Debt Recovery: AMCON Undeterred As Obligors Intensify Media Attacks

Debt Recovery: AMCON Undeterred As Obligors Intensify Media Attacks

Recently some individuals have made themselves available tools to assist desperate debtors of Asset Management of Nigeria (AMCON) who are trying to change the narrative of how their businesses ended up in the books of AMCON.

These distorted narrations are increasingly paying more attention to the intervention of AMCON in the aviation sector.

This plethora of new attacks started since AMCON approached the aviation authorities in the country to indicate interest in establishing a holding company to warehouse all of its aviation portfolio. Following AMCON’s heavy intervention in the aviation sector in Nigeria, the Corporation still has over five aviation business, which it now wants to assemble under one entity for ease of management and strategic exit. Obviously, this development appears to have woken up the beast in some AMCON debtors that would stop at nothing to frustrate the move.

It would be recalled however that AMCON intervention in aviation and Arik in this instance was on the instance of the Federal Government of Nigeria that was concerned by the external monitoring of the activities of the airline between October 2016 and January 2017, which revealed a disturbing trend of overall deterioration in the affairs of Arik. The facts are still fresh that the airline experienced frequent flight cancellations and poor on time performance (OTP), which is a critical service measurement of the ability to dispatch a flight within 15 minutes of schedule time.

In addition, Arik’s obligations to local and foreign creditors and service providers were not being met, just as credit lines with foreign creditors were withdrawn with threats to even repossess Arik aircraft. The company was to say the least involved in a free fall.

The Federal Government was also concerned about the poor management and corporate governance practices within Arik and therefore feared that any disruption in the operations of the airline at that time in Nigeria’s aviation history with dearth of airlines would result in greater economic stress for the nation, which at the time was also grappling with other economic challenges.  As a matter of fact, the Ministry of Aviation strongly feared that Arik may not survive another eight weeks without intervention.

Therefore, it is important to remind these so-called ‘aviation experts and commentators’ that it was these well-informed discussions at various highest levels of government on the impact of the airline’s failure on the economy and public safety, that guided the government’s resolve to intervene in Arik through the vehicle of AMCON. Therefore, on February 9, 2017, Arik was placed under the receivership of Oluseye Opasanya, SAN (“Receiver Manager”) of the firm Olaniwun Ajayi LP. Captain Roy Ukpebo Ilegbodu was also appointed as the Chief Executive Officer (CEO) under the recommendation of the Ministry of Aviation.

In taking the hard decision to direct AMCON takeover of the troubled Arik at the time, the Federal Government considered the following assumptions, which included that Arik has about 30 aircraft, the largest fleet in Nigeria; held approximately 55-60% of the air transport market in Nigeria; serves 18 domestic and 11 international destinations, including Johannesburg, London, Dubai, and New York City; estimated revenue at N7billion monthly; and the airline employed over 2,000 staff. Clearly, Arik’s mismanagement was surely going to have huge socio-economic impact, which would also have negative consequences in the brand image of Nigeria among the comity of nations.

AMCON’s intervention objective was to stabilise the operations of the airline (which has been done admirably) rather than to realise the assets of Arik in settlement of the outstanding debt. AMCON utilised the instrumentality of its statutory powers to actualise the resolution of the Federal Government to salvage the already threatened airline industry from further setbacks, which could have been occasioned by the imminent collapse of Arik. In addition, the intervention was also intended to place Arik in a position to meet its obligations to all stakeholders both foreign and local.

It is also important to emphasise the fact that the decision to intervene in Arik was the joint decision of various agencies of government, including Ministry of Transport (Aviation), the Central Bank of Nigeria (CBN), the Ministry of Finance and the Presidency. Even though the Arik Eligible Bank Asset (EBA) was not performing, AMCON knew that direct intervention would be costly and difficult as the aviation industry in Nigeria was notoriously unprofitable, and therefore suffers many structural weaknesses all of which makes the business highly risky. The Federal Government however deemed the company strategic and AMCON was asked to intervene being the institution with the right instrument and power to so act.

Upon the intervention, AMCON discovered rampant flight cancellations of up to 40% and ineffective adherence to schedule; OTP was down to 19% in January 2017; high outstanding debt obligations and claims in excess of N300billion to local, foreign creditors, service providers and litigation claims. Of this debt, Arik owed AMCON alone in the excess of N140 billion.

Aside AMCON the total debt burden of Arik is also owed to various financial creditors and trade creditors including aviation agencies of government such as Nigeria Civil Aviation Authority (NCAA), Federal Airport Authority of Nigeria (FAAN) and Nigeria Airspace Management Agency (NAMA). Arik is also indebted to several foreign air management agencies including Agency for Aerial Navigation Safety in Africa and Madagascar (ASCENA), which covers all French speaking West African countries. Again, this development caused much embarrassment to both Arik and Nigeria.

AMCON further discovered unremitted pension contributions, and over seven months unpaid staff salaries and severe difficulty in payment of overdue fleet insurance premium. There were threats of service suspension from major vendors and suppliers due to unsettled debt obligation by vendors, mostly fuel suppliers; weak corporate governance with poor internal control and unkempt book of accounts since 2015.

To put it mildly, Arik was run at a loss not supported by shareholders capital as well as threats of cancellation of fuel supply contracts due to the Arik’s failure in prompt settlement of its obligation to vendor among other messy discoveries. In addition, Arik as a business had cashflow and liquidity problems, which made Passenger Service System (PSS) to threaten interruptions and eventually terminated service to the airline. Arik grossly had inadequate stock of spares/consumables to continue in business. Arik at the time had a diminishing fleet from 30 to 9 aircraft and serious key man risk because all management decisions were at the whims and caprices of Sir Johnson Arumemi, the Chief Promoter of Arik.

To illustrate how bad the condition of the airline was at the time AMCON intervened, the recommendation of the Receiver Manager to the management of AMCON immediately after the initial review was that Arik should be liquidated as it cannot be salvaged without huge costs to AMCON and the country. But guided by its mandate AMCON insisted on implementing the Federal Government’s directive of sustaining and stabilising Arik’s operations as a national imperative.

With these facts in the memory of Nigerians, it is highly crafty and misleading that the one-time Vice-Chairman to the former management of Arik, distinguished Senator Anietie Okon, in a recent exclusive interview with Thisday newspaper joined those that are pushing the wrong narrative regarding AMCON and its well-intended intervention in the aviation industry with reference to Arik. The spurious claim that “Arik was healthy before AMCON’s intervention” as far as discerning minds are concerned came across as a debased strategy to peddling cheap falsehood.

AMCON is a child of necessity in the development of Nigeria’s financial system. The financial system in in the country before the creation of AMCON was on the brink of total collapse similar to the experiences in Europe and North America during the global financial crises of 2008 and 2009. It would be recalled that the banks’ inability to lend resulted in credit crunch, which nearly led to the economic shut down. So, AMCON was established by the Federal Government to serve as a special intervention and resolution vehicle under the supervision of the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance.

The CBN, Ministry of Finance in collaboration with the Nigerian Parliament (who enacted the AMCON act), established AMCON in 2010, as a special resolution vehicle, which was vested with extra ordinary powers in order to achieve its three cardinal objectives of— (a) Providing liquidity to the financial institutions by—(i) purchasing the non-performing loans; (ii) direct injection of capital by way of financial accommodation;

b) Take over the troubled assets, treat and subsequently dispose them for good returns; and (c) to support the businesses where possible.

Following the three core objectives the Corporation acquired about 12,743 bad debts worth approximately N3.7trillion from 22 commercial banks in Nigeria. AMCON also injected another N2.2trillion as financial accommodation to 10 commercial banks to prevent systemic failure at the time. It is overwhelmingly evident that this singular action helped stabilise the financial system in Nigeria. As a direct result of that intervention therefore, about N3.66trillion of depositors’ funds and interbank takings were protected; and approximately 14,000 jobs were saved because of AMCON’s intervention in the banking sector alone.

Since the huge debt, which today stands at over N5trillion must be recovered, no amount of cheap blackmail, guerrilla attacks and lies of many colours would stop AMCON from meeting its mandate because the Corporation remains undiscouraged and resolute even in the face of the new wave of campaigns of calumny against the Corporation’s intervention in Arik or any of the assets in its portfolio.

Nigerians should indeed be grateful to the present administration for their boldness in ensuring the amendment of the AMCON Act by the National Assembly and to the President of the Federal Republic of Nigeria, Muhammadu Buhari for graciously signing the AMCON amended Act into law in 2019, which further empowers AMCON to recover the huge debts owed the nation by the likes of Arik and other recalcitrant obligors.

– Nwauzor, Head Corporate Communications Department, AMCON sent in this article from Abuja.