A former Executive Director at Asset Management Corporation of Nigeria, AMCON, Mr. Abbas Muhammed Jega, testified before Justice Mojisola Dada of the Special Offences Court, Ikeja, in the ongoing case between Arik Air and the former AMCON MD/CEO, Ahmed Kuru, being prosecuted by the Economic and Financial Crimes Commission, EFCC.
The other defendants being prosecuted by EFCC on a six-count charge bordering on conspiracy, stealing, and abuse of office are; Mr. Kamilu Omokide, a former receiver manager of Arik Air Limited; Captain Roy Ilegbodu, Arik Air Chief Executive Officer; Union Bank Limited; and Super Bravo Limited.
Jega is the third prosecution witness in the ongoing trial of the former AMCON boss and four others, who are standing trial over alleged financial misappropriation amounting to ₦76 billion and $31.5 million.
Arik Air/Union bank business relationship
Narrating the details of what he could recollect about the Arik Air/Union Bank business relationship that went bad, Jega recalled that following the directive of the Central Bank of Nigeria, CBN, regarding the dumping of non-performing loans to AMCON, Union Bank had informed AMCON then that the CBN informed them to collapse the guarantee of Arik into loan because of the huge amount involved in the Union Bank had exceeded the single obligor limit allowable by the apex bank.
Jega whose directorate in AMCON was in charge of the transaction (as Executive Director, Credit) disclosed that it was in a certain meeting held in London that we “first knew that what Union Bank sold to us was not a loan but a guarantee given to some foreign lenders, that in the event Arik died or burnout, Union Bank will pay the instalments.”
The witness, while being led in evidence-in-chief by counsel to the EFCC, Dr. Wahab Shittu, SAN, Jega stated “One of the loans that we bought from Union Bank in December 2011 was facilitated to Arik Air runs into billions of naira.
“We paid Union Bank on 31st December. While in January 2011, Union Bank accosted us and they said they wanted to have a meeting with HSBC and Union Bank.
“We had a meeting on 4th February 2011, where Union Bank said that they are giving AMCON as the new lender to Arik Air because of the Central Bank of Nigeria, CBN’s intervention.
“In the meeting Union Bank told the banker, HSBC was there and the EXIM Export, they said the CBN has asked them to collapse into an unbalanced sheet loan to Arik and because of the huge amount involved the Union Bank has exceeded a single unit and since they have exceeded a single unit, they have to sell the loan.
“They said clearly at that time that the loan was performing and the guarantee.”
According to Jega,“It was at the meeting in London that we first knew that what Union Bank sold to us was actually not a loan but a guarantee given to some foreign lenders, that in the event Arik does not pay in instalments.
“We now invited Union Bank to come and explain to us why it is a guarantee. The agreement we reached with Union Bank for those guarantees is that they should return the monies to us…, and that AMCON will repay the payment on behalf of Arik.
“We invited Arik, I can recall vividly that the Chairman of Arik as at then was avoiding us, because he believed we should not be talking to AMCON because he then have a non-performing loan in Union Bank.
“However, some of the majors with the CBN which include if you are owing AMCON you can not borrow. Some of the majors have forced him to now come to the table and we signed some restructuring agreement on loans.
“We even gave Arik more money to help them sort out their capital problems after we achieved negotiation. The loans is different form the waiver.
“The money we collected back from Union Bank and is being held for the purpose of repaying the instalment of the guarantee when they mature.
“We bought loans from different sectors of the economy and we know in the economy, some sectors are more problematic than others..
“To avoid the collapse of airlines, Hon. Minister of Finance at that time gave an order that the loans of capital market.. AMCON should be written-off and that is what saved the capital market in Nigeria and many operators where able to bounce back, so the fact that they are holding monies and created the loans… to Arik. We created the loans but the loan that is created the money is also a loss. It means that it will be very difficult for that airline.
“I am aware that normally in the aviation industry airlines don’t take loans via… They would literally do a type of arrangement that Arik Air did while loan will get a guarantee, they will now collect the aircraft, then they will use the revenue being generated by the aircraft to be paying the loans…and write it off.
“Union Bank told the foreign lenders and the Export EXIM that the facility is performing.
“Since we took over the arrangement of Union Bank, it was not performing and the nature of the facility is changed and Arik Air was not enumerable to that change. Also Arik was not able to source its capital needs from the money market.
“While I was with AMCON, we tried two things to save the situation, we tried to sell the idea of jet.
“We told Arik that the burden we are carrying in our books are not being sustained by airline, so the best option would be, is to convert some of that debt.
“We thought that would be better than to allow that airline to die gradually.”
He stated further that, “The first step is that there should be a professional valuation of the airline. The normal thing would be that since the two are now to own, each will bring a valuer.
“But Arik had already done its own valuation. I think that value was 3.7billion dollars, we injected that that is not the normal thing but it easier we appoint chain valuers or we discount the value of that dollar rate that is given. We could not agree on the value of discount. Then we tried the second option.
“We said we should have some management control in the airline, we wanted to appoint the managing Director, executives and the chief financial officers in the airline because we wanted to have oversight and financial control.
Arik problem comes from over-trading -witness
“Initially, the owners of Arik agreed to the second option but they dragged on on the agreement issue. This is at the stage at which I left AMCON, he said.
The witness further stated that one of the functions of AMCON is to buy eligible debt assets from financial institutions.”
At this point as the witness cited AMCON Act 2010, Olalekan Ojo, SAN, counsel to the fourth defendant objected and Professor Taiwo Osipitan, SAN, counsel to the first and third defendant, also aligned with him.
Justice Dada held that they are guided by the law and he is not interpreting the law.
The witness continued, “The CBN Governor issued directives to banks and AMCON in 2010, telling us all what is an eligible and how AMCON should define it by the banks
“What is most clear in that order, it is either a loan is non performing or if it is tainted, that is wrongly given,” according to Jega.
“I cannot remember how exceeding a single obligor limit not performing loan.”
When Dr. Shittu asked what role did Arik played, he explained that “Arik had no role because our only negotiation is with the bank and those 4000 loans.”
Under cross examination, Prof Osipitan asked about the role of the first and third defendants at the London meeting, the witness said, they didn’t attend so they played no role.
He also said they defendants were not part of the AMCON team that took part in negotiation in respect of the purchase of the loan by AMCON from Union Bank.
Prof. also queried the prosecution witness further, “As per the movement of funds of the balance sheet are not part of the problem, the witness replied “they are not.”
“Are they part of those who decided that any person owing AMCON should not borrow any capital, he told the court, “It was CBN.
“Arik problem comes from over-trading, I said that in my statement.”
The counsel asked him for an explanation of what he meant. Jega responded, “When a business is trying to do so many things at the same time without enough working capital.
Again, he was asked, “Did you find their hand? He replied in the negative.
He stated that between the two options, Arik was dragging. In his words, “At a stage, they agreed but when it came to implementation, they were not forthcoming.
Justice Dada adjourned the trial until the scheduled dates for its continuation.
