Nigeria is on tenterhooks as it awaits progress on the matter of a $9b penalty that a British court levied her for failure to honour a contract. Mr Justice Butcher of a UK High Court ruled in favour of Process and Industrial Development (P&ID) Limited in the breach of contract claim for Nigeria’s failure to build a pipeline for a gas gathering facility the firm was to construct near Calabar, Cross River State.
Beyond the humungous sum what is even more worrisome is the failures of corporate governance and diligence in the management of Nigeria’s affairs it reveals. The issues are so elementary that getting to this pass suggests not just failures but even a conspiracy to fail. Many questions arise from the trajectory of the case. How and why it got to this point is a wake-up call for both government and citizens.
The facts are straightforward. P&ID is a British-registered firm with claims to expertise in managing gas infrastructure. Nigeria signed in January 2010 an agreement with the firm. They would construct a facility to convert flared gas to one that our power plants could utilise. In return, Nigeria would build the pipelines to the site. The contract provided for dispute determination by a UK court, thus favouring the client rather than the principal from the beginning.
Both parties failed. However, P&ID was quick to claim breach against Nigeria. Negotiations commenced to the point where the outgoing government passed the notice of an agreement on a fee of $800m for execution by the incoming government.
“Government magic” a la Nigeriana then set in. The federal government did nothing.
It did not pay the agreed fee; it did not negotiate with the firm or convince it to go back to the site given the importance of the project to the agenda of the Buhari government. Zilch. It did nothing until the P&ID went to court. The federal government then ignored the advice of its counsel, preferring to change the team.
The comedy of errors is unfortunately not funny at all. The judgment sum is about 20 percent of our foreign reserves. Nigeria could default on its Eurobonds and other loans if the matter sails through. The country risks another recession, too, if it pays that colossal debt.
The issue demonstrates the continued high price Nigeria has paid for the lethargy in government since May 2015. No one had eyes on the ball. Further disclosures speak of even more damaging causes of this failure.
The Auditor-General of the Federation reports the serial failure of government and its MDAs to observe procedures and requirements for accountability. The report records improper records of transactions, false claims and failure to submit reports at all. Then there is recklessness in the management of public finances.
The list of non-compliant agencies is bewildering. The Presidency, the spearhead of an alleged anti-corruption crusade, is the foremost culprit. Then there is the EFCC and the National Assembly. The report implicates all the ministries.
The other issue is the disregard for the rule of law as well as due diligence. Who signs contracts that fail to take cognisance of national interest, such as agreeing to dispute resolution in a foreign land and in the home of a party to the issue? Treasury managers since the SAP era learnt to denominate payments in local currency given our currency fluctuations.
Finally, there is a lack of executive capacity. The federal government should rejig its team, focus on the ball and be committed to reforms. Nigeria must do all it can now to get a reversal of the Butcher fine.
