AMCON recovers 57% of bad debts bought in crisis

The Asset Management Corp. of Nigeria (AMCON) said it has recovered 57 percent of the bad debts it took on five years ago to rescue banks in Africa’s largest economy from collapse, reports Bloomberg.

“We’re a little bit behind, but not too far behind, what we expected,” chief executive officer Mustafa Chike-Obi said in an interview in Lagos. “The courts are a constraining factor. As much as we want to carry a hammer, we still have to go through the court system and remain an institution that obeys the laws. That takes time.”

The state-owned agency managed to collect or reorganise the debts it bought at a rate of 1.07 times for what it paid for them, above its 80 percent target, he said.

Modeled on organisations including Ireland’s National Asset Management Agency Ltd. and Korea Asset Management Corp., AMCON used bonds to bail out 10 lenders and buy more than 12,000 loans from industries including aviation, gasoline marketing and manufacturing for about N1.8 trillion ($9 billion).

A clean-up of the industry means Nigerian banks are better able to withstand shocks even as non-performing loans rise following the latest oil slump, Chike-Obi said. It is unlikely that lenders will be offered another bailout, he said.

“If the central bank, whose decision it is mostly, did ask us, we’d have to think very seriously about it,” he said this month. “But there’s not much appetite from the central bank, AMCON or the nation for this. Nobody wants it.”

While non-performing loans stood at 2.9 percent at the end of December, they are rising, the central bank of Africa’s biggest oil producer said in April. The ratio will climb to between 5 percent and 10 percent by the end of 2015, Fitch Ratings said last year.

Brent crude’s 40 percent drop since June is making it harder for oil companies, which account for about a fifth of lending in Nigeria, to repay loans, Fitch said.

Local companies are also battling to pay for imports and service foreign-currency debt after the naira’s 18 percent depreciation against the dollar in the last 12 months.