BY ANTHONY OMOH
The Asset Management Corporation of Nigeria (AMCON) has explained its decision to take over Arik Air (in Receivership), citing the airline’s overwhelming indebtedness of NGN227.64 billion debt owed to banks. AMCON revealed that these debts were acquired from Union Bank of Nigeria (UBN) and Bank PHB (now Keystone Bank) after the loans were classified as non-performing. This repossession, AMCON stated, was undertaken under the powers granted by the AMCON Act, designed to stabilize and recover bad assets.
Following the back and forth since the 2017 takeover, AMCON also says it has not ruled out liquidating Arik Air. It only managed the airline company acting on government directives at the time.
According to AMCON, UBN initiated the loan’s classification as non-performing in compliance with Central Bank of Nigeria (CBN) prudential guidelines. The bank subsequently sold the loans to AMCON, which stepped in to manage and recover the staggering debt. In a statement, AMCON disclosed: “In a letter dated October 22, 2010, UBN informed Arik that its loans, which amounted to a staggering $474 million (approximately ₦70 billion at the time), were non-performing and posed a threat to the bank’s stability.” This, AMCON noted, was a significant factor in Union Bank’s financial challenges.
AMCON further explained that Arik’s financial troubles extended beyond Union Bank, stating: “It is important to note that beyond Union Bank, Arik’s loans were also sold to AMCON by Bank PHB (now Keystone Bank), and Sir Johnson Arumemi-Ikhide has, on several occasions, admitted to this indebtedness.”
Additionally, AMCON highlighted that Sir Johnson Arumemi-Ikhide, the promoter of Arik Air, accumulated significant debts under other businesses, including Rockson Nigeria Limited and Ojemai Farms Limited. These companies, combined with Arik Air’s liabilities, contributed to a total indebtedness of over ₦455 billion as of December 31, 2024. Of this amount, AMCON stated, “Arik owes AMCON ₦227,637,469,394.34 billion; Rockson Engineering owes ₦163,502,837,397.75 billion, and Ojemai Farms owes ₦14,031,457,980.71 billion.”
Why Receivership Became Necessary
Before its receivership, Arik Air was plagued by insolvency and operational paralysis, which left it on the brink of collapse. A KPMG report commissioned by AMCON revealed that Arik had been balance-sheet insolvent with a negative equity of approximately ₦80 billion and total liabilities of ₦289 billion by December 31, 2016. Furthermore, AMCON disclosed: “PwC Nigeria, the company’s long-standing auditors (previously appointed by Sir Johnson Arumemi-Ikhide), conducted audits for the years 2015 and 2016. These audits confirmed that Arik had been technically insolvent since 2014, with its liabilities exceeding its assets throughout 2015 and 2016.”
When AMCON’s Receivership Team assumed control, the company encountered significant operational challenges, including inadequate cash reserves, grounded aircraft, and mounting debts. AMCON noted: “When the Receivership Team took over Arik, the airline was financially stranded and on the verge of shutting down. Several planes were grounded, while service providers withdrew support over unpaid debts.” The corporation added that this operational paralysis caused Arik’s on-time performance (OTP) to drop below 40%, with frequent flight cancellations.
Contrary to claims of mismanagement, AMCON clarified the state of Arik’s fleet upon takeover: “Upon taking over the company, the team found a fleet with only eight operational aircraft (as against the inaccurate 30 being bandied about). Many of the planes required urgent maintenance, while others had been used as collateral for Sir Johnson’s personal debts, leading to repossession by creditors.”
AMCON’s Legal Powers and Responsibilities
AMCON emphasized that the takeover was conducted within its legal powers under the AMCON Act. Specifically, Section 6 empowers the corporation to purchase, manage, and dispose of Eligible Bank Assets (EBAs). AMCON explained: “The appointed Receiver or Receiver Manager holds the discretion to either manage, sell, or liquidate the assets of the troubled airline.” However, acting on Federal Government and CBN directives, AMCON chose to manage Arik Air’s operations instead of liquidating its assets, prioritizing stability over immediate debt recovery.
Despite facing public criticism, AMCON maintained its resolve to recover debts, noting: “The leadership of AMCON knows that there is no nice way of recovering debt. For that, obligors go to any length to assassinate the characters of AMCON staff, malign the corporation’s name, and intimidate our personnel.”
AMCON’s Resolve to Recover Debts
AMCON’s intervention in Arik Air highlights the complexities of stabilizing distressed companies and recovering bad debts. By addressing insolvency and operational challenges, AMCON’s efforts reflect its commitment to fulfilling its mandate under the AMCON Act. While the recovery process remains contentious, the corporation’s strategic approach underscores the importance of preserving critical national assets while pursuing financial accountability.
