THE EXCERPT:
I want to start by saying that we are never upset by a critical examination of what we are doing. AMCON is big; it is a very big institution, and we have currently liability of close to N6 trillion, which is bigger than almost any state in the country. We are not elected at AMCON, so we need to be watched and observed and everything we do is on the basis that we are accountable. We do not object to tough articles, but we object to articles that are uninformed. We are very open to dialogue; we are very open to any question you can ask us and we will answer the question as frankly as possible.
I have no prepared remarks, but I will answer your questions as they come, because we believe in transparency and there is no attempt to hide anything from anybody. We are saying please that people should ask questions and after you ask us the question, you can write whatever you want because that is what you do. We have seen a number of articles from very many Newspapers that we feel did not adequately understand what we are doing. I will start from the very obvious. Your editor-in-chief started by saying that AMCON is spending your money.
Who pays AMCON bills and what is its life span?
To date, AMCON has spent N10billion of the Federal Government’s money. The rest of the money is not government money and will never be government money. The rest of the money is going to be from recovery, restructuring and from the banks. The banks will pay the rest of the money. The reason why AMCON is operate for 12 years, instead of five years or seven years as IMF recommended, which it called ambitious, or even why we are taking of 12 years is very simple. We have to balance four things. The first thing we want to balance is that we cannot afford to over-burden the banks in terms of what they are paying. Currently, banks are paying approximately 20 per cent of their profit before tax to AMCON every year. And if AMCON want to go faster than promised, by year10, that 20 percent may go as high as 40 per cent of their profit they will pay to AMCON. And we need to be very conscious that we do not have to overburden the banks. If we make the banks pay more quickly in order to make AMCON’s life span shorter, it will lead to a situation where banks will pay all their profits to AMCON and that will be unadvisable.
So, we have to balance the burden on the banks, which are the major payers of AMCON’s debt. The second thing is that because of the size of AMCON, we have currently about 300 billion worth of listed securities in our portfolio. The stock exchange trades about four billion a day on average. If we are to start selling those securities, it will probably take up to a year before we will finish selling them and we will depress the market by probably 30 or 40 percent if we put that kind of volume in the market. So, we have to balance how we can dispose off those assets in an orderly fashion so that the market is not negatively impacted.
The same thing goes to Real Estate assets. We have a lot of real estate assets and it will be unwise to dump them in the market at once. I was telling the Business Editor, that in the airline industry, of the four largest airlines, AMCON is involved in four of them. If you take Arik for instance, Arik owes AMCON about N70 billion, but the aircrafts they have are worth about N75 billion. We could take the aircrafts tomorrow; sell them in order to get our money back. We will have no problem, but what will that do to Nigeria. It does about 65 per cent of the domestic air travel. It has credit from NEXIM Bank; so it will affect Nigeria’s credit rating abroad. We will lose some where between10, 000 and 20,000 direct and indirect jobs and it will cripple the airline business in Nigeria. So, we have to balance that against recovering our money over 10 years and immediate disruption of airline business. But that’s how it is. We are also very involved in Aero Contractors and IRS Airline. So, when you look at the airline industry, you ask yourself, what is the most responsible way of getting your money back and still keep the industry and employments alive? That is what takes time. That is the airline industry. In manufacturing sector, of the 15 biggest manufacturing companies, AMCON is involved in 10 of them. In the downstream petroleum industry, of the 10 biggest depots, we are involved in eight of them.
Cuts in, you hold the economy
That is the point. That is why when people say ‘wind AMCON down’, I say they do not know what they are talking about because you will immediately kill the economy, you will lose half a million jobs and you will cripple everything. And the role of government is to sometimes allow an orderly transition. In our planning, orderly transition will take about 10 years. That is what we envisage; it could take more than 10 years, but we are very sure that by 10 years, it will be all over. We like dialogue when people ask us why we are doing things this way.
What about the bridged Banks?
The three banks that were bridged and owned by AMCON were losing money somewhere between N2 to N3 billion a month. If you extended that, we would have gotten to a situation where the three banks would be losing up N10 billion a month and what did we do? We stopped it, now they are all profitable. We lost about 50 per cent of these banks. We were looking at a rate where we would have lost 100 percent of these banks if we had not intervened. A lot of these things that have been done were done with caution in mind. I am sure you are aware of the refinancing plan.
We have had seven scenarios of how to refinance and we have finally settled on the one that was announced, the one we are using. Am sure you are all aware of it. The summary of that is that we are going to keep N2 trillion of the debt and refinance N3.6 trillion, so we are reducing our size already by 75 per cent. And we think that is a responsible thing to do. I just want to reassure you that if there is anything AMCON has got to do and we are doing, we have thought about the consequences, not just on one group of people, but on the economy as a whole. So, if there is any problem we have today in my opinion, it is unemployment of young people. You have a situation where young people go to the university and they have no expectation of getting jobs when they leave the university. The impact of that is that they do not study in school; they hang around in school for three or four years, get the degree and get out. They are not proud of doing Youth Service because they know they can’t get job.
AMCON management conscious of employment generation
We must be conscious of anything that will create employment opportunities for young people, to promote businesses that have chances of survival. If it will take longer, then we will do that. The old ways of liquidating banks that NDIC used to do, as far as I have experienced, the banks that were liquidated 15 years ago, their depositors are still waiting to collect their money today. With what we have done this time, no depositor lost a kobo. Nowhere in the world has there been a banking crisis involving more than 10 per cent of total banking assets where depositors will not lose money. Nigeria is the first case in the history of this world where the banking crisis involved 10 percent of banking assets and nobody lost any money as a depositor. I think we should be proud of that. No bank failed today; we should be proud of that. The banking employment as a whole decreased by about 10 per cent; I think we should be proud of that. If you look at what is happening in Spain, Cyprus, what is happening Slovenia, what happened in USA, Northern Island, Britain, Greece, even France where there was no banking crisis, they have lost more than 10 per cent of banking employment. So, again, we are trying our best and we will do better.
The Act that set up AMCON permitted it to buy non-performing loans, but along the line, AMCON bought performing loans and there are complaints about that…
(Cuts in) AMCON bought three performing loans. First of all, the Act said eligible banks assets, and is defined as any asset that the Central Bank determines may be critical to the banking system. So, the law does not say non-performing loans at all. There is nowhere in the law you will see the word non-performing loans, what you will see is EBA, eligible banks assets, as defined by the central bank. There are three of these so-called performing loans, not four, not five, three. The first one was Zenon’s loan, Femi Otedola’s loan. Femi Otedola owed 10 banks a total of a N191 billion. If those loans ever went bad, assuming we ignored those loans and they went bad, everything we had done would have been wasted because we would have had another banking crisis. The banks could not absolve the N191 billion losses from Femi Otedola. So, it was determined by the central bank that it will be taken out of the banking system. Surprisingly, he had collaterals to cover those loans. So, AMCON took those loans and the collaterals and in the end we have taken the collateral from him and we will get the money back. But those loans were taken out of the banking system, because it is systemic risk to the banking system. I will tell you about the origin of taking off of these loans from the banking system; I went for a Standard Bank conference in New York and I asked all the investors, ‘why are you buying our banks shares below book value, because banks shares should not be sold below book value, half of their book value across the board and I said why are you people doing this to us? And they said, ‘we don’t believe the book value of you banks assets.
We think that the book value your banks are churning out are not true because you have Zenon loan and Zenon is marked as performing and we don’t think it is performing, and because of that, we are marking down all your banks.’ So, I went back to the CBN and told the management that this is why investors are pricing our banks so low and it hurts us. When banks sell so low, it actually hurts you because they can not raise capital and when they can not raise capital, they cannot lend. Now, you see all the banks are now going outside to raise capital all over the place because their share prices are high enough to start raising capital because no bank can raise capital half the price of its book value. So, we looked at the loans and there were three loans we believe that were causing this problem. First was Zenon and I just talked about Zenon. The second was Seawolf. Seawolf is a company that has three oil rigs operated by Conoil and I think shell and one other oil company. It had a loan facility of $760 million in one bank –First Bank, and if that loan failed, there goes First Bank. So, we decided to take over that loan. The third was for the same reason – Goemetric power and Geometric Power is a huge success story because they are about to start producing power in Abia State. I think they are going to start in June and by December, they would have paid up their loan. That was a success story, but they had debt with one bank – Diamond Bank. So, those three loans were identified as systemically dangerous loans and they were taken out of the banking system by AMCON. That were the only performing loans that AMCON bought. It was a very special situation and AMCON has not bought any other performing loans since then.
Cuts in, what is the situation report on Arik airline
Arik’s loan facility is a non-performing loan. All the other loans that we bought were non-performing loans. And to tell you the truth, those loans were non-performing. Femi Otedola could not pay interest on the loans any more. Even though the banks said they were performing, they said so because they couldn’t afford to take the loss. So, it was technically performing, but in real sense, it was not performing. So, it was a good thing we took them out, but we are not buying any more loans. No more loans are going to be bought by AMCON, good or bad. So, the issue of moral hazard, no moral hazards has stopped. We will not buy any more loans from any bank for the life of AMCON.
I have been wondering since the day AMCON was formed where it got all the money it is using to buy all these loans.
Debts, Debts, We got N10 billion from the Federal Government and the rest is debt. Debt that we have to pay back and the N2 trillion we have to repay now is from recovery we have made and from contributions from banks. We will keep paying it from recoveries and banks’ contributions till we finish paying it. Yes, we owe money; nobody gave us money. The good thing about the debt is that it is government guaranteed, so it counts for equity, it could count as liquidity because it will allow them to go back and do their business. But that money has to be repaid. We are repaying N2 trillion in the next two years because we have collected enough money from everything we have done to be able to repay N2 trillion. Over the next 10 years, there is N3.6 trillion we are going to pay back. Government only gave us N10 billion, N5billion from the CBN, N5 billion from the Ministry of Finance. That’s the only money we got from government.
There is insinuation that AMCON is being subjected to political manipulations. Chief Great Ogboru alleged that his loans were performing and he had collaterals to backing them up, but there some political intrigues
Let me say a few things. One is who is Great Ogboru that AMCON would go after him? If political enemies are going after somebody, it is definitely not Great Ogboru. The issue for Great Ogboru is that he borrowed money. I asked him, ‘Did you borrow money’ and he said ‘yes’. Have you paid, he said No. If you borrow N500 million and somebody is saying it is N1billion and you are disputing it, ‘bring the N500 million and put it somewhere and let’s dispute the other one you said you did not owe. You haven’t paid interest on the money you borrowed from a bank in three years. He agreed that he borrowed the money; he agreed he has not paid interest, but he is disputing the amount, so he won’t pay. I said bring the one you agreed you owe to the table first, and then we can fight over the one you said you didn’t owe. Is that not the way to do things? So, Great Ogboru owed money and AMCON has bought the loans and he will pay that money one way or the other. He can run around and talk about political enemies.
I do not belong to any political party; I do not care about politics. I only want to collect my money back. I said, ‘give me my money back, and you can’t complain about us.’ And just so you know, his own outstanding debt amounts to about N3 billion. We paid over N617 million, because we agreed that some of those charges could be suspicious, and we are asking him to pay the N617 million and he is saying he wont pay it. Look, we have 13,000 loans. People like Great Ogboru are not used to people saying to them ‘pay the money you owe.’ So, he will say this and I said to him, ‘go to court. When you go to court, we will meet you in court and then we will see what the court says.’ But I can assure you that I am not interested in anybody’s politics. AMCON can never be used against political enemies imagined or real.
Ifeanyi Ubah for instance owes us much more than that, and we told him to go and run for governorship, but if you run for governor, you cannot run your company because we do not want to be seen as sponsoring a governorship candidate. So he agreed. He is gone to run for governorship. We have taken over the management of his company. We are going to appoint all the executive directors in his company and when he finishes running, he can come back and discuss coming back to the company, but he can’t do it for less than two years. So, we are not partisan. Why will we be fighting for N617 million.
It is the smallest loan we have, but we have to collect it? So, let me just answer your question directly. We are not subject to any political interference. The president of Nigeria, who technically is my boss, because he appointed me, has never asked me to do anything for anybody. Not for once. I talk to him frequently and if he doesn’t ask me to do it, nobody will because I always ask him, ‘This thing they are asking me to do, is it you with your permission? So, they now know that I will ask him. So, nobody, not the Minister of Finance, not the CBN governor, nobody has ever asked me to do anything improper. People complain and they will come and say ‘This person has complained, look into it.’ I know people bash Jonathan depending on their political will, but he has never asked me to do anything improper as the MD of AMCON. Not once
What is the term of agreement you had with Ifeanyi Ubah concerning his governorship aspiration?
We gave him two choices. We said to him, ‘We can’t tell you not to run, but you owe us a lot of money. So if you want to run, you will give the management of the place or we prefer that you don’t run, but go and manage your company so that we get our money back.’ But we can not as Nigerians tell him not run because that will be improper, but we said, ‘You cannot use the company’s money or asset to run for the governorship election because you owe. So, here is your choice – complete breakaway from the company for two years while you run or you agree not to leave for two years. He chose to run. So, we will appoint MD, CFO and another ED to run the coy. He still owns it, but he can not write any cheque or sign any money out of that company for two years.
(Chips in, you won’t pay him while he is way?)
How can we pay him when he is not working? When he finishes paying us, he can take anything he wants.
Cuts in gain, He has not paid salary for months now)
We will pay salary when we take over.
You have not taken over yet?
We will sign the agreement sometime this week. When we take over, we will run the company as it should be run.
From the picture you have painted, AMCON looks too powerful. Is there no tendency of subsequent MDs misusing the absolute power this Corporation has in event you are not reappointed after five years?
Jokingly, I will beg them to re-appoint me. Laughter, Seriously, my tenure is five years renewable. So after 10 years, nothing will be left. Let me answer you. AMCON is powerful in a very narrow way. We are powerful if you owe us money. We are not that powerful if you don’t owe us money. We are not as powerful as the IG of police, who has interest in all of our lives. 12,000 loans, 12,000 people, a lot of them have paid part of their indebtedness. So, 10,000 loans are not that many. So, we are not really the power that you should be afraid of. However, we recognize that in those areas where you owe us money, we have tremendous power and the power is geared towards recovery, and it is essential. We have established a number of processes to ensure that the power AMCON executives have is limited. We have a process for recovering loans, we have a process for restructuring loans and we have a process for selling our assets. We have all kinds of policies that create an institution. So, nobody can actually go to AMCON and take too much away from the policies. That is one.
The second is that we are regulated by the CBN. We are a regulated entity. CBN examiners come to AMCON once a year for what they call routine examination and they have what they call special examination and they are very intrusive. If there is anything annoying I have seen in AMCON, it is CBN examination. They ask all sorts of questions; it is very intrusive. So, we can not do too much without the CBN knowing. That’s two. The National Assembly is very interested in what AMCON is doing. I am going on Tuesday to make some explanation to the House Committee on Steel. They want to ask about Delta Steel, one of the debts we are actually trying to realise, but I have to go and explain it to the National Assembly. So, we have National Assembly oversight, which is quite intrusive as well. Finally, we have a Board of Directors. You know the composition. These are Director General Finance Ministry, NDIC MD, SEC DG, and DG, Financial System & Control of CBN. These are the four institutions we have on the board of AMCON and they ask all sorts of questions. So, the degree of freedom the AMCON executives have is not as much as you think, your concern is important. We hope that the appointing authorities are conscious of the damage a corrupt, inefficient and lazy executive can do in AMCON and that they appoint only the right people. But we can only hope.
It appears that you are confident that that whenever you go to court, you must have an upper hand. I said this because I was at the last training you organised for judges and I kept wondering why a government institution should be training judges
First of all, it is extremely normal for institutions to sensitise judges on laws pertaining to them. NDIC does it every year. The CBN does it more than once a year and when there is a new law, it will be foolish of you not to sensitise the judges of the new law and what you are trying to do, who you are and all that stuff. It is completely acceptable and we applied to the Federal High Court Chief Judge and it is done all the time. So, this is not anything unusual no matter how people are presenting it to you. Olisa Agbako presented something called the AMCON rules for the Federal High Court. It was organised and presented by Olisa Agbakoba and company. We supported it, we were there to seek the judges, we were sensitised and it is completely appropriate. Now, after that so-called seminar, (we have had two now), Justice Tafaratu ruled against us in what we call, ‘a very surprising fashion on Capital Oil.’ So, I do not think that you are right in saying that we are very sure. What we are sure about is this, if you borrow money, you signed a loan document and you take the money and if you do not pay it, we are actually sure that the court will determine that you owe the money. We do not just go to court; we go to court with documents.
What is this controversy about the IMF and winding AMCON down?
The clarification is in the IMF report. I have found myself defending something that the IMF did not say, which is a very difficult position. IMF did not say AMCON should wind down now. The report is clear. It commended the Nigerian authorities for AMCON, then goes on to say, ‘Having succeeded in its task, we recommend that AMCON starts the process of winding down,’ and it used the word, ‘with an ambitious time target of say 2017. They call 2017 ambitious in their report. So, if IMF says 2017 is ambitious, we agree with them. We think 2017 is ambitious and in fact, it is a little bit irresponsible. We think the right time is 10 years from now because we do not want to break our banks and break our economy, that’s all.
They say 2017 is ambitious, we agree with them. We think it is 2023. That’s what I found really hard about this. It is a very complimentary report. It complemented Nigeria authorities and AMCON for having done the job and that the banks are now healthier. That’s what the report said. How Nigerians took that and flogged it as a bad thing, I do not understand. And the same IMF report said you should remove fuel subsidy now and the people, who are jumping up and down saying wind down AMCON are not saying remove fuel subsidy. If people like IMF so much, go and recommend that
Beyond using the court to enforce your loan recovering, what other enforcement mechanism do you have?
The issue of enforcement is very important. We use the court. We will not go outside the legal system. We will go to court, get a court order and based on that court order, we will enforce, but we will not do anything improper, anything illegitimate. We will not coerce people, we will not do anything like some banks that will go and seize people’s generators and beds in the middle of the night. We will not do any of that. We will go strictly by the courts.
