Lessons From The $9bn Award Against Nigeria


Eze Onyekpere

censoj@gmail.com; 08127235995

The governance of Nigeria is always in the news for the wrong reasons; incidentally, most of the challenges facing the nation are avoidable. With our economic indicators virtually facing south, while our debt to revenue profile has hit 70%, the news that a British commercial court has imposed $9bn damages or fine against the Federal Government of Nigeria for violation of contract obligations calls for extremely sober reflections. It is a strong threat to our national fiscal sustainability considering that $9bn is about the actual retained revenue that accrued to the federal treasury in the 2018 fiscal year.

In our usual lackadaisical manner, the country signed a gas harnessing agreement with a company called Process and Industrial Development. The company was to process the gas for local consumption and for export while Nigeria was bound to supply the gas feedstock through building a gas supply pipeline to terminate at the location of the gas processing plant. One hundred and fifty million standard cubit feet (mscf) of gas per day was to be supplied to P&ID plant and gradually increasing up to 400mscf per day in the later stages of the project. Eventually, Nigeria defaulted and did not build the gas pipeline while P&ID did not invest a kobo in the project. But the company later initiated proceedings for loss of potential income and revenue which after so many years of back and forth, culminated in the award.

It is on record that the company did not invest a kobo and had not even acquired land for the gas plant before the Federal Government’s default. Yet, $9bn was awarded against Nigeria.

So many issues are raised by this award, coming at a time we can hardly get enough retained revenue to fund recurrent expenditure. It is the position of this column that this kind of threat provides opportunities to be harnessed for the reform of our fiscal governance laws and policies. If we must suffer loss, it must be one from which we can draw lessons for progress and to block the pipes of mischief which enable us to say “never again”. In every thereat, there must be an opportunity to develop a strength and to learn the right lessons.

The first issue is that Nigerian governments must stop entering into contracts and obligations they are not ready to implement. Our lack of respect for the sanctity of contracts ends in our jurisdiction. Other countries and partners, whether public or private, take themselves very seriously and do not enter into frivolous contracts they are not ready to implement. Signing a contract and announcing it to Nigeria add no value to the local economy or the security and welfare of Nigerians without the requisite will to implement the same. It is also believed that the government officials packaging the business would not have any opportunity for private gain if the contract is not implemented. To stop this trend involves the design of processes that ensure the buy-in of every ministry, department or agency and stakeholder necessary to guarantee the implementation of the project. This will involve high levels of public-public consultation and engaging the private sector to ensure that the project is not swept under the carpet.

The second issue is that every new government in Nigeria sees itself as not bound by agreements and obligations entered into by the previous government even when the two governments come from the same political party and one handed over to the other. For instance, that a contract was signed by the Umaru Yar’Adua government, of which Goodluck Jonathan was the deputy, can be no excuse for the abandonment of the contract after the demise of President Yar’Adua by the Jonathan administration. Was the need for gas gathering and processing for local consumption and export overtaken by any supervening events during Jonathan’s presidency? Discerning Nigerians will recall that President Olusegun Obasanjo’s National Economic Empowerment and Development Strategy led to the few achievements of his administration and before he left office, NEEDS 2 was at an advanced stage when virtually all stakeholders had been consulted and NEEDS 2 awaited a few inputs at the highest level to get it ready for implementation. But as soon as Yar’Adua took over power, he abandoned NEEDS 2 for his Seven-Point Agenda. This was done despite the fact Obasanjo virtually handpicked and installed him as President.

This attitude was also the same that led to the Muhammadu Buhari government to have a non-challant attitude towards payment and or engaging the less the $850m negotiated settlement done by the Jonathan administration, when it became clear that Nigeria had defaulted in this contract under consideration. The Buhari administration had two options, either to pay or further negotiate the award before it got out of hand. To stop this attitude, we need the Project Continuity and Implementation Act which will bind governments to continue and fully implement existing projects before staring new ones. To abandon an existing project or to stop the same, the government must show cause and reason(s) using empirical evidence, to justify that the project is no longer in the overall national interest and thereafter, the government would be duty bound to bring the process of the project to a closure either through negotiations or requisite settlements that will close the file of the project.

The third issue is that Nigeria has been signing agreements where all the penalty clauses are tilted against the country and we have little or no protection whilst all the benefits from the agreement accrue in favour of the other parties. This is not the first time we signed such agreements. How on earth did we end up signing an agreement that entitles a company to claim loss of earnings without having invested a kobo? Who was the lawyer that drafted the agreement and how much was he paid? Was it a private legal practitioner or a team of lawyers in the Ministry of Justice? Who reviewed the draft to make inputs? Did the company use its lawyers to produce the agreement and simply asked the representatives of the Nigerian government to sign? When the blind and or ignorant leads their colleagues or even persons who can see, they are bound to enter a ditch if they are under obligation to follow wherever they go. Nigeria has produced enough quality legal practitioners and scholars of national, regional and international repute, professional jurists of the highest learning, character and reputation; to fall for this kind of cheap blackmail is the worst thing to happen to this country.

To stop this madness, we need to have a system of using our best lawyers and jurists to draft and perfect agreements of this nature and to defend our legal disputes. Poor lawyering was responsible for our loss of Bakassi to Cameroon. Again, we did not use our first eleven for that case. And now, this one.

Nigeria now needs to move expeditiously, in a targeted manner and in the national interest to engage the company before our assets are seized. We could possibly ask the company to come back and we start constructing the requisite gas pipeline and fulfil our own part of the obligation. Alternatively, we can negotiate the award and see how we can reduce it to a minimum. It would not be an easy negotiation but we cannot afford to sleep over this.