With the 2011 elections over, one of the major challenges the new government is expected to tackle is the issue of economy, which has adversely been affected by the sanitisation exercise in the banking sector by the Central Bank of Nigeria (CBN) governor. The exercise began about two years ago. It also threw up the establishment of Asset Management Corporation of Nigeria (AMCON) to mop up the debts of the rescued banks by the CBN by opening a new vista among Nigerian lawyers, who are involved in insolvency practice. In this Interview with BERTRAM NWANNEKANMA, a renowned Lagos- based insolvency practitioner and Senior Advocate of Nigeria (SAN), Kunle Ogunba, said the creation of special courts for commercial matters would help in expanding the space for the practice, as well as assist AMCON to fulfil its mandate. He also spoke on other issues. ExcerptsAS an Insolvency practitioner, what do you anticipate from the incoming administration now that elections are overLet me first of all congratulate President Goodluck Jonathan, all elected officers and Nigerians for the smooth elections. Having said that, I dont expect much from the in-coming administration, as there are already a lot of legislations in place for the practice. What we need is the implementation and willingness on the part of government to enforce the laws that we have, which has remained a problem. But the creation of special courts to handle commercial matters will help a great deal in this regard.Apart from that, I dont expect anything different from the legislators or the President, in terms of the workings in insolvency practice, because, for example, they are not going to be the judges, they will not be lawyers to the debtors, who will be filing all sorts of applications to forestall the receivership of legitimate debts.What about the Asset Management Corporation of Nigeria (AMCON) established by the CBN to mop up toxic loans, which impact, many say, has not been feltMay be after this time out, we should begin to see the effect of AMCONs activities, because those of us in practice, are all waiting to see the dynamism AMCON can bring to the debt issue. It is really a serious problem. That is what I see. I know AMCON is putting infrastructure in place. So to me, seeing AMCON at work after the incoming administration has taken over, will be gladdening and I want to be part of the party.How about the speculation of imminent changes in CBNs management Dont you think that AMCON may be affected by any changeIt is a speculation for now. I dont know the mind-set of the CBN governor, or the mind-set of President Goodluck Jonathan. But what we have on ground from the legislation is a pointer that AMCON has come to stay. Of course, if a new CBN governor is appointed, he may have a fresh perspective, just like Sanusi had a fresh perspective to what Soludo did. But that is neither here nor there until the dynamics really unfold, then we can now grabble with the facts as they come up.What impact do you think the sanitisation exercise in the banking sector, which began about two years ago, has in insolvency practiceI will look at it from the perspective of efforts before the sanitisation exercise and our efforts after, vis-à-vis our activities as insolvency practitioners. Prior to the sanitisation exercise, there was a lot of anxiety on the part of some of the banks on the effect of their debt portfolio on their total economic outlook, and there were lots of efforts geared towards engaging the services of insolvency practitioners to help in salvaging the situation. It was so massive and endemic, and within the contest and the regulatory framework that we had, that is the judicial system. I think we were trying before the Central Bank of Nigeria took over the management pursuant to the sanitisation effort. If you look at our activities after, nothing much has changed except when a few months back, Asset Management Corporation of Nigeria (AMCON) was set up and started the process of mopping up the toxic debts of some of these banks.Prior to the setting up of AMCON, the efforts of the banks also were in tandem with the previous efforts of the previous owners of the banks and some of these institutions, and that to have a zero-tolerance to outstanding debts and to do all they can to get the funds out.So there are many factors that are responsible for the inability of some of the banks to recover the debts. It is not really due to the absence of any regulatory framework. There have been laws. There are legislations, legal frameworks and tactics that could be used to salvage a very precarious situation. People have likened giving out loans by banks in Nigeria to a situation where you give water to a monkey with a glass cup.While there is no problem with that, the chances of recovering your glass cup from the monkey are slim, because after drinking the water, the monkey is likely to retain the cup and muddle up with that process. That really accounts for why there had been so many toxic assets within the system. We are yet to see the effect of AMCON in the industry as practitioners, save for the fact that there has been some laxity on the part of the banks, because they are now waiting for AMCON.In fact, some of the actions we took prior to the coming of AMCON had thrown in a lot of challenges, because the banks do not even know how to deal with us. We helped them to recover some funds and they refused to pay us our fees. May be because they want to get directives from AMCON. So all these are throwing up challenges, which are not good for overall economy.Concerns had been raised that stakeholders were not consulted before the creation of AMCON, do you subscribe to that viewIt may not be correct to say that stakeholders were not consulted. I dont know what they mean by consultation really. If you say they should have consulted people like us, I will understand. We were not consulted and I dont know of any insolvency practitioner that was consulted before the creation of AMCON. But I believe that within the regulatory framework of the CBN, some of the chief executives of banks and the Attorney General of the Federation made some inputs in drafting of the bill, before the National Assembly passed it into law. So within that context, I think, there were consultations. It may not be enough, but the CBN cannot just wake up to impose AMCON on us.Does the coming of AMCON in any way absolve insolvency practitioners of their jobsIf you read the Act very well, you will discover that there were anxieties on whether it will affect us or not. But as far as I am concerned, AMCON will not and cannot do it alone. In fact, there have been cases where AMCON had said it should continue with some of the accounts we are handling on their own behalf. Really and truly, it will just be that AMCON as it were will sulk in the debts and find the means of going after the debtors on its own on behalf of the banks. And in doing that, it has to engage professionals, file actions in court and sustain actions in courts. So really, I dont think that it does affect the insolvency practice; it merely even highlights the activities and importance of people like us in that sector of the economy. So I think it is a welcome development.What other challenges do insolvency practitioners encounterCooperation from the courts to compel debtors to pay their debts has remained one major challenge that we have. That is an area in our practice, where we want more proactive action, because actions relating to debts should be taken more speedily. As it were, lack of specialised courts has remained a drawback for the practice. I know that there are agitations within the financial circle for creation of commercial courts, where we can approach those courts with matters bordering on insolvency. Until that happens, we will continue to go to regular courts like any other person, even though the judges hands are already full. They will continue to take the matters as they come. You will see a situation where a judge will handle insolvency matter, handle maritime case next, then the other may relate to trademarks on the same day with the same judge and there are limits to what human beings can do and there are also limits to what you can expect.One other challenge is long adjournment of these cases without bearing in mind the time factor and the need to have these debts sulk back to the banks or back to the system in time. Like I said, it is a big problem in the sense that it is not even limited to the lower courts. If the debtor, for example, decides to challenge any decision and it has to go to the higher courts, it could be there for years. Even if we succeed in pushing through, the quest for specialised courts, what we will get is that the matters are speedily handled in the first instance, but when appellant jurisdiction is invoked, we may be back to square one. But we take it as it comes, first of all, let us get these specialised courts in place, then we can take it from there.Generally, how do you then assess insolvency practice in NigeriaTo me, insolvency practice is unduly being projected in the country. It is not meant to be that way. We have what is meant to be insolvency practice in other climes, like in England, but it is not as prominent as ours, because of the system. For example, if you owe a debt, may be in England, it takes merely a letter. You dont need to be reminded or you will not even rush to court to say, oh! Stop this man from coming after me, no court will give you such injunction, no court will come to your aid. And if you give your house as mortgage and you default, it is almost automatic, acquisition of mortgage and foreclosure, you dont have issue. But here, it is protracted and then it gives people like us the opportunity to come in and say: this is it, which ordinarily should not be so, and now we have insolvency practitioners.In other climes where things work, it is never like that. I have occasions where people come from overseas to compare insolvency practice here in Nigeria vis-à-vis insolvency practice in other parts of the world, and we found out that more often than not, the legislation is the same, the laws are virtually the same, what is different is enforcement.For example, a company that is insolvent in United Kingdom will be the first to admit and then, if a receiver is appointed, it does not even think of resisting the receivership or going to court to challenge the receivership, nobody will listen to you. And if you do, the kind of damages and costs that you will incur will serve as a deterrent to that overture, so that is the difference and that makes it difficult. Even for us to operate, because for you to fight bank customers like that you have to put on your experience, all your paraphernalia that you have acquired all over the years to force customers in this case to perform.Dont you think these problems come from the banks recklessness in granting of credit facilities without due diligenceThat is a factor that was even highlighted during the sanitisation exercise. Some of these loans are questionable. Some of these loans shouldnt have been given in the first instance. But in an ideal situation, even if you get these facilities and there are problems along the line that make you not to perform, if all the indices were right, before they gave you the facility and suddenly, something changed, then, the loan went bad, ideally, you should be the first to come back to say, this is the position.You took a loan, you mortgaged your house or property whatsoever and you shouldnt be in the vanguard of challenging the acquisition of mortgage since you freely gave it to the person, which is not here.What brings about courts indiscriminate issuance of ex-parte orders to debtorsI told a court in one matter in Abuja on the danger of reckless granting of ex-parte recently. In that case, there was a mortgage, it was clear and there was a default, and it was clear. What we did ordinarily was to write to the debtor to come, for us to see how we could solve this problem. But surprisingly, he went to court and the court gave an order restraining the exercise. When the return date came, I told the court that if we wanted our economy to grow, this was not the kind of order we should be granting. It was apparent from the face of it that this man took these facilities and mortgaged it, the documents were there staring the judge in the face. There is no excuse whatsoever for giving that kind of order. What are you encouraging At best, you can put them on notice. So really, it is a dicey situation and in some cases, owing the bank really deserves granting of ex-parte, but more often than not, the judges should exercise restraints in granting ex-parte, moreso, when it is evident that the applicant is owing the respondents banks some money at that point in time.The best position is to put the other parties on notice so that the real truth of the matter is properly ventilated.Why is it difficult for people to declare themselves bankrupt in Nigeria as it is done in other climesIt is so because our economy and ethos here are quite different from those in other climes. The signal associating with declaring yourself bankrupt come with other variables. If you declare yourself bankrupt, you may not perform some obligations, it is like almost committing economic suicide. But I believe that issue does not necessarily have to get to that level before you make conscious effort of ensuring that outstanding obligations are properly addressed.What we detest is the penchant of customers who owe to fight the institutions where they have so much benefitted from. You dont necessarily have to go all out to declare bankruptcy. Really, there could be difficulty, if one is honest and pious about issue, if you take a facility and you have really not misused it, you should have asset to cover it and you dont have to horn the world. Sometimes, you have a house somewhere and can properly use it to service the debt, but you dont want to let go.Just as in politics, it is the same thing in economy. You agree to take something from somebody and you dont want to give it back. There could be genuine excuse. I am sure no bank, in the face of open and honest reason for inability to pay will still go after the debtor, if you sit down with the banks and talk. But the problem is that sometimes, you are given a facility to do A, you have extended it to BCD, without the knowledge of the bank, and when things didnt work and the bank asks you to bring the money back, you start to fight. Those are the variables that we see in our practice.
Click here to read full news..
