On September 4, 2014, Asset Management Corporation of Nigeria (AMCON), the Nigerian “bad bank” established after the severe crisis that rocked the banking sector in 2009, divested its participation interests in Ecobank to the profit of Qatar National Bank. The following day, Amcon sold its shares acquired in 2010 in Union Bank to Atlas Mara. However, on September 9, 2014 the Nigerian media revealed that the sale of Mainstreet Bank, one of the three banks still held by Amcon had been postponed to October 31, 2014. Amcon’s failure to meet its target date of September 15, 2014 highlights its challenge to divest from Mainstreet Bank’s share capital. This is a victory for governance in Nigeria. Banking is about trust and without trust the financial system simply cannot operate.

By way of background, Amcon acquired in and around 2010 several distressed banks in complete opacity. At that time, the bad bank’s actions could have been justified by the critical situation in the Nigerian banking industry. However, this is not adequate enough to explain how the shareholders and debtors were stripped off theirs rights without prior notice or compensation. These shareholders remained powerless as the banks were acquired, liquidated, or merged arbitrarily. Among these banks were PHB, Spring Bank and Afribank that are in the process of being respectively divested as Keystone, Enterprise (recently sold for 340 million dollars to another Nigerian bank) and Mainstreet Bank.

The case of Mainstreet Bank, in which Intangis maintains exclusive rights, illustrates Amcon’s questionable approach in dealing with the Afribank’s liquidation. First, the Purchase and Assumption Agreement (PAA) that affected the transfer of Afribank’s assets and liabilities to Mainstreet Bank is a forgery. The missing pages and undated agreement provided sufficient evidence for the International Court of Arbitration in Paris to issue a decision in our favour. The International Court of Arbitration also pointed to serious irregularities in respect to the validity of the agreement and therefore the legality of the transaction. Second, Mainstreet Bank’s failure to provision in compliance to the international reporting rules (IFRS), its liabilities estimated at 1.4 billion dollars should encourage potential investors to be more cautious. Finally, legitimate questions remain on the ultimate beneficiaries of the sale proceeds of Amcon’s divestment of its participation interests in these banks.

Nigeria, the new African Economic Power, has a duty to lead by example, especially as the country becomes the preferred destination in sub-Saharan Africa for private investment. The message from the “Amcon Affair” could set a negative precedent. The perception of governance risk, opacity, and disregard for the rule of law by the financial community in general is as crucial as the attractiveness of Nigeria and its economic performance. The issues raised by Amcon’s mandate in the restructuring of the Nigerian banking sector must be addressed, hence, Intangis’ ongoing legal proceedings in the Supreme Court of the State of New York.

 destination in sub-Saharan Africa for private investment. The message from the “Amcon Affair” could set a negative precedent. The perception of governance risk, opacity, and disregard for the rule of law by the financial community in general is as crucial as the attractiveness of Nigeria and its economic performance. The issues raised by Amcon’s mandate in the restructuring of the Nigerian banking sector must be addressed, hence, Intangis’ ongoing legal proceedings in the Supreme Court of the State of New York.

By Jean Missinhoun – a senior partner at Intangis, an American investment fund.

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