Experts raise concerns over FG’s plan to fund deficit from privatization
Zainab Ahmed, Nigeria's Finance Minister


The rising judgment debts awarded against Nigeria by local and international courts of arbitrations for contracts violations have continued to assail the nation’s finances, Business Hallmark investigation has revealed.
The situation has left the nation counting huge losses as government grapple with reduced revenues.

The Attorney-General of the Federation and Minister of Justice, Abubakar Malami, had last Monday disclosed that the Federal Government had settled a long-standing $5.26billion contractual dispute with a foreign investor group in the steel sector for $496million.

According to Malami, the mediation proceedings were under the Alternative Dispute Resolution framework of the International Chamber of Commerce led by Phillip Howell-Richardson.

BH reliably gathered that the dispute arose from five contracts entered into by the administration of former President Olusegun Obasanjo between 1999 to 2007, which concessioned some Nigerian companies, particularly the Ajaokuta Steel Company Limited (ASCL) and the National Iron Ore Mining Company (NIOMCO) in Itakpe, to an Indian business conglomerate, the Global Steel Holdings Ltd (GSHL).

The contracts were, however, terminated by the administration of former President Umaru Musa Yar’Adua in June 2008 after years of alleged inactivity on the part Global Steel.

Expectedly, the termination of the $5.26billion worth contracts sparked off a prolonged legal battle in local and international courts, with Global Steel demanding over $10billion in damages.

The saga eventually culminated in last week’s settlement by the Federal Government to the tune of $496million.

The Global Steel contracts debacle, BH findings revealed, is just one out of several contracts judgments the nation is currently battling hard to extricate the country from, by either appealing them or negotiating amicable settlements with aggrieved parties.

The huge commitment, several government sources informed our correspondent, has grown into a huge monster threatening the nation’s financial stability.

A senior lawyer who handles dispute arbitration cases for the federal government who did not want his identity disclosed described the situation as alarming and embarrassing.

According to him, top government officials and their collaborators in the private sector are complicit in deliberately short-changing the country with the untidy way they handle the controversial agreements for pecuniary gains.

“Or how do we explain the way and manner supposedly well-learned and experienced government negotiators and lawyers usually append their signatures on questionable contract deals, trading off their father-land’s commonwealth to outsiders?

“Several cases abound where Nigerian officials either ignorantly, stupidly or deliberately with their two eyes opened put the nation in trouble by signing off on unworkable contracts.

“Two examples that readily come to mind are the Azura Power Plant in Edo State and eleven (11) electricity distribution firms deals.

‘In the first instance, the government sold the 11 discos to new investors for $1.26billion, but signed an undertaking to pay $2.3billion to repossess the firms.

“Is that not stupid? Who does that? The Azura Power plant agreement is even worse. Under the Pull Call Option Agreement, Nigeria is obligated to pay between $30 million and $33 million monthly to Azura for power generated, whether energy is transmitted or not.

“Since the plant began operations on May 1, 2018, her owners have taken over $1.2 billion from the country’s foreign reserves without commensurate service.

“There was a time the plant was down for several months, yet the government was obligated to pay for services not rendered.

“Though most Nigerians are not aware of it, this is another epidemic, this time financial epidemic, that is ravaging the nation”, the top legal luminary lamented.

Multiple sources informed BH that the country is currently liable to the tune of over $40billion in botched local and international contractual agreements.

Using the official exchange rate of N430, the amount translates to approximately N17trillion and N29trillion using the parallel market average of N730.

The judgement debts and other financial commitments include the $9.6billion judgement debt in favour of Process and Industrial Development Limited (P&ID) over a botched gas project, by the United Kingdom Commercial Court that is under appeal; the $276 million Combined Expatriate Residence permit and Aliens Card (CERPAC) judgement debt; the $489 (plus interests) Interstella Communication Limited vs NITEL judgement debt and the 2006 Enron Nigeria vs Lagos State government judgement debt of $12million (risen to $121million).

Others are the Federal Government/LR Avionics debt of $9.7million; the $418m Paris Club refunds judgement debt and the £2.5 billion (now over $15bn plus interests) debt judgment awarded Petro Union Oil and Gas Company Ltd. against the Central Bank of Nigeria (CBN) and Union Bank of Nigeria (UBN), among several others.

Asides multiple judgements obtained by foreign interests against the Federal Government and some of its agencies in international courts of arbitrations, the government is also liable to several local debts judgements awarded by Nigerian courts.

Some of the liabilities include the $1.638 billion awarded to the Delta State government as 13% derivation sum due as arrears of revenue payable to the state by the Court of Appeal; N81.9billion Mobil Producing Nigeria Unlimited/NNPC/CBN versus Ibeno Local Government Area of Ibom State; N800 billion judgement debt awarded to Egbalor, Ebubu community in Eleme Local Government Area of Rivers State against Shell Nigeria and the Federal Government which owns 49% of the liability, as well as the N2.5billion judgment debt in favour of Innoson Nigeria Limited against the Nigeria Customs Service (NCS) and many others.

While some of the judgement debts are legitimate and well deserved, majority of them, legal experts claimed, are frivolous and should be questioned.

According to the legal experts, most of the litigants (foreign companies) had actually violated the terms of the various agreements they signed with the Nigerian government by not fulfilling their own side of the bargain, like the non bringing in of the much needed foreign investments, but were rather leveraging on the assets of the companies they acquired to raise loans from Nigerian banks.

“For instance, in the case of Second, Global Steel, the Indian company was busy asset stripping the assets of the companies it had concession without regards for their fortunes.

“The companies were also not paying taxes with their promoters not prosecuted in Nigerian courts. These are enough reasons to vitiate the agreements.

“But the firms and their Nigerian collaborators are allowing them to get away with blue murder, while they turned around to blackmail the country in international courts

“Though, I am not a fan of the current administration, it has done well by not allowing the country to be short-changed by economic saboteurs.

“It is on record that not a single debt judgment, apart from the ones against overzealous security agencies like the police and the DSS by Nigerians, had been awarded against the country.

“The administrations of former Presidents Obasanjo, Yar’Adua and Jonathan did not contest the cases in court until it was too late.

“It did not come as a surprise that many public officials had been jailed or reprimanded by this administration for deliberately skewing the problematic contracts against their own country.

“As it is, the country, apart from using scarce resources to pay off dubious judgment/contractual debts, is also at risk of having her assets abroad seized to pay of the debts.

“Several of the litigants had already made moves to effect the seizure of Nigeria’s funds and properties in Europe and America”, stated Barrister Ola Ibodapo, a dispute and arbitration attorney based in Lagos.

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