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AMCON debtors struggling to repay loans amid economic slump

By on December 10, 2015

The Asset Management Corporation of Nigeria (AMCON) has said its debtors are currently finding it difficult to repay their loans because of the economic slowdown in the country.

Also, the Managing Director/Chief Executive Officer of AMCON, Mr. Ahmed Kuru, who said this in Lagos during an interactive session with journalists yesterday, disclosed that the value of AMCON’s property assets was dropping because of the economic slowdown.

According to the AMCON boss, the challenge before the ‘bad bank’ today is how to pay off its N5.6 trillion liabilities, which include bonds held by the Central Bank of Nigeria (CBN).

“The banking institutions have guaranteed that they will support the sinking fund with about 70 per cent through the contribution of 0.05 per cent of their balance sheets and the other 30 per cent is supposed to come from us because those loans that we purchased have all been collateralised but what we are trying to do now is how do we recover either through restructuring or through outright sale of assets in order to meet our financial obligations.

“We have roughly about N5.6 trillion debts that we need to honour in the next 10 years. It is going to be a challenging period for us because of the perception out there and the expectations.
“Paying N5.6 trillion in the next 10 years is not an easy task, it is almost the size of the national budget,” Kuru explained.

Furthermore, he pointed out that the significant drop in the price of crude oil; now at $40 a barrel, would also have multiple implications on AMCON’s debt recovery.

This, he stated, “reduces government’s ability to honour even its own commitments, which means if we have customers or stakeholders who have loans with us and part of those loans are expectations from government payment, that one is impaired.

“Two, because of the price of crude which has also affected turnaround in the economy, economic activities of some of the businesses that owe have been weakened and their ability to repay is also impaired.

“Then we also have the impairment of some of these assets that we are holding, because the oil and gas sector represents more than 30 per cent of our book.”

Kuru explained further: “If we have a tank farm that was worth N10 billion yesterday, and you want to buy it today, obviously it reflects the price of crude. That also is a challenge to us because the price of crude is affecting some of our assets.

“As I’m talking to you, there are quite a lot of assets that disposing them will be challenging. For instance, there are quite a lot of tank farms in Apapa. And that is a specialised asset.

“Whoever indicates interest, will do so based on cash flow projections, expecting that five or 10 years down the line, they would have been able to pay back. To dispose of them is a big challenge and disposing of them at the prices we got them is also another challenge.

“Some of those assets were re-valued and revaluation is most a time-based on discretion.”
According to him, the banking sector’s sinking fund previously assumed that the industry would grow at 20 per cent year-on-year.

But based on developments in the economy, he put the current banking industry’s growth rate at less than 12 per cent per annum.

Responding to a question on the delayed sale of Keystone Bank Limited, which is wholly owned by the corporation, he said: “There was already a plan to sell Keystone Bank. But unfortunately, because of the change in management and board of AMCON, we have not been able to sell the bank. So, obviously, we are coming up with a new time-table.”

He assured all stakeholders that the process that would lead to the sale of the commercial bank would be transparent and competitive, adding that “there will be no hanky-panky or secret deals in the disposal of our assets”.

The former chief executive of Enterprise Bank Limited said the new AMCON leadership has blocked all the leakages.