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Why did President Buhari Fire Ex-Goldman Head of Amcon, Chike Obi

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Chike ObiPresident Muhammadu Buhari yesterday fired the head of a government-owned bad bank set up to resolve a financial crisis five years ago.

Mustafa Chike-Obi, chief executive officer of the Asset Management Corp. of Nigeria, AMCON, and a former Goldman Sachs Group Inc. bond trader, was replaced yesterday by Ahmed Lawan Kuru, according to a statement signed Femi Adesina, a presidential spokesman, and received by Elombah.com.

Kola Ayeye, Eberechukwu Uneze and Aminu Ismail were named as executive directors, taking over from Mofuluke Dosumu, Hewett Benson and Abbas Jega.

It’s an “enigmatic” decision because Amcon’s board had a mandate until November, said Bismarck Rewane, chief executive officer of the Lagos-based consultancy Financial Derivatives Co. “Amcon has a good reputation for competence,” said Rewane. “Chike-Obi’s very bright and highly-regarded.”

The Asset Management Corporation of Nigeria (AMCON) was established on the 19th July 2010, when then President of the Federal Republic of Nigeria Goodluck Jonathan, signed the AMCON Act into Law.  AMCON was created to be a key stabilizing and re-vitalizing tool established to revive the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy

Femi Adesina said by phone he didn’t know why Buhari changed Amcon’s management.

Kuru was a former managing director of Enterprise Bank Ltd., a failed bank which was owned by Amcon until last year. 

Buhari, who came to power in May after defeating Goodluck Jonathan in a campaign pledging to clamp down on corruption, appointed Emmanuel Ibe Kachikwu as group managing director of the state-run oil company, the Nigerian National Petroleum Corp., on Aug. 4.

Chike-Obi ran Amcon since it was established in 2010 to buy non-performing loans as banks and the economy of Africa’s biggest crude producer suffered from the oil price crash of 2008 and 2009. It bought more than 12,000 loans from industries including aviation, gasoline marketing and manufacturing for about 1.8 trillion naira ($9 billion).

Amcon managed to collect or reorganize 57 percent of the bad debts it took on at a rate of 107 percent what it paid for them, Chike-Obi said in May. While that was above the agency’s overall recovery target of 80 percent, the remaining loans would be harder to fix, he said.

Mr. Chike-Obi founded Madison Park Advisors, a financial service advisory and consulting firm in New Jersey, U.S.A, specializing in hedge fund and private equity investment advice and served as its managing partner. He also held senior positions in various Wall Street firms including Goldman Sachs, Bear Stearns and Guggenheim Partners among others. He graduated from University of Lagos with a First class degree in Mathematics and an MBA from Stanford University Graduate School of Business.

On the other hand Mr. Ahmed Lawan Kuru who replaced Obi has managed only failed financial institutions. He has been Managing Director of Enterprise Bank Limited since August 2011 and also serves as its Chief Executive Officer. Mr. Kuru served as an Executive Director of Keystone Bank Limited. Mr. Kuru served as an Executive Director of North Bank, West, Central and East Africa of Keystone Bank Limited. He serves as a Director of Express Discount Limited. He served as Director of Orient Bank Limited.

Chike-Obi said in the same interview he didn’t want to offer banks another bailout even as non-performing loans rose in response to the latest plunge in oil prices. It may prove difficult for Amcon to maintain that stance, according to Rewane.

“Whether we like it or not, Amcon is going to have to start buying assets again,” he said. “Asset quality is beginning to deteriorate because of the downturn in economic activity.”

Growth in Africa’s largest economy will decelerate to 4.8 percent this year, about half the average of the last decade, according to the International Monetary Fund.

Non-performing loans stood at 2.9 percent at the end of December and are rising, the central bank said in April. The ratio will climb to between 5 percent and 10 percent by the end of 2015, Fitch Ratings said last year.

As well as recovering its loans, Amcon is tasked with selling the last of its bank holdings. It owns Keystone Bank Ltd. and has stakes in Unity Bank Plc and Wema Bank Plc.

Amcon is meant to be wound down by 2023, when 3.8 trillion naira of bonds held by the central bank mature.

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