More than a decade ago, Nigeria’s banking industry was in the middle of a crisis. Companies were shutting down by the day and people were losing hard-earned money.
For the few who survived the corporate apocalypse, they have government loans to thank. The government bailout brought some solace. But more than ten years after, the government is still engaged in an exasperating game of hide-and-seek with those companies over the recovery of those loans.
Now, Nigeria faces the risk of never recovering about NGN 5.5 Tn (USD 15 Bn of bad loans taken over during the banking crisis.
The amount owed is nearly 80 percent of Nigeria’s target revenue for 2019 and 62 percent of planned spending by the Muhammadu Buhari-led administration, equalling NGN 8.9 Tn in total.
That is the amount of money the state-owned Asset Management Corporation of Nigeria (AMCON) still has to collect from Nigerian companies that have failed to repay the sum they once borrowed from the lenders.
Litigation delays are hindering the process of debt recovery, while slow economic growth is making it difficult for businesses to thrive. The debt recovery process has, thus, been hampered.
In the wake of the oil price crash of 2008-09, AMCON used bonds to bail out 10 lenders and buy more than 12,000 loans from industries including aviation, gasoline marketing and manufacturing. So far, it has managed to recover only NGN 1 Tn, and that’s according to Ahmed Kuru, CEO of AMCON, who spoke at a conference in Lagos last week.
It is AMCON’s responsibility to recover the outstanding debts to enable it to meet its obligations to the Central Bank of Nigeria, which provided the cash it used to repay holders of bonds that were issued to acquire the loans.
The CEO said shifting grounds by extending the operations of AMCON beyond its 2023 deadline would do more harm than good because that could encourage bad behaviour in the financial industry and among borrowers.
Part of AMCON’s plans for debt recovery for this year is to appoint advisers for the sale of Polaris Bank (formerly Skye Bank). It would be recalled that AMCON took over the bank last year after it went afoul of the capital and liquidity thresholds set up by Nigeria’s apex bank.
AMCON kept Polaris Bank afloat with an NGN 786 Bn bailout and according to the CEO, there are no plans to rescue other lenders.
Featured Image Courtesy: pulse.ng