The $9.6 billion judgment against Nigeria
VERY few things can be more harrowing for a government than the judgment by a London court granting the Process and Industrial Developments Ltd (P&ID) the right to seize $9.6bn in Nigerian assets. The sum is about 20 per cent of the country’s external reserves of $45billion. The judgment is a fallout of the failure of the Nigerian government to keep faith with the terms of a Gas Supply and Processing Agreement (GSPA) between it and the company.
In 2010, the two parties signed an agreement that P&ID would build a state-of-the art gas processing plant that would convert wet gas to dry gas and supply same to the national grid at no cost to the country, while the Federal Government would lay all the pipelines and supply gas to the plant. The company was to make its money by exporting the byproducts of the wet gas over a period of 20 years. However, neither happened; the government did not lay any pipes and P&ID did not build any plant. This resulted in a dispute with the company accusing Nigeria of breach of the contract, depriving it of the chance to earn a profit and claiming that its building the plant was contingent on the government laying the pipes.
The company, in keeping to the terms of the contract, went for arbitration in 2012 and a settlement was reached in 2015 with Nigeria agreeing to pay $850 million to it in several installments. But Nigeria did not keep to the terms of the arbitration, forcing P&ID to go back to arbitration, and on January 31, 2017, the arbitration tribunal ruled in favour of the company, ordering Nigeria to pay US$6,597,000,000, being the value of the profits which P&ID would have earned from March 2013 with interest. But again, the government refused to pay, forcing the company to approach a commercial court seeking an enforcement of the tribunal’s ruling. The court held that Nigeria erred in the handling of the matter and ruled that the country must pay $9.6 billion to the company.
The judgment is a double loss for the country as not only would it lose more money than it can afford, it has also lost the opportunity to improve electricity supply. The catastrophe that befell the gas processing contract is reminiscent of the disaster that followed the Lagos metro line project which was initiated by the Lateef Jakande administration in 1983 but was cancelled by the military administration of General Muhammadu Buhari in 1985 at a cost of $78 million to Lagos State despite losing the opportunity to ease the traffic problem in Lagos. Lagos State ended up paying for the metroline that was not built.
It is our considered view that the GSPA failed because it is characteristic of succeeding administrations not to follow through with programmes and projects initiated by their predecessors. This was evident at every stage of the bungled project and the jumbled arbitration process. The project fell through because Alhaji Umaru Yar’Adua, in whose tenure the agreement was signed, died shortly after the deal was concluded. His successor, Dr Goodluck Jonathan, did not continue the project but tried to reach an agreement with the company. When P&ID went into arbitration with the administration of Jonathan and an agreement was reached in favour of the company, the Buhari administration that succeeded Jonathan abandoned the agreement. As a result of this negligence at the highest level, not only will the country have to forfeit $9.6 billion unless the judgment is reversed at a higher court, Nigeria has also been portrayed in the international community as an unserious country whose word is not its bond.
We are of the opinion that to guard against a recurrence and to save the country from the pains and pangs of abandoned projects which litter the whole country, a Project Continuity and Implementation Act, which would compel new administrations to complete projects initiated by their predecessors, should be enacted. While we appeal to the Federal Government to reach out to the P&ID management to find ways of resolving the crisis without crippling the economy, everyone whose culpable negligence brought the nation to this strait should be made to face the music.