By Lukman Olabiyi
The third prosecution witness in the ongoing trial of former managing director of the Asset Management Corporation of Nigeria (AMCON), Mallam Ahmed Kuru, and four others, has told Justice Mojisola Dada of the Special Offences Court in Ikeja, Lagos, that AMCON acquired 4,000 loans, including the one involving Arik Air worth billions of naira.
The witness, Abbas Jega, former executive director of Credit, testified yesterday during the trial over an alleged N76 billion and $31.5 million fraud.
The defendants in the six-count charge of conspiracy, stealing and abuse of office include Ahmed Kuru, Capt. Roy Ilegbodu (Managing Director of Arik Air), Kamilu Omokide (Receiver Manager of Arik Air), Union Bank Nigeria Plc and Super Bravo Limited.
Jega explained that AMCON bought the loans from various banks, including a major one from Union Bank in December 2011, which was tied to Arik Air.
“We paid Union Bank on December 31. In January 2011, Union Bank asked us to meet with HSBC and EXIM Bank in London. At the February 4, 2011 meeting, Union Bank announced that AMCON would now lead Arik Air’s debt restructuring due to CBN’s intervention,”Jega said.
He further disclosed that Union Bank had exceeded its single obligor limit due to the size of Arik’s debt and had to offload the loan. Although the facility was said to be performing, it was actually a guarantee for foreign lenders, not a conventional loan.
“It was during the London meeting we discovered that what Union Bank sold to us was not a loan but a guarantee, meant to back Arik’s payments to foreign lenders in case of default,” Jega said.
Back in Nigeria, AMCON summoned Union Bank to clarify the situation. According to Jega, AMCON reached an agreement that Union Bank would refund the money for the guarantees, and AMCON would then take on the obligation of repaying the lenders on Arik’s behalf.
Jega said Arik Air’s chairman at the time avoided AMCON, believing they should not be involved since the original loan was with Union Bank.
However, due to CBN’s policies, including one that barred AMCON debtors from accessing new credit, AMCON restructured the loan and even injected additional funds to help Arik resolve capital issues.
“We signed restructuring agreements, and AMCON gave Arik more funds to help stabilise its operations,” Jega added.
He noted that AMCON acquired loans from various sectors, but some were riskier, such as aviation. He referenced a directive from the then-Minister of Finance, which allowed some loans to be written off to prevent systemic collapse, especially in the capital markets and aviation industry.
“To avoid collapse of the airline industry, the finance minister ordered AMCON to write off certain loans, which saved many operators,” he said.
On Arik’s financial model, Jega explained that airlines typically do not take conventional loans but instead use structured financing backed by aircraft-generated revenue.
“Union Bank misrepresented the Arik facility as performing but when AMCON took over, it was clear the arrangement had failed. Arik could not meet capital needs or adjust to the new terms.”
He said AMCON attempted two solutions: first, a debt-equity conversion, and second, gaining management control. Arik initially agreed to management oversight, including appointing a Managing Director and Chief Financial Officer, but later stalled implementation.
“We also wanted a professional evaluation of the airline. Arik had valued itself at $3.7 billion, which we found unrealistic. We couldn’t agree on the valuation terms before I left AMCON,” Jega noted.
During cross-examination by Prof. Taiwo Osipitan (SAN), counsel for the first and third defendants, Jega confirmed that Kuru and Omokide did not attend the London meeting and were not part of AMCON’s negotiation team with Union Bank.
He also clarified that neither defendant influenced AMCON’s internal financial movements or the CBN directive barring AMCON debtors from borrowing.
“That policy came directly from the CBN,” he emphasised.
Asked what he meant when he said Arik was over-trading,”Jega explained: “It means trying to do too many things at once without sufficient working capital.”
He noted that although Arik initially agreed to restructuring efforts, it later failed to follow through.
The trial was adjourned to June 30 for continuation.