●●As Buhari Clears Obasanjo, Atiku’s 19-Yr-Old Mess
Almost all traditional and social media news platforms in the country were in the first week of September 2022 awash with the positive and patriotic resolution by Nigeria’s Federal Government of the long-standing contractual dispute with a foreign investor group, Global Steel Group on the Ajaokuta Steel Company.
Consequent upon the resolution, Nigeria would now pay $496m or 9% of the $5.258 billion earlier demanded by the company. The settlement agreement, according to Justice Minister Abubakar Malami, came into effect on August 19, 2022.
“Nigeria succeeded in reducing the claim in mediation brought by the international firm of King and Spalding, legal representatives of the Global group which earlier put up a claim for over $10 billion in arbitration before the International Chamber of Commerce, International Court of Arbitration, Paris in respect of five major contracts of 2004-2007, covering steel, iron ore, and rail”.
It might interest all well meaning Nigerians to recall that the seeds of the disputes can be traced to five contracts entered into by the 1999 -2007 PDP administration that gave complete dominance over the Nigerian Steel space to one company group, the Global Steel group.
Going down memory lane one can recall that in 2008 a new administration proceeded to terminate these contracts contrary to legal advice offered by the Federal Ministry of Justice, which cited the termination costs in the form of damages.
But for the termination of the Ajaokuta Share Purchase Agreement on 1 April 2008 after waiting for just 55 days to terminate, Government would have collected more than $26 million from Global Steel.
This was because the firm appeared unable to pay the first tranche for the Ajaokuta shares before the first anniversary of the agreement (25 May 2008). This failure would have given Nigeria a right to over $26m as liquidated damages under clause 12 of the Ajaokuta Share Purchase Agreement.
Global Steel, in consequence, took the FGN to the International Chamber of Commerce, International Court of Arbitration, Paris, commencing arbitration in 2008. Although the Federal Government negotiated a settlement in May 2013, the previous administration failed to implement its settlement agreement.
The recent resolution of the Ajaokuta Steel dispute after 14 years of international litigation, is no doubt an attestation to President Muhammadu Buhari’s efforts at freeing Nigeria from foreign debts occasioned by wrongful contractual Agreements.
In May 2020, Global Steel threatened a resumption of the arbitration and announced an anticipated claim in damages of over $10-14 billion against the Nigerian State in respect of the five affected contracts.
It is very strategic that the administration of President Muhammadu Buhari took the ‘bull by the horn’ in taking a decisive step to resist this claim, rather than pass it on to a future administration with ballooning interest payable.
In his strategy to forestall any future occurrence of this nature against the Nigerian state, Attorney General and Minister of Justice adopted a blueprint of seven principles for the cost-effective resolution of contractual disputes wherever they occur.
The principles are: use of institutional mediation, right choice of Federal Government’s counsel, use of financial advisers with reputational capital, importance of not discouraging foreign investment, fiscal responsibility, transparency, and the recognition that joined-up government produces superior outcomes
This uncommon attitude by public servants inspired Minister Malami to reaffirm the commitment of President Buhari’s administration of standing firm to continue to make assiduous efforts in “protecting the public interest and ensuring that Nigeria is not denuded of its resources through whatever means.”
Indeed President Buhari has now rescued Nigeria’s steel industry from interminable and complex disputes as well as saving the taxpayer from humongous damages.
Nigeria’s Thisday newspaper in a special report recently titled ‘Buhari: Unburdening Nigeria from Wrongful Contractual Agreements’, said: “there’s a swirling belief that most of Nigeria’s foreign debt are attributable to bad contracts entered into by the previous administration. Thus, the President Buhari administration, from the on set did not hesitate to free the country from many of such debts by challenging suspected agreements in various international arbitrations and engaging in meaningful negotiations to resolve genuine ones”.
The report quoted Minister of Finance Zainab Ahmed saying “Our national debt is not only a function of sovereign borrowings – it is swelled by legal claims brought as a result of contractual disputes. Terminating bad contracts is often as costly as entering into bad contracts”.
The actual figure of Nigeria’s foreign debt attributed to contractual dispute, arguably, is running into several trillions of naira that is capable of making the country go bankrupt if not well managed.
Thisday report added that the current judgment debt allegedly owed to Process and Industrial Development, P&ID is put around $10 billion, which if converted, with today’s exchange rate at the parallel market, is about N7 trillion.
This is just one of the country’s legal battles occasioned by faulty contractual agreements entered into by previous administrations. But for the timely intervention of the Buhari administration, Nigeria’s assets across the world would have been frozen by now, further crippling the nation’s economy.
Like the Attorney General of the Federation and Minister of Justice, Abubakar Malami disclosed recently Nigeria ended up paying $496 millions rather than $5.2 billion.
It is worthy of note that just like the P&ID dispute, the Global Steel dispute was not generated by this administration despite her efforts at resolving them. The deal was first brokered by the President Olusegun Obasanjo administration in July 2003, with the concessioning of the Ajaokuta Steel Company to SOLGAS (along with contracts to build a gas facility and a 2,300MW power plant), for $3.6 billion.
The 10-year concession contract, was meant to achieve the rehabilitation, completion, commissioning and operation of the steel complex, unfortunately, it was later cancelled, on the grounds of non-performance, and a new bidding process started.
Following the cancellation of the agreement, the Obasanjo administration, in 2004, then unveiled BUA International as winner of the new bidding process for the concession of Ajaokuta. Again, the administration cancelled the process, before finally granting the contract to Global Steel Holdings, GSH through a subsidiary, Global Infrastructure Nigeria Limited, GINL.
As a result of the development, Solgas in December 2004, initiated arbitration proceeding against Nigeria in the International Chamber of Commerce, seeking the sum of $15m damages. It should be stated that, Obasanjo between 2004 and 2007, granted a total of five major contracts to GINL, as part of so-called privatization reforms.
It should also be noted that in addition to Ajaokuta and NIOMCO, other contracts granted GSH/GINL covered the Delta Steel Company, Nigerian Mining and Iron Ore Company, NIOMCO and the Warri-Itakpe Railway.
Regretably, President Yar’Adua on coming to power terminated all the five GINL contracts on April 1, 2008, contrary to legal advice by the Federal Ministry of Justice.
Government’s failure subsequently resulted in a legal tussle at the International Court of Arbitration, London, where Nigeria was accused of wrongful termination and breach of contract. When the Goodluck Jonathan administration came on board, it opted for an out-of-court settlement in 2012, based on legal advice that potential cost of the termination could be unimaginable.
The administration then set up a Negotiating Team in 2013, where a Framework Settlement Agreement, FSA was reached between FGN and GSH/GINL. Unfortunately, the Jonathan administration did not execute/implement the agreement before leaving office in 2015.
Among the terms of the 2013 FSA were, Re-concession NIOMCO to GlNL for 7 years, and draw up a Modified Concession Agreement, MCA to this effect; Retrieve Ajaokuta from GINL. When the Buhari administration came on board, in 2016, it initiated a further review/negotiation of the MCA for NIOMCO, to achieve more favorable terms for Nigeria, as part of the overall FSA.
The Buhari administration also commenced the execution of the Jonathan administration’s FSA, along with the Buhari’s MCA. According to the federal government, at the time, “execution of the agreements marks the commencement of process to liberate Ajaokuta Steel Plant from every arbitral encumbrance with GINL, which had held it bound since 2008.”
However, Global Steel Holdings, GSH in 2020, threatened resumption of the ICC arbitration in abeyance, with a cost implication of as much as $10-14 billion in potential damages against FG, in respect of all the five contracts that were cancelled by the Yar’Adua administration.
On its part the Buhari Media Organisation, BMO, said that the Peoples Democratic Party, PDP ‘should hang its head in shame on account of how its previous administrations at the federal level dragged Nigeria into ridiculous agreements that are costing the country hundreds of millions of dollars in arbitration’. It added that the PDP, former President Olusegun Obasanjo and former Vice-President Atiku Abubakar were criminally negligent on the Ajaokuta Steel concession agreement from which President Muhammadu Buhari has now liberated the country at the cost of $496m.
In the view of BMO “the concession agreement which was sealed on the watch of former Vice-President Atiku Abubakar, who incidentally is now campaigning ‘to rescue the country’, smacks of criminality. And this much was confirmed by the succeeding PDP administration which maintained that the terms of agreement did not favour the country”.
BMO further noted that the Ajaokuta deal is not the only act of irresponsibility perpetrated by the PDP as agreements on the Mambila Power Project that is to cost Nigeria $200m in settlement and the infamous P&ID which had even secured a $9.6bn judgement which the country is battling to overturn are other messes of PDP the PMB administration us working hard to reverse.
“We believe President Buhari deserves credit for extricating the company from the legal dispute even though it is costing the country $496m that could be spent on important infrastructure.
The group noted that the Buhari administration is committed to cleaning up the mess left by previous administrations while also doing its best to build a more resilient economy.
EMEKA ANYAOKU STREET, ABUJA email@example.com