AMCON Purchased N181bn Non-Performing Loans from Banks

Ahmed Kuru
MD/CEO
AMCON

The Managing Director/Chief Executive Officer of Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, has called on agencies that are saddled with the responsibility of regulating the aviation industry and indeed other critical sectors of the economy to adopt the same template, which the Central Bank of Nigeria (CBN) used in streamlining banking operations in the country.

Kuru was a guest speaker at the 6th Nigeria Transport Awards and Lecture where he presented a paper entitled: “AMCON’s intervention in Transport and Allied Sector; Achievements, Challenges and Prospects.” Explaining the proposed template, the AMCON boss said such approach will ensure stiffer corporate governance in the business of aviation and other allied critical sectors; minimize risks as well as ensure that the experiences, which necessitated AMCON intervention in Arik and Aero will not recur.

Kuru who was represented at the event by Mr. Kamilu Omokide, a Senior Vice President at AMCON, argued that the huge debt of the corporation would have been avoided if the affected companies had proper corporate governance structures that took better business decisions. But with many failed entities as a result of poor decisions that led to huge non-performing loans, he said the government had no choice then but to create AMCON to mop-up the bad loans thereby stabilising and revitalising the Nigerian economy.

To do that effectively, AMCON according to him purchased non-performing loans of about N181 billion from various banks. But of this lot, 90 per cent of the loans purchased was in the aviation sector. He said despite plans to aid their resuscitation with additional investment of N40billion on very good terms, there were still no light at the end of the tunnel, which compelled AMCON to appoint Receiver Managers over a lot of the companies including Arik and Aero airlines.

He said, “AMCON was created to be a stabilising and revitalising tool in the Nigerian economy. Towards achieving our mandate, we purchased non-performing loans of about N181 billion from various banks. Over 90 per cent of this was in the aviation sector. To place the companies in a position to recover and generate adequate cash flow, we gave additional un-lending facilities (in collaboration with Central Bank of Nigeria and Bank of Industry) of almost N40 billion on very good terms. Unfortunately, notwithstanding this support, the companies could neither pay the old nor new loans. We have therefore been compelled to appoint Receiver Managers over a lot of the companies, the biggest being Arik and Aero.”

Kuru further noted that AMCON’s intervention in sectors including the aviation industry has not come without its challenges, which stem from shareholder actions, lack of support by some trade creditors, some foreign lenders, and increased union demands but said these were not unexpected and have been professionally and transparently handled over the period.

He further said, “The new management in Arik had to take bold decisions to downsize its operations, especially cutting down all the long haul flights, due to the losses being sustained on those operations, and the lack of equity capital to absorb the losses. Generally there was the need to reassure the travelling public. AMCON is an asset management company, not a consultancy firm to run airlines. So we got professionals to do the job. They are the ones running the airlines. There were skepticism in some quarters earlier on but the narrative has changed. Nigerians are happy with our intervention in the transport sector. However, a lot still needs to be done.”

With a population currently estimated to be 180 million and with the abundant human and natural resources of Nigeria, Kuru also stated that the prospects in the transport sector of Nigeria remains huge. Nigeria he insists is naturally endowed geographically to be a global hub. And with the abundance of water and land mass it is possible to create a harmonious rail, sea, road and air transport sectors to the benefit of Nigerians and the economy.

In conclusion Kuru said, “The aviation and transport sector requires solid capital to make it deliver for the good of the Nigerian people. It will require a measure of policy consistency and governmental support to thrive. However, from our experience, no matter the capital thrown at the sector, if corporate governance is not strengthened, it will still fail. The absence of governance or quality governance and sound financial risk management systems is at the heart of the failures that are common in the sector. I urge regulators to act with courage by insisting on proper governance in airlines. I recommend they look at the work being done by CBN and Financial Reporting Council to improve the practice in airlines.”

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