Opinion: AMCON’s dubious economic function
By Tayo Oke
The Asset Management Corporation of Nigeria is a government agency established by an Act of the National Assembly in 2010, “for the purpose of efficiently resolving the non-performing loan assets of banks in Nigeria; and for related matters”. The consolidation (or shrinking) of the banks in Nigeria from over 100 to just 25 in 2005 revealed not only the level of the insolvency of some of them, but also the extent to which the whole financial system was nearly dragged into the abyss due to the amount of reckless debts they had hitherto stockpiled.
A humongous amount of money; N8bn was taken from the public coffers to bail out the banks on the orders of the then Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi. Since it was said to be an emergency, there was no parliamentary input into the requisition of the cash by the Central Bank of Nigeria. It was needed to secure the solvency of the Nigerian banking industry, full stop. AMCON thus became the vehicle through which the assets of the beneficiaries of the CBN largesse could be “managed” and redistributed in a fashion that secured and protected the creditors of those banks. Once this had been done, the banks were offloaded back into private hands and business, as it were, continued as usual. Lest we forget, the money from the CBN does not belong to the governor, neither does it belong to the President of the Federal Republic of Nigeria; the money belongs to the tax-paying public. That said, there is a context to AMCON’s raison d’être, which helps put things in a perspective.
Since 1999 when the then President Olusegun Obasanjo was sworn in on May 29, Nigeria has maintained a fledgling but sustained period of democratic governance. Before then, the country had been under a prolonged spell of military dictatorship which, in fact, had become the norm throughout the continent of Africa. The 1980s saw the rise in agitation for democracy and wider participation on the continent. It was also a period tied to crippling public debt and growing unsustainability of the state in Africa. For fear of Africa being engulfed by a succession of failed states, the West, spearheaded by the International Monetary Funds, made transition to multiparty democracy a major conditionality for foreign aid across the continent. Freedom of political association became intertwined with “free market” and liberal economic policy as a panacea to poverty and social malaise spreading like cancer across the states in Africa. In short, the state was conceived of as an impediment to prosperity by international financial institutions. Economic policy should be “liberalised” as far as possible and private enterprises be allowed to thrive, rise or fall on their own ability and capability.
The sudden collapse of the Soviet Union bloc in 1989 accentuated the apparent supremacy of “market forces” over state diktat as a tool for economic policy. It was also around this same period that a bright government functionary in the United States of America, named, Francis Fukuyama, wrote his seminal paper: “The end of History and the Last Man” in 1992, in which he argued that the ideological rivalry between capitalist (the West) and socialist (Eastern bloc) economic doctrines had ended with the triumph of capitalism, which he predicted would spread around the world like bushfire. The debate over how “free” free enterprises ought to be in a democracy is still raging until today. There are those who see limits to the free market dogma, and there are those who, barring acts of criminality, see no limits to free market at all. It matters not that the market is a dog-eat-dog jungle, harbouring only the survival of the fittest. Companies and enterprises ought to be allowed to prosper, fail, and bounce back at will. Government should have no business in business other than as an “enabler” of entrepreneurial activity. This line of thinking became the convention throughout the 1980s and 1990s, until the Wall Street crash of 2008 prompted governments and analysts in the West to ponder the merits of untrammelled free enterprises. To regulate or not to regulate once again became a hot topic of debate across the globe. It was thought that some industries are simply “too big to fail”, thereby posing a systemic risk that threatens the whole of the economy if left to implode. The USA embarked upon far-reaching reforms of its financial system and introduced legislation: the “Dodd-Frank Wall Street Reform and Consumer Protection Act 2010”, which places certain limits on free enterprises operating in the critical sectors of the US economy. It was hailed at the time as a welcome piece of legislation whose time had come, but the Act is being considered for repeal by the current US administration of President Donald Trump for having gone too far in “restricting” free enterprises.
It is within the above discourse that our own AMCON was born in Nigeria, but questions remain: Should free market not also mean freedom to experiment and fail in business? Is that not how progress is made? Or, should government always remain in the shadows to offer bailout to failing companies? If so, what is the rationale for picking winners? Given the finite resources at the disposal of the state, what is the basis/logic for selecting which enterprise to bail out, and which to abandon? In their abiding wisdom, the draughters of the AMCON Act had targeted the banking industry and “related matters”. This has allowed the body not only to focus on rescuing the banking industry alone, but to henceforth fish around for “related matters”, which could mean, well, whatever. Since the Act has left the door so widely open to accommodate any enterprise that suits the fancy of officials, AMCON has, ipso facto, expanded its focus to what it considers the “critical sectors” of the economy. For heavens’ sake, I am yet to understand exactly which sector of our economy can be brushed aside as not being critical at this point in time.
Arik Air is the latest example of a private enterprise in distress, of which AMCON has mounted a hostile takeover, because, they say, it is such a “critical sector” of the economy. It will soon be “streamlined”, rendered solvent and handed back into private hands. The question simply is this, should AMCON be at liberty to use infinitesimal amount of public funds to save private enterprises from their own failures, make them solvent, then, hand them back to fat cat directors backed by greedy shareholders in the name of “free market”? Is it fair to rob Paul to pay Peter in this way? Someone please tell me if I am missing something. Punch