There’s a saying that truth is stranger than fiction, and Nigeria — more than any other country — epitomises this.
This week, the Nigerian government will be on trial in London over a deal that has dragged on since 2010. If the court rules against us, we’d have to cough up an eye-popping $11 billion. That’s almost one-third of our foreign exchange (forex) reserves.
Nigeria’s already crumbling under a staggering ₦77 trillion debt. Another $11 billion (or over ₦5 trillion using a conservative exchange rate) would make a bad situation worse. What’s more annoying? The payment’s being enforced for doing literally nothing. Here’s the gist.
The gas flaring problem
According to Stears, Nigeria, up until 2008, flared its gas. That means we just burnt the gas that was given off during oil extraction. This practice made the Niger Delta an environmental mess.
[Environmental degradation from gas flaring. Source: Behind the Logos]
Eventually, someone asked, “why can’t we use this flared gas to power gas plants to provide electricity?” So that’s what the government tried to do. Unfortunately, not many high-profile oil companies were interested. One of the companies that agreed to take this up was an unknown company called Process and Industrial Development (P&ID). In 2010, Nigeria agreed with P&ID. This turned out to be a grave error.
Here’s what both parties agreed to. First, P&ID would refine — for free — the flared gas known as wet gas into lean gas, which is suitable for electricity production. Nigeria pledged to provide infrastructure to move the gas to P&ID’s gas processing facility (GPF). P&ID would then make their money from selling byproducts of the refining process while Nigeria gets electricity. This agreement was supposed to be binding for 20 years.
Here’s what happened. Nigeria didn’t lift a finger to build the infrastructure, and the P&ID guys didn’t do anything either because they couldn’t act until the FG did. As it turned out, P&ID was a shell company, and one of its founders, the late Michael Quinn, had a dubious history of running procurement scams.
So how have things played out?
Long and short, P&ID in 2012 took the FG to an arbitration panel in the UK on the grounds that it had invested $40 million for some groundwork and that the profit it would’ve expected from the deal hadn’t materialised.
The arbitration panel ordered the Nigerian government to pay $6.6 billion in damages. This was in January 2017. If you’re wondering how that number swelled to $11 billion, that’s because of interest which stands at 7 per cent. Nigeria claims the whole deal was a sham led by “vulture funds” that offered bribes before the contract was signed. The FG is looking forward to fighting this case in a UK court.
How does it affect you?
In 2019 when a court ruled that Nigeria must repay over $9 billion, the Minister of Finance, Zainab Ahmed said “This award is unreasonable, an assault on every Nigerian and unfair.”
Notice how she subtly dragged “every Nigerian” into it? When the deal was signed, nobody invited us to the table. Now that all the pipes have burst, they want us to join hands in cleaning the mess.
To be fair, the deal wasn’t signed during the Buhari administration. Yet, Buhari’s posture on the matter suggests he has no interest in paying such hefty fees, not when he’s at the tail end of his tenure. P&ID, too, have no interest in backing down as they smell a huge payday ahead. Meanwhile, the damages keep rising.
If Nigeria loses the case and continues to default, they could seize our assets overseas which would be another embarrassment. As a citizen, you should ask whoever you plan to vote for how they plan to resolve this wahala. Because, like it or not, this debt has to be cleared, and you may have to chip in to do so, one way or another.
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