The Asset Management Corporation of Nigeria (AMCON) revealed that it has successfully recovered more than 70 per cent of the N4 trillion in bad debts from debtors, despite prevailing concerns related to interest rates.
Ahmed Kuru, MD/CEO of AMCON made this known while speaking to newsmen in Lagos on Monday.
- “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 per cent.
- Unfortunately, because the loans were purchased with bonds, as you are recovering, there are also interests to be paid averaging around 11 per cent,
- “The situation is that as we are recovering, there is also an 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,” he said.
He noted that the original funding plan of AMCON was 10 years and that there was the assumption that the banking industry would grow at the rate of 20 per cent.
Nevertheless, he highlighted that the banking sector’s growth has been below 5 per cent for the past seven to eight years.
There is a general feeling that AMCON is killing businesses, but he said 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.
- “From about 12,000 accounts, we focused on 350 which represents 84 per cent of all the cases we have, and out of this, 264 cases represent N3.64 trillion what is owed, so, we focused on the 350 because over 12,000 represents less than 20 per cent,” he added.
Renewal of AOC Certificate
In the meantime, AMCON has reported that it has transferred the responsibility for renewing the Air Operating Certificate (AOC) process to an investor as the AOC’s expiration date approaches.
In an attempt to recoup the N300 billion debt incurred by Arik Air during Joseph Arumemi-Ikhide’s time as its founder, AMCON opted to set up an independent airline, NG Eagle and repositioned the assets within this fresh venture.
He explained that AMCON invested almost two years in the procedural requirements.
However, their efforts were impeded by allegations that the airline was intended to serve as a national carrier, causing delays in the airline’s launch, despite having obtained the AOC.
- “We branded three aircraft 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.
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Kuru, however, hinted that AMCON is ready to negotiate ownership with the leadership of Arik.
- “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 further shared that upon AMCON’s takeover of Arik Air, they discovered seven aircraft on the ground, indicating that these planes were not in serviceable condition due to either cannibalization or vandalism.