Recently, the Minister of Finance, Mrs Zainab Ahmed, provided what appears to be an update of the activities of AMCON, while inaugurating its Board under the chairmanship of Mr Muiz Banire, when she stated that as of the end of the corporation had been able to recover over N1trillion while its total debt obligation to the Central Bank of Nigeria was in excess of N5trillion. The direct impact of that action is seen in the protection of N3. This view is also shared by some who argue that AMCON has become an important institution in the Nigerian financial system considering the significant reduction in the NPLs of the banking system to nearly single digit compared to about 35 per cent in But the IMF seems to take a different view.

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The act of the CBN Governor was perceived by many as an interventionist manovre to stem the haemorrhage that rocked the banking sector then. The AMCON Act could therefore be seen as a child born out of circumstance to ensure the affected banks remained a going concern. This write-up seeks to do an appraisal of the AMCON Act, with an examination of some of the salient provisions of the Act and ancillary issues.

Section 1 2 and 3 provide that the Corporation shall be a body corporate with a common seal, perpetual succession and may sue and be sued in its corporate name. The Corporation may acquire, hold and dispose of movable and immovable property for the purpose of its functions and objects. Section 1 4 provides for the independence of the Corporation in the discharge of its duties. The Authorized share capital of the Corporation as provided in Section 2 1 shall be 10 Billion Naira, which shall be fully subscribed to by the Federal Government and held in trust by the Central Bank of Nigeria and the Ministry of Finance incorporated in equal proportion of fifty percent each.

The objects of the Corporation [4] are: To assist eligible financial institutions to efficiently dispose of eligible bank assets in accordance with the provisions of the Act. To efficiently manage and dispose of eligible bank assets acquired by the Corporation in accordance with the provisions of the Act. To obtain best achievable financial returns on eligible bank assets or other assets acquired by it in pursuance of the provisions of the Act.

Section 5 of the Act goes further to list the functions of the Corporation as: To acquire eligible bank assets from eligible financial institutions in accordance with the provisions of the Act. To purchase or otherwise invest in eligible equities on such terms and conditions as the Corporation, with the approval of the Board of Central Bank of Nigeria may deem fit.

To hold, manage, realize and dispose of eligible bank assets including the collection of interest, principal and capital due and the taking over of collateral securing such assets in accordance with the provisions of the Act.

To pay coupons on, and redeem at maturity, bonds and debt securities issued by the Corporation as consideration for the acquisition of eligible bank assets in accordance with the provisions of the Act. To perform such other functions, directly related to the management or the realization of eligible bank assets that the Corporation has acquired, including managing and disposing assets acquired with the proceeds derived by the Corporation from managing or disposing of eligible bank assets acquired by it.

To take all steps neccessary or expedient to protect, enhance or realise the value of the eligible bank assets that the Corporation has acquired. To perform such other activities and carry out such other functions which in the opinion of the Board are necessary, incidental or conducive to the attainment of the objects of the Corporation. From the foregoing, it would seem that the intervention of the government through AMCON in the purchase of toxic debts is to enable financial institutions to be replenished with funds to further and enable financial transactions.

The powers of the Corporation [5] are wide and include, but not limited to: isssue bonds or other debt instruments as consideration for the acquisition of eligible bank assets; maintain a portfolio of diverse assets including equities, fixed income bonds and real estate; borrow or raise money, with or without the guarantee of the Central Bank of Nigeria including money in a currency other then the naira ; initiate or participate in any enforcement , restructuring , re-organisation, programme of arrangement or other compromise.

A pertinent question to ask at this point is: how does the Corporation operate to achieve the stated objectives and functions? The Act expressly establishes a Board of Directors to carry out the functions of the Corporation. The Board of Directors consists of 10 members [6] , and the minimum qualification for the membership of the Board is possession of 10 Ten years cognate financial experience at a senior management level or such other relevant as may be prescibed by the Central Bank of Nigeria.

It may be instructive to note that the Corporation shall have a Secretary appointed by the Board who shall be a legal practitioner and has been so qualified for not less than ten years. Section 21 of the Act makes it mandatory for the Corporation to file Annual report to the Ministry of Finance and the Central Bank of Nigeria of its activities during a financial year not later than three months after the end of each financial year.

Eligible Bank Assets Acquisition and Management. Section 24 of the Act provides that the CBN may designate through guidelines any class of bank assets as eligible bank assets and Section 26 provides that the consideration to be furnished by the Corporation for an eligible bank asset shall be 7 years bonds or such other debt securities of such other tenor as the CBN may prescribe.

The Corporation is not under an obligation to purchase all eligible bank asset. Where however, the Corporation has acquired an eligible bank asset, the financial institution from which the eligible bank asset was acquired shall deliver to the Corporation its nominee books and records, documents of title pertaining to the assets and execute all such instuments necessary to properly document the acquisition.

As soon as possible, after the acquisition of an eligible bank asset from an eligible financial institution, the financial institution shall notify the relevant debtor, guarantor or surety of the debtor and any other person the Corporation directs.

The Corporation shall not be liable for any failure or delay in notifying any person, and such delay shall not invalidate the eligible bank asset concerned. Section 36 of the Act is most instructive as it relates the acquisition of eligible bank assets to the effect of acquisition under the Land Use Act.

Tainted Eligible Bank Assets: Section 37 of the Act provides that where there is a tainted eligible asset, the borrower or obligor of such tainted eligible asset shall not be entitled to, and shall not be granted any forbearance, waiver, or debt forgiveness by the Corporation.

The Section further provides that the Corporation shall pursue, to the fullest extent possible, all lawful civil and criminal remedies against any such borrower or obligor connected with such tainted eligible bank asset. Sub-section 2 lists out the categories that shall be deemed to be tainted eligible bank assets. They include: Loans, credits or other financial accomodation obtained by insiders of, or persons related to or otherwise connected to the eligible financial institution which granted the loan in breach of the provision on financial assistance rules under the Companies and Allied Matters Act.

Issuance of pre-action notice on the Corporation: Section 43 3 of the Act provides that an Action shall not be brought against the Corporation until after the expiration of 30 days notice in writing to the Corporation giving details of the alleged wrong, date and remedy sought. Corporation not required to be registered as owner of security: By virtue of the provisions of Section 45 of the Act, the Corporation is not required to be registered as owner of any security that is part of the eligible bank asset acquired by it and shall none the less have the powers and rights of a registered owner.

Redemption of Debt Securities: The Corporation may from time to time after consultation with the Minister of Finance and the Governor of the CBN, redeem and cancel debt securities issued by the Corporation under the Act. What happens to the assets of the Corporation upon dissolution of the Corporation?

Section 47 of the Act provides that the assets of the Corporation remaining after the redemption of all debt securities and discharge of all payments and re-payment obligations shall at its eventual dissolution be transferred to the Fund of the Corporation and distributed by the Governor of the Central Bank of Nigeria between the subscribers to the capital of the Corporation in proportion to their respective stake in the authorized share capital of the Corporation.

Special powers of the Corporation: In addition to the powers of the Corporation earlier listed, [8] the Corporation has special powers [9] to act as, or appoint a receiver for a debtor company whose assets have been charged, mortgaged or pledged as security for an eligible bank asset acquired by the Corporation.

Debt Recovery Procedure under Section 53 of the Act: The Chief Judge of the Federal High Court may designate any judge of the Federal High court to hear matters for the recovery of debts owned to the Corporation or an eligible financial institution and other matters arising from the provisions of the Act to the exclusion of any other matter for such period as may be determined by the Chief judge.

Central Bank to supervise and regulate the Corporation: By the provisions of Section 58 of the Act, the Central Bank of Nigeria shall have power to supervise and regulate the activities of the corporation and may in this regard appoint examiners and any other person to carry out special or routine examination of the books and affairs of the Corporation. The reason for these exemptions may not be unconnected with the fact that the Corporation is not a profit making one.

Having examined some salient provisions of the Act, one cannot but appreciate the passage into law of the Act. As expected however, there are some criticisms of the Act and by implication, the Corporation the Act establishes.

Such an overlap has a tendency of creating difference in prices and unintended arbitraging opportunities for banks. One therefore wonders what role high-wire politicking will play or not play in the choice of eligible bank assets to purchase since it seems to be absolutely discretionary with no particular requirements.

Significantly, ridding financial institutions of their bad debt portfolios should not — and must not be seen as a green light for them to revert to their sinning ways. Part 6 deals with special debt recovery procedure, Part 7, offences and penalties and Part 8 is the Miscellaneous part which includes the Interpretation section.

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Kakree Home Featured Post Debt Recovery: To receive our NEW investment newsletter containing intelligent investing news, data, analysis and research, type in your e-mail address. Onyereri who was addressing his colleagues in the Ancient City of Kano at the opening of a three-day retreat said given the sunset date of AMCON, which he stated was created by the government not to operate in perpetuity, the National Assembly, the executive and the judiciary must ensure that the recovery agency of government meets its obligation within the expected and acceptable timeframe. This site uses cookies: The AMCON, is the principal vehicle for resolution of the solvency of asset quality problems that have risked the banking system in the last two years and it provides an alternative to the liquidation of distressed banks. With these developments in the National Assembly, the Central Bank hopes that all skepticisms around the establishment of AMCON and unguarded speculations around political support for the reforms have been put to rest. It also holds the promise of reducing the debt overhang on capital market operators, thus giving the much needed stimulus to the capital market. Blil Bill is very important and we promise to work with the Senate in ensuring a quick passage of the Bill.


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An Appraisal Of The Asset Management Corporation Of Nigeria (AMCON) Act, 2010.


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