Grand Theft AMCON? The N1.6trn Question

It was all over the papers yesterday that AMCON managed to lose N2.37trn in the course of 2011.

Here’s a summary of what I have managed to understand from various sources that covered the news yesterday

1. AMCON bought bad loans totaling N4trn from our banks. In other words this is the value it placed on the loans it bought from the banks so it is reasonable to say that the actual value of the non-performing loans should be at the very minimum 10% higher.

2. However AMCON actually spent N5.6trn in total. The difference, please sit down, was made up of what AMCON’s CEO Mustafa Chike-Obi called ‘acquisition costs’. In other words, it cost AMCON N1.6trn or 40% of the total amount to acquire these loans from the banks. More on this below

3. Where did AMCON get this money from? Well, it sold various bonds with different maturities. Now we know that N1.7trn of these bonds are zero coupon bonds due to be repaid by the end of 2013. To put it very simply, a zero coupon bond is a bond sold at a discount. Imagine you want to borrow N100m via zero coupon bond. The market then works out that the interest rate on such a bond will be 20% so you will need to repay N120m. In this case, you simply borrow the N100m but the value of the loan is shown as N120m. Say you borrow this for 2 years, in that time you don’t make any interest payments at all. At the end of the 2 years you simply repay N120m unlike other bonds where you make interest payments every quarter or year. So if AMCON got a zero coupon bond for N1.7trn then perhaps the actual cash it obtained was say N1.3trn with the N400bn being the interest to be paid off at the end.

Also note that these bonds are backstopped by the Federal Govt so if for example at the end of 2013, it is unable to repay the N1.7trn, then the govt has to step in to repay the loans on its behalf. I am not sure if a provision has been made in the 2013 budget for this possibility.

4. AMCON initially planned to buy around N1trn worth of loans but it then discovered that it actually needed to buy N4trn worth. According to Mofoluke Dosumu, AMCON’s Executive Director of Finance, this happened because the banks were not honest about the actual number of non performing loans they were holding on their books. So when AMCON started buying, they started ‘confessing’ that they actually had more. My hunch is that AMCON must have been buying these loans at very generous terms indeed. Certainly here in the UK and in America, the bailout terms were so costly for the banks that the reverse actually happened – the banks understated the amount of dodgy loans. For example, in 2009 the UK Treasury insured £282bn worth of RBS’ loans but the terms were such that RBS was to bear the first £60bn of losses on those assets before the Treasury took over. In addition RBS also paid a fee of something like £250m to be able to use this facility. Even with these terms, you will still find a lot of people who are very much annoyed at how the banks managed to get bailed out.

The AMCON method works quite differently. AMCON was set up as a bad bank and then the banks simply sold their bad loans to it at an agreed price freeing up their own balance sheet in the process.

5. From this list here, we can see the loans for N5bn and above that AMCON bought from the banks and the discount it applied. So for example Femi Otedola’s outstanding loan in the name of Zenon for N192bn was discounted to N141bn when AMCON bought it i.e. a discount of roughly 36%. If we assume this is the average discount applied to all the loans, then we can assume that the N4trn worth of loans AMCON bought were actually around N5.4trn on the books of the banks. This, need I tell you, is larger than Nigeria’s annual budget.

6. Given that AMCON initially planned to buy N1trn of loans but ended up buying N4trn, it is reasonable to assume that whatever the costs of acquiring these loans would also go up. But by the testimony of Mustafa Chike-Obi, these costs doubled to N1.6trn from what they planned. But this doesn’t make much sense does it? If Mofoluke Dosumu is saying they ended up buying 4 times the amount of loans they planned to buy, is Mustafa Chike-Obi saying they planned to spend N800bn in acquiring N1trn worth of loans?

N1.6trn is already a shocking 40% of the amount of loans that were bought so the other scenario does not even bear thinking about.

These are incredible sums to comprehend – a trillion has twelve zeroes. To put this in perspective, this N1.6trn is more than the entire capital budget in Nigeria’s budget for 2013. You will need to add up Education spending (N428bn), Defence (N349bn), Health (N298bn), Works (N184bn) and Police (N311bn) before you arrive at these ‘acquisition costs’. These are the entire amounts to be spent on those ministries for the whole of 2013 that AMCON has run up as a ‘cost’ in just one year. Sorry if I am repeating myself, but this N1.6trn is not the actual loans but merely the ‘cost’, whatever that may be, of obtaining the loan from the banks.

In a buyer’s market, where the banks were desperate to get these loans off their books and AMCON being the only buyer, I am struggling to understand how it managed to run up these costs.

7. The whole point of AMCON buying the loans was for it to then do the legwork of collecting the loans from the debtors. However, of the N4trn worth of loans it acquired from the banks, it has so for managed to recover a trifling N85bn from the debtors or 2% of the amount of loans bought.

8. Finally, since it paid N4trn for the loans, AMCON now confesses that the loans have since become worth only N3.34trn i.e. it is admitting it overpaid by almost N700bn and has since written this off as non recoverable. God knows what kind of lending Nigerian banks were doing in the run up to the crash of 2009.


Now there has to be something I am being clueless about here. Does anyone reading have any more information I may have missed? I am particularly interested in these acquisition costs of N1.6trn. If you prefer to let me know in confidence, please send me an email at

Any information, factual and anecdotal will be appreciated. The comments section is all yours.

God bless Nigeria



1. ThisDay

2. Bloomberg

3. Reuters


2 thoughts on “Grand Theft AMCON? The N1.6trn Question

  1. Whao! Thank you Feyi!
    For the N1.6 trillion; what they simply did was hire all shades of consultants and analysts and paid them ridiculous management fees and retainers.
    To break it down; Consultants were earning % of the face value of the loan being re-structured or worked out. One of the firms tried recruiting me last year and I was astounded at the level of fees and bases.

    In fact, based on some of the agreements I saw, this cost should rise to N2 trillion by 2013 Dec because they will keep pilling up.
    In fact
    It was just a time to pay boys and they went to town! Hurray!

  2. Pingback: Update on AMCON: Mustafa Chike-Obi Clarifies | Agùntáṣǫólò

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