Trouble looms for Oba Otudeko’s Honeywell Flour Mills as company may end up in AMCON’s beehive

• Nigeria’s Senate pass bills empowering AMCON to sell debtors’ properties used as collateral

Charles Abuede

More trouble looms ahead as all unfolding events are now a major pointer to what looks like Honeywell Flour Mills might end up in the Asset Management Corporation of Nigeria (AMCON) beehive as the Nigerian Senate has, during Tuesday’s plenary, passed a bill empowering the government corporation to seize the assets of loan defaulters that were not included as collateral when the loan was approved.

The bill, which is known as the Asset Management Corporation of Nigeria Act, (Amendment Bill, 2021), seeks to empower AMCON to, amongst others, take possession, manage or sell all properties traced to debtors, whether or not such assets or property are used as security or collateral for obtaining the loan. The bill also empowers AMCON to access the Special Tribunal established by law – BOFIA 2020, for dealing with financial related issues.

Meanwhile, Oba Otudeko owned Honeywell Flour Mills was reported to have obtained a credit facility in the region of N75 billion from First Bank of Nigeria which became non-performing before a recent restructuring by the bank. However, the Central Bank of Nigeria, as a regulatory body, felt concerned that First Bank has not performed due diligence in the collateralization of the credit facility which further shows that there was no binding document filed with the apex bank that will allow it to claim the collateral legally should there be any default in the facility. This has further created more controversies within the banking sector and also in the bank of which the apex bank ordered the board and shareholders to vacate their positions.

Elsewhere, there exists a long winding issue over the transfer of assets (Honeywell and Airtel) which were allegedly pledged to Ecobank, to First Bank who stands in the equity position of ownership while Ecobank has a debt position on the assets. According to news reports, a N5.5 billion loan facility given to Oba Otudeko’s Honeywell Flour Mills by Ecobank in 2013, has turned out to be the subject of legal process and is in fact still ongoing at the Supreme Court. Thus, the central bank, in a memo on Thursday has ordered for the divestment in the equities of Honeywell Flour Mills and Bharti Airtel Nigeria Limited within 90 days.

What does the bill say about AMCON’s powers to obligors’ assets?

The bill which was passed by the Nigerian lawmakers amid protests by some members after being read out for the third time had some clauses in it which will empower AMCON to go beyond its mandate. Uba Sani, the chairman of the Senate Committee on Banking, Insurance and other Financial Institutions, who made a presentation of the panel’s report to the house pointed that stakeholders, in their submissions, pushed for AMCON to be empowered to take possession, manage, foreclose or sell, transfer or assign such properties adding that “this will provide for a quicker, easier and legitimate process of assets disposal.”

The articles read: “Section 34 of the principal Act is amended by substituting for the existing subsections (1) (a) and (1) (b) with new subsections (1) (a) and (1)(b) as follow;

“(1)(a) subject to paragraphs (c),(I) and (d), become vested with and acquire legal title to the eligibility bank assets and all assets or property tangible or intangible belonging to, traced to and in which the debtor has an interest in, whether or not such assets and corporation shall be vested with power, to the exclusion of all other creditors, to take possession of, manage, foreclose or sell, transfer, assign or otherwise dispose of the eligible bank asset and any tangible or intangible asset or property is used as security for the eligible bank asset, in full or partial satisfaction of the debt owed to the corporation by reason of the acquisition of the eligible bank asset notwithstanding that the interest of the debtor in such asset or property is equitable only.

“(1)(b) Any certification of sale or certificate of transfer of title executed by the Corporation in exercise of its powers under subsection (1)(a) above shall constitute a valid registration instrument under all applicable land registration laws applicable in the Federation and in all Land and Corporate Registries in the Federation.”

What happens next from here?

The directive by Nigeria’s central bank to First Bank of Nigeria (FBN) to call back the loans owed by Oba Otudeko’s Honeywell Flour Mills Plc and be paid immediately within 48 hours while it has also called for the divestment in all equity investment in the company and in Bharti Airtel within 90 days, will stand as a deterrent to obligors and their cronies on the need to settle their loan debts through a restructuring process as and when due or face the empowered AMCON coming for their assets as a means to recovering the debts.

However, as some analysts have posited that the move will bring about sanity and accountability in the banking sector, Nigerian banks will sit up in the management and restructuring of their loan books. Although, the non-performing loans (NPLs) ratio had stayed above the prudential benchmark of 5.0 per cent, the central bank has been tasked to brook its regulatory measures to bring it below the prudential benchmark. Meanwhile, with the rising loans in the sector which are yet to be recovered by the banks, it is maintained that those lenders who operate within the 65 per cent loan to deposit ratio of the central bank will stay reluctant in the provision of loans to various sectors of the Nigerian economy.