The Managing Director of Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, has called on agencies saddled with the responsibility of regulating the aviation industry to adopt a more efficient regulatory enforcement approach in order to grow the industry.
Kuru, who was a guest speaker at the 6th Nigeria Transport Awards And Lecture where he presented a paper entitled: “AMCON’s intervention in Transport and Allied Sector; Achievements, Challenges and Prospects”, canvassed the need for the agencies to learn from the measures being undertaken by the Central Bank of Nigeria (CBN) which have helped in stabilizing the banking system.
The AMCON boss said that if adopted, such an approach will ensure stiffer corporate governance in the business of aviation and other allied critical sectors; minimize risks as well as ensure that the ugly development that necessitated the corporation’s take-over of Arik Airline and Aero Contractors Airline would have been averted.
Represented at the event by Mr. Kamilu Omokide, a Senior Vice President at AMCON, Kuru pointed out that the huge debts of the entities would not have accrued if the affected companies had proper corporate governance structure for innovative business decisions.
The AMCON chief who puts the total non-performing loans purchased by the corporation from banks at N181 billion, explained that due to poor corporate governance in the aviation sector, it accounted for about 90 per cent of the NPLs.
According to him, despite plans to revitalize the hugely indebted airlines and companies with additional investment of N40 billion on very good terms, the inability of the managements compelled AMCON to appoint Receiver Managers for the companies, including Arik and Aero airlines.
Kuru explained: “AMCON was created to be a stabilizing and revitalizing tool in the Nigerian economy. Towards achieving our mandate, we purchased non-performing loans of about N181 billion from various banks. Over 90 per cent of this was in the aviation sector. To place the companies in a position to recover and generate adequate cash flow, we gave additional un-lending facilities (in collaboration with Central Bank of Nigeria and Bank of Industry) of almost N40billion on very good terms.
“Unfortunately, notwithstanding this support, the companies could neither pay the old nor new loans. We have therefore been compelled to appoint Receiver Managers over a lot of the companies, the biggest being Arik and Aero”, the AMCON boss added.
Kuru listed some of the challenges being faced by the corporation in its salvaging efforts to include, shareholder actions, lack of support by some trade creditors, some foreign lenders, and increased union demands, adding that since some of these were not unexpected, AMCON has professionally handled over the period.
Kuru pointed out that the aviation and transport sector requires solid capital to make it deliver for the good of the Nigerian people.
He clarified: “It will require a measure of policy consistency and governmental support to thrive. However, from our experience, no matter the capital thrown at the sector, if corporate governance is not strengthened, it will still fail.
“The absence of governance or quality governance and sound financial risk management systems is at the heart of the failures that are common in the sector. I urge regulators to act with courage by insisting on proper governance in airlines. I recommend they look at the work being done by CBN and Financial Reporting Council to improve the practice in airlines”, the AMCON chief added.
