The Asset Management Corporation of Nigeria (AMCON) has performed its functions in a manner that saved over 2,000 jobs in Nigeria as the bad bank took over troubled companies, stabilising their operations and infusing efficiency into their systems.
Africa’s biggest economy was plunged into the first recession in a quarter of a decade on tumbling oil revenues, catalysed by plunged oil prices and declined production volumes; companies’ earnings were battered, forcing many of them to shut down or sack people.
The effect of the recession on job losses in the country was moderated by AMCON. The ‘bad bank’ took over the operations of companies such as Silverbird Television and aviation giants, Aero Contractors and Arik Air, reviving the companies at substantial costs and forestalling impending employee sack.
“We operated from the necessity to save jobs,” said Aminu Ismail, AMCON executive director, during a round table discuss at the company’s office to present the company’s 2016 financial year result. “We always look for opportunities to deepen the market and improve the economy.”
Arik Air, a dominant operator that controls over 60 per cent of the passenger traffic in the Nigerian aviation industry, was taken over by AMCON early this year, in a bid to stem an imminent collapse of the company and save the country’s aviation sector from disaster.
Prior to the takeover, Arik had owed creditors and workers for several months. The airline employs at least 2,000 Nigerians; up to eight of its aircraft had been grounded as its prospects had been subverted by bad corporate governance and mounting debt burden, among other issues.
Ahmed Kuru, AMCON’s managing director and chief executive officer, said that AMCON has tremendously improved the corporate governance regime and operational efficiency in Arik since it took over the management of the company, emphasising that AMCON’s presence in Arik is only temporary, as it is not set up to manage businesses. AMCON is just a ‘bad bank’ and a resolution company, Kuru said at the financial statement presentation roundtable.
“We will only manage Arik profitably and drive it to the point of exit and then sell to investors with capacity.”
Bismarck Rewane, chief executive officer of the Financial Derivatives Company (FDC), presented highlights of 2016 financial performance, which showed that AMCON adopted more efficient debt recovery measures, as non-performing loan (NPL) ratio improved by 2 percentage points to 63 per cent, from 65 per cent in 2015.
The company also efficiently ran its operations, having adopted several cost-saving measures. Reported total operating expenses improved 23.5 per cent to N64.7 billion from N67.7 billion the previous year as the bad loan manager wiped N4.3 billion off its personnel costs.
Similarly, liquidity ratio, defined as the proportion of AMCON’s liquid assets to its total assets, rose by 1.5 percentage points, from 7 per cent in 2017 to 8.5 per cent in 2016. The company’s net operating loss moderated 13.2 per cent from N234 billion in 2015 to N203 billion in 2016
Even though 2016 was a difficult year for AMCON, the company improved its performance, growing funds from resolution sinking fund (RFF) by 77.8 per cent to N186.3 billion within the year under review; credit losses improved by 69.8% to N19.7 billion.
Nigeria’s shrinking economy shrivelled the company’s fortunes as fees and commission plummeted compared to the prior year. Fees and commission comprised 0.58 per cent of total earnings in 2015; it shrunk to 0.4 per cent in 2016.
The company’s earnings worsened in 2016 as lower revenue and loss from Keystone bank, a major subsidiary, pushed net loss to N351.4 billion within the year, from N302.1 billion in 2015. Keystone bank, one of the banks AMCON took over in a bid to resolve troubled loans in the Nigerian banking system, had posted a loss close to N83 billion during the year prior to its sale in 2017. AMCON expects that the positive impact of the sale will be seen in its 201 first quarter results.
Ismail said that AMCON is a major player in the country’s capital market, having led the drive for deepening the market. He said that it has contributed to deepening the capital market though the securitisation of the real estate assets in its books.
“We supported the creation of real estate investment trust (REIT) in 2013 and continued to support its development in 2016.”
INNOCENT UNAH
