FOR the umpteenth time, the Asset Management Corporation of Nigeria has lamented its inability to recover debts of over N4 trillion from recalcitrant wealthy debtors, reflecting another dimension of Nigeria’s dysfunctional institutions and state capture. The AMCON debt conundrum aptly highlights the huge burden the economy and the taxpayer bear because the state cannot enforce its laws against the rich and influential. Broke, indebted, and broken, Nigeria should unleash all the powers of the state within the law and recover these bad debts to plug the gaping fiscal hole.

It is part of the disappointing legacy of the regime of the President, Major General Muhammadu Buhari (retd.), that in eight years, he was unable to resolve the banks’ bad debts crisis he inherited from his predecessor. The Managing Director of AMCON, Ahmed Kuru, lamented the huge indebtedness to the agency by some high-profile persons and difficulty in recovering the loans.

AMCON was set up by an Act of the National Assembly in July 2010 in the wake of the global financial meltdown of 2008-2010 and the systemic stress that swept through Nigeria’s financial system, with an initial intended lifespan of 10 years to buy the bad loans of the banks and avert bank failures. As it prepares to wind down 13 years after, it is a huge embarrassment that the unrecovered debts still stand at over N4 trillion though the corporation claims a recovery rate of about 70 percent.

A novel concept adopted by many jurisdictions, a debt recovery institution or ‘bad bank’ is a special, separate financial entity deliberately set up to buy the illiquid or non-performing loans of other financial institutions. Bad banks free stressed financial organisations’ balance sheets of crippling liabilities by segregating NPLs, thereby enabling them to survive as going concerns. The United States, India, the United Kingdom, Germany, and several other European Union member countries established bad banks in response to the 2007-2010 financial crises.

Nigeria followed suit as at least eight of the existing 25 banks were found to be at the edge of distress. Records show that the top 20 debtors owe 67 percent of the total debt. Unlike other jurisdictions, in Nigeria, big debtors live large and refuse to settle their indebtedness without consequence.

Invariably, as Kuru warned, if the corporation is unable to recover the huge debt, it becomes the Federal Government’s, and invariably the taxpayer’s burden. He said, “The implication is that the public will be made to pay for the recklessness of only a few individuals, who continue to take advantage of the loopholes in our laws to escape their moral and legal obligations to repay their debts. We should not allow a few individuals to escape with our commonwealth and we want to do it within the confines of the law.”

The government should therefore throw its full weight behind AMCON and strongly deploy every lawful means to compel repayment.It is very unfair for some pampered individuals to subject millions of other Nigerians to repaying their loans.

Internationally, there are mechanisms for managing loans and ensuring that they are repaid, and in the event of borrowers’ inability to repay, measures are in place to ensure that assets pledged as collateral are taken over and sold so that the money can be recovered.

In the US, temporary inability to repay loans is not a criminal offence, but refusal to service indebtedness after several incentives can be, and should be criminal. However, if a loan continues to go unpaid, the debtor should expect late fees or penalties, wage garnishment, as well as a drop in credit score; even a single missed payment could lead to a 40- to 80-point drop. With time, a lender might send the delinquent account to a collections agency to force the debtor to pay it back.Foreclosure and asset seizures and liquidation of businesses are last resorts.

The Financial Times of London reported in 2018 that 47 US bankers were sentenced to jail time for their role in the financial crisis, as banks’ inability to recover loans led to the catastrophe that caused the global financial crisis.In 2019, Reuters reported that the UK’s bad bank,  UK Asset Resolution, set up to manage more than £100 billion of assets from two lenders that collapsed during the financial crisis, had repaid the last of the £48.7 billion used to fund the bailouts, several years earlier than expected.

Some Nigerian bank officials and debtors had also been made to account for the collapse of financial institutions under the Banks and Other Financial Institutions Act as about 160 bank executives were clamped into detention.Somewhere eventually convicted for breaking the laws in defiance of conventional credit guidelines and corporate governance protocols.Individuals or businesses that cannot repay loans should have the assets they pledged as collateral seized. Under the BOFIA, every director of a debtor firm is liable. The situation whereby chronic debtors live in ostentatious luxury is elite conspiracy and corruption at work.

Unfortunately, the courts have been unhelpful to AMCON as the big debtors run perpetually to the courts to obtain protective injunctions, while lawyers frequently tie up processes with technicalities. In several countries, bad banks have fulfilled their mandates and wound down.

The Central Bank of Nigeria should help the debt recovery efforts by barring individuals and corporates with delinquent debts from obtaining fresh credit facilities from any financial institution in the country.Before AMCON closes shop, the government should summon the necessary political will to recover all outstanding debts. The incoming administration will do well to follow this path as it will inherit an empty treasury and will need all the funds it can get. Recovering AMCON’s NPLs is one stream; unlike Buhari, it should go after them with iron determination.


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