, Lomiro Oil Palm, OGSG Pharmaceuticals, OGSG Forestry project, Gateway Hotel Ota, Inland Dry Port at Kajola/Papalanto, amongst others,” the HoS said.
While congratulating the author of the book for his contributions to the discourse on PPP, Onasanya said the valuable resource will no doubt guide policy makers, practitioners and investors in navigating the complexities of PPP arrangements in Nigeria and urged public servants as well as private sector partners to key into the messages of the book and apply its lessons in their endeavours.
On his part, the former Minister of Information and Culture, Alhaji Lai Mohammed, said the book is timely because government alone cannot maintain all its assets, which requires the PPP arrangements, saying the arrangement paved the way for some major road infrastructure with particular reference to Ogun State and commended the Ogun State Government for keying into the initiative, which has created more job opportunities for the people.
Speaking to journalists on the sidelines of the event, the National President of the Nigeria Union of Journalists (NUJ), Dr. Chris Iziguzor said the PPP initiative has assisted Ogun State in achieving much in the area of infrastructural development and added that the arrangement, in turn, brought in more investors and provided job opportunities for the citizens.
In his response, the author, Pst. Adebisi Sogunle, while appreciating all guests for the support he got, said he wrote the book based on the experience he garnered while working on a PPP arranged programme in Cross River State.
He said the book will help in examining the roles of stakeholders because they have the responsibility to maintain the environment when political, economic, and administrative concerns arise while partnering.
News
Reverse 40 per cent import fees on LPG to encourage local manufacturers – Techno Oil boss urges FG
Mrs Nkechi Obi, Group Managing Director (GMD), Techno Oil Limited has urged the Federal Government if Nigeria to reverse its policies on the importation of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) cylinders.
Obi made her displeasure known during a panel session at the 2024 Nigeria Oil and Gas (NOG) conference in Abuja.
Speaking, Obi pleaded with the government to reverse the zero import duties placed on the importation of LPG cylinders and restore the initial 40 per cent import duties, to discourage importation.
“We need policy reversal on that to encourage local producers. The unofficial explanation we are getting from some customs officers is that the Compressed Natural Gas (CNG) which the government wants to encourage its usage in Nigeria, has the same Harmonised System (HS) code with LPG.”
“So, the import benefits placed on CNG equipment eventually affected LPG equipment; that is why they were tied together on the zero import duties.”
“Harmonised System codes are commonly used throughout the import and export process for the classification of goods.”
“For me, we don’t produce CNG cylinders in Nigeria because it involves advanced technology but we produce LPG cylinders here.”
“For us to produce CNG cylinders, we have to change one or two machines, and we expect the government to encourage us to upscale our technology to 32, which we are planning to do.” She lamented.
Obi also called on the Federal Government to separate LPG HS code from that of CNG, to ensure that importers of LPG pay higher import duties, and to also enable the government to continue with its efforts to make CNG affordable in the country with zero import duties.
“The previous government protected those producing cylinders, so that import will not overshadow local production; they did that to encourage local manufacturing but when this government came into existence, policy changed.”
“We only enjoyed that policy for six months before it was scrapped and replaced with the new “zero import duties” policy.”
“Definitely, we have to produce CNG cylinders and the government needs to consider those that will go into that production. But if government policy is killing LPG cylinder production that we are doing, it will be very difficult to enter into CNG cylinder production.”
“So, if there is anybody who can venture into CNG cylinder production, we the producers of LPG cylinders are here to do that and it is in our plan.”
“But we are not encouraged to do it because of what happened to us in the LPG cylinder production because of the frustrating policy that is encouraging its importation,” Obi added.
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