- Where will Nigeria get $8.9bn to settle judgment debt over abandoned contract?
AT Nigeria’s expense, a British firm, Process and Industrial Developments Ltd. (P&ID) may soon smile to the bank, following its award of an $8.9 billion fine by a London Arbitration Tribunal. The fine consists of a judgment debt of $6.6 billion in damages and $2.3 billion in interest. According to a lead judgment by Lord Hoffman, the fine must be paid before or by February 15, failing which P&ID can enforce the award against Nigeria by seizing the country’s assets anywhere in the United Kingdom.
The Director, Press in the Ministry of Petroleum Resources, Mr Idang Alibi, confirmed the financial obligation adding that the Federal Government and the ministry were aware of it. He said the ministry would respond to it at the appropriate time.
We wonder when that appropriate time would be. This is a matter that has traversed three successive administrations. It actually began in the Chief Olusegun Obasanjo administration but was eventually consummated in Dr Goodluck Jonathan’s regime. The debt arose from Nigeria’s failure to execute its contractual obligations under a gas supply and processing agreement it signed with P&ID. Under the agreement, Nigeria was to supply the company with natural gas over a 20-year period. The fine is the punishment for Nigeria’s repudiation of that agreement.
This is curious not only from the business perspective and the country’s image, but also because, under the agreement, the project would have generated about 3,000MW of electricity for the country, using the natural gas that we complain of being flared daily. We would have thought that a power-hungry country like Nigeria would have kept faith with such contract as well as others that could lift it out of this power supply morass. Three thousand megawatts is huge by any standard, and it would have contributed significantly to the 7,000MW that is currently being generated in the country.
This contractual transaction over which Nigeria is now to cough up a whopping $8.9 billion fine is a sad reflection of the way the country is governed. It is a story in lackadaisical attitude, incompetence, impunity, disdain for court orders, lack of patriotism and, perhaps, corruption.
According to this newspaper report, P&ID accepted Nigeria’s repudiation of the agreement on March 20, 2013, and the country did not make any move to set aside the final award at the tribunal until the deadline to do so expired.
The report said further that attempts by P&ID to settle the matter were stalled by the Nigerian government. Indeed, it made reference to a particular May 3, 2015 offer of $850 million from the company, which was brought to the attention of the Buhari administration, but which was also rejected. Now, the country is saddled with a fine more than 10 times that amount.
The consequences of P&ID enforcing the award cannot be lost on anyone, not in the least the Federal Government. This is especially if it decides to go for oil revenues. At a time the country needs every foreign exchange it could lay its hands on to take care of infrastructural decay, pay the new minimum wage, as well as cater to other sectors of the economy, the implications can better be imagined. The $8.9 billion fine is about a third of the $23.9 billion budget that President Buhari presented to the National Assembly in 2017 and about a fifth of the country’s $43.2 billion reserves. Without doubt, this is a chunk of the country’s revenue and there is no way it can pay such a huge amount as fine without serious effects on the economy. Yet, the fine would have been avoided if public officials representing the country on the matter had been a little more diligent and patriotic.
The Federal Government must identify all those who brought this upon the country. Nigeria had been subjected to all manner of avoidable fines for incomprehensible reasons, both at home and abroad. We know such instances are not totally avoidable. But they can be minimised. That is why we have to investigate what really went wrong with this contract with P&ID. Blames must be apportioned and appropriate sanctions applied. This is the only way we can reduce to the barest minimum, such unnecessary expenses for a cash-strapped country.