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AMCON: How We Redeemed N1.7tn Bonds in December

The Asset Management Corporation of Nigerian (AMCON) Monday disclosed how it redeemed its N1.7 trillion bonds in December 2013, an amount it described as the largest bond redemption so far in the history of Nigeria.
 
Making this disclosure at a one- day public hearing on AMCON Amendment Bill 2013 organised by the Senate Committee on Banking, the Managing Director/Chief Executive Officer,
AMCON, Mr. Mustapha Chike-Obi, however, revealed that out of the N1.7 trillion that was redeemed, the corporation had net pay-off of N1 trillion while N700 billion was refinanced.
He disclosed that as at December last year, AMCON had recovered 50 per cent of its loans.
Chike Obi also said the agency had been prudent with its employment capacity, by keeping its staff strength below 300 with a view to avoiding the creation of institutional problems that could impose greater burdens on the nation.
 
“The challenge we have is that if AMCON goes ahead and employ 2, 000 people to collect these loans, when these loans would have been paid, we will have the institutional problems of reducing the size of the staff with its attendant difficulties.
 
“So, we are trying to maximise debt recovery while minimising unnecessary employment. We do not want to create a huge bureaucracy which would create a burden on Nigerians. To date, we have kept our staff strength below 300, who would handle difficult loans from 21 institutions,” he said.
 
Continuing, he said: “In December 2013, we have been able to pay N1 trillion of our debt well ahead of schedule. We also planned to pay an additional N 1 trillion of the debt in October 2014 which will reduce AMCON’s indebtedness by 30 per cent in four years of operation.
 
“The redemption of our series one in December 2013 of N1.7 trillion is the largest bond redemption in the history of Nigeria and is considered the largest redemption anywhere in the World and I think it’s a matter to be celebrated.”
 
The AMCON boss also added that in line with the corporation  responsibility to recapitalise all the weak institutions in Nigeria since December 2011, all banks in the country now have capital adequacy ratio well above the statutory minimum requirement as well as liquidity ratio in excess of the statutory minimum requirement.
 
According to him, the amount of money spent by AMCON in recapitalising the banks was N4 trillion and not N5.6 trillion as being erroneously held, saying the N4 trillion was zero couponed bond, whose interest, he noted, raised the capital to  N5.6 trillion as he gave a breakdown of how the money was spent.
 
“The N1.6 trillion was the interest in three years. Of that N4 trillion, AMCON used N1.7 trillion to purchase non-performing loans. It also used about N861 billion to recapitalise the three wholly owned AMCON banks which are Enterprise Bank, Keystone Bank and Mainstreet Bank.
“An additional N1.5 trillion was to recapitalise other five distressed banks. So N2.3 trillion was spent to recapitalise the banking institutions,” he added.
 
Chike-Obi also said the agency was so successful in its recapitalisation assignment to the extent that no depositor in Nigeria lost a single kobo in the affected banks as he argued that the development was unprecedented in the history of banking crisis in the world.
“There is no banking crisis anywhere in the World of this magnitude where depositors would not lose funds. Nigeria is the first case where every depositor got his or her money back. So, the N2.3 trillion was spent by AMCON to give the Nigerian depositors confidence in the banking system that when they put money in the bank, they can get it out.
 
“Now, of the balance, the AMCON’s operating cost represents less than one per cent of this amount spent. AMCON’s total operating cost till date is under N40 billion and while that sounds like a large number, much of that money was being used to pay lawyers and debt recovery agents for the purpose of recovering the debts that we are trying to recover.
 
“Today, I want to give statistics on what we have done to date in terms of debt recovery. We have recovered or restructured over 50 per cent of the non-performing loans we acquired, not the 15 percent that was being reported by the media recently,” he added.
 
While declaring the hearing open earlier, Senate President, David Mark, urged commercial banks in the country to make an annual contribution that is equivalent to “50 points of their respective total assets to the Resolution Cost Fund.”
 
Mark, who was represented at the hearing by Senate Leader, Victor Ndoma-Egba, explained that the Resolution Cost Fund is an agreement between the Central Bank of Nigeria (CBN) and commercial banks as contained in Section 65 of the Asset Management Corporation of Nigeria Act, 2010 Amendment bill, 2014 that is before the National Assembly.
 
The fund seeks to meet the obligations of AMCON arising from debt securities issued in case the corporation is unable to meet up payments from proceeds generated through sale of acquired assets from banks.
 
Ndoma-Egba said: “Although AMCON believes that it is positioned to meet its obligations arising from the debt securities issued by it from its various sources of income, the Resolution Cost Fund will act as an additional safety net.”
 
He added that the fund if established, would ensure that any future banking resolution costs, which may arise as a result of any financial mismanagement by the banks, would not be borne by taxpayers, rather by the banks with money from the fund.

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