The huge challenge of debt recovery was recently underscored by Mr. Ahmed Kuru, Chief Executive Officer of the Assets Management Corporation of Nigeria (AMCON), when he complained that many of the corporation’s debtors are living large and flying private jets all over the place. The agency has already started publishing the names of some of the 220 firms and their directors whose total outstanding debts have been put at N1.146 trillion.
The aim, as in all such cases, is to shame the debtors by having their identities in the public domain and by so doing, make them pay up to avoid further embarrassment. It is a strategy that has not been confirmed to have yielded much positive results in the past, and we doubt that it would be different this time.
What we believe will work better is to properly secure loan agreements and enforce the terms when there is a breach. Before any loan contract is sealed, there is usually a loan agreement, with some collateral as security. In the present AMCON case, how were the loans secured? Was it that in its desperate bid to save some of the debtor financial institutions and especially our banks, the loans were not secured? That would be very tough luck, indeed.
AMCON must, in deciding on the ‘publish and shame’ option, be careful not to risk libel and getting sucked into protracted court cases. This has happened severally in the past with cases like this.
We advise AMCON to exhaust all legal, moral, and interpersonal avenues to convince the recalcitrant debtors to pay up. When all else fail, the agency can resort to the legal option with a view to identifying and confiscating the assets of the debtors as part of the recovery process. This, in our view, is a more effective option.
All considered, it is disheartening that the AMCON debt has piled up to the level it has reached. The N1.146 trillion involved is no small amount, especially now that the economy is in dire straits. The sum will go a long way in re-inflating the economy.
The amount in question is almost one-quarter of the 2016 budget, one-third of which is going to be borrowed. It would be a big relief, therefore, if the debtor organisations pay up.
That is why we view the action of the 220 firms involved in the AMCON debt as economic sabotage which should be condemned by all right thinking persons. We ask the directors of these firms to have a re-think and take urgent steps to repay the loans. This is the only way the laudable initiative of AMCON in saving most of the affected organisations from certain liquidation would not have been in vain.
Besides, the future beckons. Their action could deny other organisations which may need similar bailouts in future the opportunity of such initiative. Even worse, this huge indebtedness to AMCON has the capacity to depress our credit rating with investors abroad. At a time when the nation needs all the investments it can get, that would be a very unsavory outcome.
There are lessons for the future from the present AMCON debacle. We understand that as a first measure, firms which owe up to N1 billion will no longer be able to borrow from the banks.
This is a good deterrent for firms which, like the present ones, may want to abuse the privilege of borrowing without commensurate commitment to pay back.
Even more important is the need not to present government and its agencies as Father Christmas. In future, some of these firms may be allowed to go into liquidation rather than allow taxpayers bear the consequence of their poor management by their directors.
For now, we caution AMCON to be wary of the ‘naming and shaming’ option. It should, instead, resort to legal action to recover its funds. The naming option had, in the past, resulted in wrongful listings and disclaimers, which led to distractions that are not beneficial to the cause of recovering the debts.
Though court processes may be protracted and expensive, they are the best way to recover the huge funds that are currently in the hands of these recalcitrant debtors.