‘How Nigeria can avoid fraudulent contract deals’

By Ihesiulo Grace

7 September 2020

News

By Tunde Shorunke

Nigeria depends significantly on foreign contracts and funds for projects, most of which come with adverse terms in agreement clauses.

The Process and Industrial Developments (P&ID) contract is one of many fraudulent ones in the country.

In 2017, following a failed deal on gas supply, P&ID secured a judgement against Nigeria to pay it $6.6 billion as damages as well as pre and post-judgment interest at seven per cent, with the current outstanding amount estimated at $10 billion.

However, in a favourable ruling to Nigeria on 4th of September, 2020, a United Kingdom high court, gave its nod to the largest economy in Africa to appeal the $10billion lawsuit against her by P&ID.

Speaking with the Daily Times, First Professor of Capital Markets in Nigeria and former Imo State Commissioner for Finance, Uche Uwaleke, advised the federal government to involve experts in negotiating with other countries to identify hidden clauses in contracts.

He noted also that the Petroleum Industrial Bill (PIB) is set up to solve all challenges faced by the oil and gas industry.

“This has to do with the kinds of negotiations we go into, any time the country is involved in any negotiation, especially when it has to do with an obligation, we should be able to put our best foot forward because when we negotiate with incompetence, we tend to shoot ourselves in the foot.

“If we had provided a good presentation at the beginning, this menace won’t be here. But thank God, we’re out of it. Going forward, I think the challenges we’re facing in the country, the resolution lies in the Petroleum Industry Bill (PIB).

The passage of the bill and the accent of the President should be facilitated.

“The bill will solve a lot of problems within the oil and gas industry which consist of four components- the administrative component, fiscal component, oil-producing community component and governance component.

However, the governance bill has been passed by the National Assembly but is still awaiting the President’s assent.

“As long as the oil sector is a concern in Nigeria, the solution will remain the Petroleum Industry Bill (PIB) and regarding the legal issues, the country should involve experts in some of these aspects whenever we’re going for any types of negotiation.

“Expatriates should be involved in the country’s negotiation, to eliminate all hidden terms that will jeopardise the country’s position.

Also, particularly, the debt we’re contracting from China, we heard there are hidden clauses. “If we go on for a negotiation with China without the involvement of experts, we may not see the hidden terms.

But we have experts in Nigeria that are in a position to determine which clause is not in the interest of the company, which will be expended. Whenever the country is going into a negotiation, we should involve experts.”

In response to an enquiry from our correspondent, a development economist and oils and gas expert, Dr Chiwuike Uba, urged the federal government to be more cautious of contracts it gets involved with, noting that the UK court ruling will give Nigeria an opportunity to nullify the entire lawsuit filed by P&ID.

“It is important to note that the judgement was only reviewed and set aside and not actually upturned as it were. Recall that the Nigerian court has earlier established a prima facie case against P&ID for engaging in fraudulent activities here.

“Based on the established case in Nigeria, the UK court decided to review and set aside the previous judgement to allow Nigeria an opportunity to make representation on the case in the UK.

Personally, the decision of the court presents Nigeria an opportunity to completely nullify the earlier arbitration judgement.

“Now on its implication for the oil and gas industry, I doubt if there are any major implications besides the need for the Federal Government to be more careful on contracts with companies.

We need to be cautious with terms and conditions of contracts we enter into at all times.”

Also, speaking to the Daily Times, the Managing Director of OilFlow Service, Dr. (Engr.) Lucky Akhiwu, said the country needs to be proactive in providing a strong legal framework to tackle further fraud contracts in the oil and gas industry.

“The solution to this menace is to put a strong legal framework in place because, in the first place, that contract was a fraud.

Looking at how oil companies operate in the country, Nigeria needs to put up a system to ensure that this kind of thing does not occur again.

“The nullification of the case is a good one for the industry, but that is not enough.

We need to be more aggressive in making the decision to improve more drilling rigs, drilling operations and a lot of production works in the country.”