AMCON’s Sunset is Overdue; It’s Time to Scrap This Inefficiency

Jimoh Ibrahim in trouble over N69.4billion debt owed AMCON

Adrive from Ibadan, the capital of Oyo State, to Lagos, the economic epicenter of Nigeria, and getting to the start of the Longbridge, lies a sprawling complex and abandoned cocoa processing company. The company was one of the relics of wasted investment and part of the causes of unemployment in a country that is struggling to keep poverty in check.

Multi Trex Integrated Foods Plc, which was the largest cocoa processing factory in the country with the potential to reduce unemployment, earn foreign exchange, and add value to an economy in dire need of dollars to prop up its foreign exchange reserves.

However, the company was taken over by the Asset Management Corporation of Nigeria (AMCON) as a result of a default in debt payment to the financial institution that funded its establishment.

Since the company was taken over by the nation’s ‘bad bank’, the complex has been left to rot away, both the buildings and billions of naira of machinery, while workers that had previously earned their living from the company were released into the unemployment market, further compounding the nation’s job woes.

Multi Trex Integrated Foods Plc is one of many such companies that have been taken over by AMCON, an entity established by the government over a decade ago with a noble mission: to salvage the nation’s banking industry from the brink of collapse.

Amid the global financial crisis of 2008 and its repercussions on Nigeria’s banking sector, the Federal Government conceived AMCON as a solution to address the pervasive issue of non-performing loans (NPLs) that threatened to destabilize the financial industry.

Established in 2010, AMCON was tasked with purchasing NPLs from banks, thereby providing a lifeline to struggling financial institutions and preventing a catastrophic collapse of the economy. The move was seen as a necessary intervention at the time, aimed at restoring confidence and stability to the banking sector.

However, as the years have passed, questions have arisen about the efficiency and effectiveness of AMCON’s operations, leading some experts and stakeholders to call for a timely end to this well-intentioned but arguably problematic institution.

AMCON had, in the course of its operations, acquired companies such as:

Aero Contractors: AMCON acquired a significant stake in Aero Contractors, a Nigerian airline, in order to rescue the airline from financial distress and prevent its potential collapse. The aim was to revitalize the aviation industry and preserve jobs.
Arik Air: AMCON intervened in Arik Air, one of Nigeria’s largest airlines, to prevent its collapse and maintain the country’s aviation sector. The acquisition aimed to safeguard the jobs of employees and ensure continued air travel services.
NICON Insurance: AMCON’s acquisition of NICON Insurance was aimed at reviving the troubled insurance company and maintaining stability within the insurance industry. The goal was to prevent potential policyholder losses and sustain the sector.
Continental Hotel: The acquisition of Continental Hotel by AMCON aimed to rescue the iconic hotel from financial distress, preserve the hospitality sector, and protect jobs within the industry.
Mainstreet Bank Limited: AMCON took over Mainstreet Bank Limited as part of its efforts to strengthen the Nigerian banking sector and ensure financial stability.
Enterprise Bank Limited: Similar to Mainstreet Bank, the acquisition of Enterprise Bank Limited by AMCON was intended to bolster the stability of the banking sector and prevent the collapse of financial institutions.
Defunct Air Nigeria (formerly Virgin Nigeria): AMCON’s intervention in the defunct Air Nigeria was aimed at salvaging the airline from operational challenges and potential closure. The acquisition aimed to safeguard jobs and maintain the competitiveness of Nigeria’s aviation industry.
Delta Steel Company: AMCON’s acquisition of Delta Steel Company was part of its efforts to rescue the steel industry in Nigeria and prevent the collapse of a key industrial asset.
Peugeot Automobile Nigeria Limited (PAN): AMCON’s intervention in PAN was aimed at revitalizing the automobile manufacturing sector and ensuring the continuation of the company’s operations.
Today, apart from a few of the companies that have been sold to new investors, some of the companies have long been liquidated, while many of them are still struggling to survive despite the pumping of billions of naira belonging to taxpayers in the effort to revive them. Many are lying waste because of the failure of AMCON to adopt a strategic revamping model to bring the companies back to life.

No doubt, the establishment of AMCON has resulted in significant stability in the banking industry and prevented systemic failure. By absorbing the burden of toxic assets, the corporation allowed banks to refocus on their core operations and regain their footing. This approach undoubtedly contributed to maintaining some level of financial stability during challenging times.

However, the efficacy of AMCON’s approach has been called into question. Critics argue that the corporation’s operations have, at times, fallen short of their intended objectives.

While some banks have managed to recover and thrive, others have continued to grapple with bad loans, casting doubt on whether AMCON’s interventions have led to lasting improvements across the sector.

Also, as AMCON’s tenure extended, concerns grew over issues such as transparency, governance, and accountability. The corporation’s large portfolio of acquired assets created a complex web of relationships, negotiations, and legal battles.

Critics argue that this complexity has led to delays, inefficiencies, and a lack of clarity in the resolution process. Moreover, allegations of mismanagement and politicization of AMCON’s operations have further eroded public confidence in the institution.

In recent years, many economists and financial experts have become more vocal in their calls for a reevaluation of AMCON’s role. Some argue that the corporation’s continued existence may hinder the development of a more robust and competitive financial ecosystem.

Instead of perpetuating an entity with its own set of challenges, proponents of reform advocate a more market-driven approach to addressing non-performing loans, fostering healthy competition, and encouraging innovation within the banking sector.

Sunsetting AMCON: As the debate intensifies, the question that looms is whether the time has come for AMCON to gracefully exit the stage. Proponents of sunsetting the corporation contend that this move would create an opportunity for Nigeria’s financial system to evolve and adapt to new challenges.

By dismantling AMCON, the banking industry would be incentivized to adopt proactive risk management strategies, encourage responsible lending practices, and foster a culture of accountability.

The AMCON experiment was a product of its time, conceived with the best of intentions to avert a crisis. A decade later, Nigeria’s financial landscape has evolved, and the nation’s banking sector is at a crossroads. As the clamor for AMCON’s dissolution grows louder, stakeholders must grapple with the question of whether the corporation has outlived its purpose.

Whether the Nigerian government Financial Fichooses to bid farewell to AMCON or seeks to reform it, the decision will undoubtedly shape the future trajectory of the country’s financial ecosystem.

Global Financial Digest