Taking Loan in Itself Is Not a Bad Thing, It Becomes Bad When You Don’t Want To Pay Back –Ahmed Lawan Kuru
…Says it is impossible to use AMCON as a witch-hunting tool
Ahmed Lawan Kuru is a career banker with professional experience spanning over three decades across Investment Banking, Risk Management, Operations, Human Capital Management and Marketing amongst others. Prior to his appointment as the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON) by the Presidency on August of 2015, Kuru served as the Managing Director/CEO of erstwhile Enterprise Bank Limited. His ingenuity at turning the then beleaguered bank around and returning it to profitability earned him the famous name in the financial sector as the turn-around-agent.
Confronted with a herculean task at AMCON whose total debt obligation of N4.6 trillion represents 75 per cent of the 2016 national budget; 26 per cent of the 2016 total national debt, and 5 per cent of the country’s nominal gross domestic product in 2016; Kuru who is driven by result hit the ground running. Expectedly some far-reaching changes he introduced at the Corporation increased the tempo of recoveries and strategically refocused AMCON on value enhanced exit of its portfolios, which encompasses continued negotiations and resolution of loans through cash recoveries, asset forfeitures via negotiation or enforcement; capital restructuring for short to mid-term exits as well as Joint Venture (JV) arrangements for asset operations and land development.
His creative leadership methodology at the government agency has led to the repositioning of AMCON’s debt recovery approach as he has strengthened the legal and credit restructuring units to collaborate and perform more efficiently with asset tracing engagements to enable AMCON to recover much more. As a result of this, AMCON was able to successfully divest 100 per cent of its equity holding in Keystone Bank Limited, the last of the bridge banks in the book of AMCON. The Corporation also saved Arik Airlines (the largest local carrier) and Aero Contractors (the oldest carrier) from shutting down operations. Irrespective of the economic challenges of last year when the country experienced a recession, AMCON still recovered over N134billion in 2016 alone.
Under his leadership, the Corporation is exploring the creation of robust Real Estate Investment Trust Scheme (REITS) that would provide a market-driven exit for AMCON’s real estate assets as well as additional capital market instruments for institutional investors such as the Pension Fund Administrators (PFAs) and other interested parties. AMCON is engaging with financial advisers, private equity and mezzanine Funds as potential partners for joint venture and other capital restructuring arrangements.
Before Kuru arrived AMCON, he previously served as Managing Director/CEO of erstwhile Enterprise Bank Limited; Executive Vice Chairman, Emeritus Capital Limited; Executive Director of the old Bank PHB Plc., and held very senior management roles at Habib Bank of Nigeria. Mr. Kuru attended the prestigious Ahmadu Bello University (ABU), Zaria where he obtained degrees in Business Administration as well as MBA. He has attended various international programmes including IMB, Switzerland, the London Business School, Columbia Business School, New York, as well as Harvard Business School.
The dedicated corporate player has served on the Board of over 30 organisations and is currently playing key roles in a number of them. He is an outstanding and experienced corporate executive with proven leadership attributes; a community builder, motivational speaker and a mentor. Kuru is also a Fellow of both the Chartered Institute of Credit Administration, the Chartered Institute of Bankers Nigeria (CIBN) and Institute of Directors (IoD), just to mention a few.
The Murya Magazine crew had an exclusive interview session with him and captures his thoughts on a number of issues about AMCON and the role the Corporation is playing in stabilising the Nigerian economy. Excerpts.
For the benefit of the general public, we want you to let us in on what the Asset Management Corporation of Nigeria (AMCON) exists for?
The Asset Management Corporation of Nigeria (AMCON) is an intervention agency and a child of necessity, which came about as a result of the 2008/2009 financial crisis. It was set up in Nigeria to address the financial crisis at that time. It was a vehicle that was created to provide stability and liquidity to financial institutions.
What role does AMCON play in stabilising the Nigerians economy?
During the time of the financial crisis, AMCON purchased loans from about 22 financial institutions and freed the banks from the burden of managing those bad debts and at the same time find a way to restructure the loans and provide additional liquidity to the financial institutions to enable them continue the business of lending to jumpstart the economy.
What AMCON did at that time was to halt the financial crisis, provide liquidity to help the banks, provide support for some of the obligors or company because some of them still needed some help and in the process, we saved depositors money to the tune of N3 trillion, saved jobs in excess of 15,000 and the likes. These are things not known ordinary Nigerians but if AMCON had not intervened quite a lot of those banks would have gone under and if that had happened, the public would have seen the negative effect of that all over the place.
Taking over people's assets irrespective of the fact that it is backed by the law can be quite tasking considering the emotions and the hard feelings that come with doing the job. How do you strike a balance between professionalism and the hard feelings that come with doing the job?
Our primary job is recovery. We purchased loans from financial institutions, assist companies that genuinely need some help. But most importantly, we are pursuing more than 80% of our obligors to pay their debts. Our people have a bad culture of debts repayment. That is why if you lend money to a friend for instance, and he or she promised to pay back after two weeks, at the end of the second week if you are not careful, you will become his or her enemy. They would start frowning faces because they don’t want to pay back. Now, relate this scenario to the billions of naira some people have collected without the intention of paying back.
Suddenly, an institution comes and say based on the creation of the law as approved by the Executive, the loans taken from commercial banks must be paid. What this means is that the only way to get back the money that some of those businesses took is through the collateral they pledged before taken the loan. In most cases, we found that some of these collaterals are as common as the houses the obligors reside in and we have no option than to take them, recover the money and pay back the debt. It is not a pleasant thing. Payment of a debt is not generally a pleasant thing unless your business is buoyant enough otherwise you wouldn’t want to pay voluntarily. Any debt you have to compel a person to pay is not a pleasant one.
Big guys take loans – the Dangote Group, the BUA Group, the Oando Group, the Shell and Chevron of this world - all these multinationals take loans to run their operations, but you don’t compel them to pay back such loans. They pay because there is a structure and they are always happy to pay because they know that is part of the process. But the moment an institution is put in a place to go and enforce the collection of debts then that is a big challenge. Otherwise, taking a loan in itself is not a bad thing. It becomes bad when you don’t want to pay back and this creates a problem when somebody is entrusted to collect it from you.
The fact that somebody is put in charge of collecting the money you borrowed, which you are unwilling to pay creates tension. Fortunately, our law envisaged that kind of situation and it gave us the powers and the guidelines on how we should go about recovering monies. AMCON has not got itself involved in any kind of illegality, as far as recovering monies are concerned, since creation. People may have issues with what we do in terms of how we collect our money, but nobody can tell you that we collect it illegally, because we follow the law and laid down procedures.
How does the Asset Management Corporation of Nigeria and agencies like the Economic and Financial Crimes Commission complement each other’s statutory functions?
As I said earlier, taking a loan in itself is not a bad thing. It is a commercial transaction. No economy can grow without a structure where people can access credit. However, not paying and not paying it on time or taking it through a fraudulent process creates a challenge. Sometimes in a commercial transaction, you do have a little criminal activity involved. That is where the Economic and Financial Crimes Commission comes in.
The EFCC helps greatly because the only thing we at AMCON can do particularly with our relationship with the obligors or banks is just to write. If we want a bank to give us documents relating to certain candidates, we can only write. The bank can decide not to give but with the support of sister agency like the EFCC, the banks are compelled to release such documents. The EFCC is an economic crime commission while AMCON is an economic support agency so we collaborate on the recovery effort.
The Asset Management Corporation of Nigeria (AMCON) often receive commendations and condemnations to the point that it is alleged that the Corporation is being used as a tool, what is your take on this?
First of all, there are two sides to this question. Number one somebody commending you and another person not commending you. I think this is quite a normal situation, because even in your house your wife could sometimes commend you and sometimes criticise you. What I am saying, in essence, is that even in normal situation you would find people who will commend and others who will condemn you. However, what one should always do is to be guided by the law and by one’s conscience.
Now when they say a tool, the question is a tool for what? A tool in this context means that somebody creates a situation where he sets you up in order to hurt you. Now even if that is the case, did anybody asked you to borrow the money in the first place? Who asked you not to pay back the loan? Who asked you to run away? I can’t understand how AMCON can be used as a tool to pursue the recovery of a loan…
…They alleged that some people are being pursued while others are left alone?
That is not possible, but even if some people are being pursued and others left alone, the question is did the people being pursed take the loans? And did they default? That should be the issue. If I have gone to pursue somebody who has not taken loan or who has not refused to pay his loan then you can say I am a tool but if you have taken a loan and it was sold to me by a commercial bank and I have your records in my book and you don’t want to pay me; I have gone to the court and the court gave me an order to enforce the collection and you are saying I am a tool? The tool must be a very effective tool.
What categories of assets do you have in your kitty and what is their value?
We have all categories of assets. As I said earlier, we have bought almost 13,000 loans covering all aspects of the economy. We have all manner of assets in our books that cover all the strata of the economy. The value, however, differs from sector to sector, but generally speaking, the total value of the asset we have at the moment is not less than N2 trillion. It is, however, important to know that the value of an asset is totally different from the realisable value. For instance, if you want to value my office building today you can get value for it at N1.4 billion. But if you want to sell it, you may likely get somebody to give you N600 million. So the value of an asset is usually different from the realisable value.
What is asset valuation and why is overvaluation of asset hampering AMCON's ability to sell the assets it took over and what is the Corporation doing about it?
Of course, asset valuation is a simple process of establishing the value of an asset. If you have this building for instance and you want to know what it is worth in the market, there are professionals (Valuers) that would look at it and tell you the value. In doing this work, we bought what is called Eligible Bank Assets (EBAs) or loans from commercial banks and those loans are backed by collaterals commonly called securities. When you are taking over these loans the collateral must have a value. If the loan you take from a bank, for instance, is worth N10 million, what is the value of the collateral the bank is holding? If the collateral on your house is worth N20 billion then I can take your loan of N10 million naira, but if your house is worth N5 million and you have a loan of N10 million because of the accumulation of interest, you obviously know that I can’t pay you more than the value of your property. So, valuation is imperative to everything we do.
There are some cases where obligors seek to forfeit an asset to us due to lack liquidity. We don’t just take the asset and close the deal. We have to determine the value of the asset viz-a-viz his or her loan. Maybe the loan is N10 million and they say it is N12 million naira. In that case, we need a valuer to ascertain the real value and that is where the problem lies.
If you get a professional valuer to value this building today, I can assure you he would tell you it is somewhere around N1.2 or N1.3 billion. Realistically, however, if you want to sell it you will be lucky to get N700 million on the property. If a valuer values this property for me at N1.2 billion and your loan is N1.2 billion and I exchange it for your loan and I am only able to get N800 million there would be a shortfall of N400 million. The question now is who is going to pay for that shortfall?
This is one leg of what we are saying in AMCON. Another leg of it is that you pay valuers on the basis of the commission of the value they come up with. So once you asked a valuer to value this house even if it is N1.4 billion naira some of them would come up with value of N2billion naira because you would give him or her 5% of the so-called N2 billion. By the time you want to sell the house, you realise it is actually worth N800 million. That means you have a N1.2 billion deficit. Who will account for that?
At AMCON, we are saying the value of assets forfeited to us must reflect the real market situation because we are exchanging it for cash. If you are supposed to give me N10, I expect you to give me something that can fetch N10 naira when I take it to the market. If you give me soothing you claim is worth N15 and I can’t sell it for N10 the worth means nothing to me. What is important to me is the value I will get if I take it to the market. That is why we always have this conflict between us and the obligors and between us and the valuers. Asset valuation would continue to be a subjective thing and we always tell them that our valuation criterion is on the basis of exchange for cash. Funny enough, some valuers can value a house for N1.4 billion. If you then give them the job of selling the house for you they would say you can’t get it at that price because the market is not conducive. Meanwhile, he was the one that valued it at N1.4 billion. In any case, we try to work with them professionally to see how to eliminate all these conflicts.
Take us through the process of disposing of assets and how an asset can be successfully disposed of?
The Central Bank of Nigeria has an approved procedure guiding our practice. If we have any assets to sell, for instance, we must first advertise it several times in national dailies. Once this is done, we open it publicly and invite bidders to come at an appointed date and time. The bidding process is transparent and we sell to the highest bidder.
We usually have what we call reserved price. If you are my friend and you want to buy this house and I tell you that the reserved price is N1billion and you decide to bid N1.1 billion and another person who of course has no access to the reserved price but out of his or her own wisdom decided to bid for N1.2 billion there is nothing I can do to help you. Even if you know of the reserved price, there is little anybody can do to help you, because the process is opened and competitive. When we fail to get a buyer through this process we send our marketers out to look for buyers anywhere they can find them.
Aside from assets take over and disposal what else does AMCON do?
Assets take over and disposal is not the only thing we do. In fact, taking over assets is the result. AMCON is an intervention fund created to provide liquidity to financial institutions by purchasing some of the hard-core and non-performing loans. There are instances, where some of the businesses paid back their loans without AMCON going through the trouble of taking and selling their assets. Selling of asset is the last resort. It is only resorted to when an obligor failed to honour his or her obligation. AMCON is just an intervention agency and not an asset grabbing and selling agency.
What other things do you think the public ought to know about the Asset Management Corporation of Nigeria (AMCON) that would help prevent misconception of the work you do?
I want obligors that are fond of running away to know that we are here to help and partner with them. If you have an account in AMCON, please come and talk to us. We don’t believe that there is somebody who has 10, 20 or N30 billion to put on the table. Some of our obligors have outstanding that amounts to 80, 90 and N100 billion. We don’t believe they have that kind of money to give at once, but it is important they come and talk to us so that we can have a resolution restructuring understanding on how we can help them resolve the debt.
Having said that however, it is also important to note that the law is behind us and if you don’t talk to us, we would take over any of the underlining assets and recover our money. Our appeal is that people should come and honour, accept, respect and commit to their obligations. They should tell us what their cash flow can do, tell us how AMCON can help and let us work together to find out how to support their businesses. Our primary objective is to recover those monies in whichever way and we believe that the best way is to communicate, because if we don’t communicate with you the law establishing AMCON allows us to take over your assets without giving you notice.