After reading the response of the Minister of Mines and Steel Development, Dr Fayemi Kayode on Ms Natasha Akpoti’s hidden motives on Ajaokuta and NIOMCO, I have these posers for her.
Natasha Akpoti’s speech before the House of Representatives on 3/3/2018 is a reminder – albeit unwittingly so – of the substantial cost of the spate of terminations.”
(a) a waiver of damages on the part of Global in respect of the Ajaokuta and NIOMCO terminations so that Global does not collect a kobo from the Nigerian taxpayer;
(b) a relinquishment by Global of the contractual right to the shares of Ajaokuta Steel Company); and
(c) a modification of the NIOMCO concession reducing its duration and increasing the concession fees payable to the FGN from 3% to 4% of turnover.”
Fayemi’s Plaster:
The settlement agreement is Fayemi’s plaster to stop our bleeding.
Question 1: is this plaster to be removed by terminating a 4th time? Have we learnt no lessons from the previous terminations.
Natasha’s paradox:
Natasha wants us to terminate a 4th time!
Question 2:
Who pays the resultant damages? Natasha or you the taxpayer?
Natasha’s Answer:
“_Nigeria must be ready for sanctions. That is one thing I’m going to say. It is not easy to go against the Western block. We must be ready for sanctions because at the end of the day, we must dream of a big great Nigeria because for all its worth, trade is always better than aid_.”
Fayemi’s Answer:
“Nigeria has incurred sufficient debts (through rampant terminations) to have built multiple steel plants. To repeat our spate of terminations a fourth time and abrogate the very settlement agreement designed to halt the haemorrhaging of our national treasury would be a tragedy of epic proportions.”
Solving the Puzzle of Natasha’s Paradox:
Her private interest is the reason why she recognises the history of costly termination and yet wishes to add a 4th termination.
Who loses: the taxpayer.
Below is the full response of the Minister, Dr Fayemi Kayode.
BRIEFING TO THE HOUSE OF REPRESENTATIVES ON AJAOKUTA STEEL/NIOMCO.
The Ajaokuta and NIOMCO projects have added vast amounts to our national debt. This is because successive governments conclude contracts that are then terminated without regard to the cost to the taxpayer occasioned
by the damages payable for a wrongful and premature termination. The FGN has terminated on three occasions concession contracts with respect to Ajaokuta/NIOMCO.
Natasha Akpoti’s speech before the House of Representatives on 3/3/2018 is a reminder – albeit unwittingly so – of the substantial cost of the spate of terminations. Ms Akpoti has told us that our breach of the contract with the Russians in the past cost Nigeria $2.5 billion USD. The salient points of her speech (time stamped) are reproduced below:
“Ms Akpoti has told us that our breach of the contract with the Russians in the past cost Nigeria $2.5 billion USD.”
“Natasha reminds us that the Obasanjo administration procured the termination of the SOLGAS concession and then proceeded to award the terminated concessions to Global. This second termination led to a claim of over $3.5 billion USD brought by Solgas against Nigeria in a London arbitration. Solgas succeeded in its case of wrongful termination and recovered substantial damages.”
“Natasha Akpoti reminds us that the Yar’Adua administration terminated in 2008 the arrangements with Global and that upon this third termination Global took Nigeria to arbitration in London in 2008.”
Natasha Akpoti reminds us that the Goodluck Jonathan government started Settlement Negotiations with Global.
“Building on this, Honourable Minister Dr Kayode Fayemi in August 2016 executed the modified NIOMCO Concession Agreement as part of a settlement agreement to end this dispute and stop the haemorrhaging of the treasury.
“The settlement achieved delivered the following:
[6.31] “In 1994 when the Russians left, it was then under the Soviet Union and the company called TyazhprpmExport. When they left in 1994, Ajaokuta was 98.2% completed.”
[6.53] “When they left, it was largely because Nigeria fell short on its contractual agreement.”
[30.41] “By the time the Russians left in 1994, Nigeria was owing them close to a billion Dollars”.
[34.09] “Russia waved away over $400m USD and said, you know what, you are a struggling country, you are a small country, just pay $500m USD and forget about the rest. While on the other hand, the Abacha administration told Nigeria that the Russians insisted on the money on the nearly 1 billion and apart from that, there were debt incurred upon the debt buy-back so that amounted to 2.5 billion USD. So that means, $2.5 billion was taken from our reserves while only $500m was paid.”
As Ms Akpoti states below another round of contract signing and termination ensued just after 2001:
[7.13]“Nigerians should know that we have several times had good opportunities to have the steel sector running. The very first was in 2001 under President Olusegun Obasanjo…
[11.35] Ajaokuta Steel and NIOMCO, which is the Iron Ore Mining Company in Itakpe were given to a company called SOLGAS …
[12.34] [SOLGAS] went to India and brought in ISPAT, which is known today as Global Infrastructures Nigeria Ltd.”
The Obasanjo administration procured the termination of the SOLGAS concession and then proceeded to award the terminated concessions to Global. This second termination led to a claim of over $3.5 billion USD brought by Solgas against Nigeria in a London arbitration. Solgas succeeded in its case of wrongful termination and recovered substantial damages.
As Ms Akpoti states below the Yar’Adua administration terminated in 2008 the arrangements with Global.
[13.30] “On the 2nd of April, 2008, at the Federal Executive Council, the Federal Executive Council met and Late Yar’Adua terminated the [GLOBAL] concession. I quote Late Yar’Adua, “After considering the report of the Administrative Panel of Inquiry established by the Yar’Adua administration to review the concession agreement and determine the extent of compliance by both parties, the Council agreed with its findings that the agreement was largely skewed in favour of the concessionaire to the detriment of the Federal Government of Nigeria.”
Upon this third termination Global took Nigeria to arbitration in London in 2008. The government of Goodluck Jonathan in 2012 on counsel’s advice – after 4 years in arbitration – sought to halt any further risk to the treasury by engaging in settlement discussions within the ICC ADR framework – 1 Counsel to the FGN had pointed out as follows:
“The FGN terminated the ASCL‐SPA too early with the consequence that the Respondent lost the following rights under cl.12 of the ASCL‐SPA: (i) the right to recover over $26m as liquidated damages; and (ii) the right to rescind lawfully. Cl.12 of the ASCL‐SPA had imposed an obligation on Global to pay by 25 May 2008 the sum of $162m (for the contractual right to the 60% shares which it had acquired). This was the first instalment of the consideration for the purchase of the shares. It is likely that Global would not have paid by 25 May 2008. It certainly had not paid by April. By terminating the contract one month too soon Respondent lost a vital advantage and scored an “own” goal.)” us ensuring institutional transparency – under the auspices of Mr Phillip Howell-Richardson. By 1 May 2013 a settlement agreement was reached. The elements of that settlement involved the following 3 aspects:
(a) a waiver of damages on the part of Global in respect of the Ajaokuta and NIOMCO terminations so that Global does not collect a kobo from the Nigerian taxpayer (it is worth pointing out that the very Presidential Committee that advised the Yar’Adua Government to terminate the Ajaokuta arrangements had estimated damages payable to Global in the region of $525m USD2
and this did not include the damages in respect of the NIOMCO termination);
(b) a relinquishment of the contractual right to the shares of Ajaokuta Steel Company (i.e., the Share Purchase Agreement was mutually terminated without the payment of compensation to Global); and
(c) a modification of the NIOMCO concession reducing its duration and increasing the concession fees payable to the FGN from 3% to 4% of turnover.
The settlement agreement of 1 May 2013 required the FGN to implement it. Honourable Minister Dr Kayode Fayemi, being bound to implement the settlement agreement and its agreed elements, initiated the formal execution of the modified NIOMCO Concession Agreement. This was done under the auspices of, His Excellency, The Vice President, Professor Yemi Osinbajo SAN, in August 2016. This is why the agreement that was signed in August 2016 was in substance the very agreement reached by the previous administration that was aimed at rebalancing it further in favour of Nigeria. This was what the settlement agreement of 1 May 2013 required.
The Paradox
Against this background of rampant costly terminations Ms Akpoti has now called upon the House of Representatives to require the termination of the NIOMCO Modified Concession Agreement. She stated:
[36.46] “So I am going to read the conclusions we have put. That one: This Honourable House considers that the NIOMCO’s re-concession of August 1st to Global Infrastructures Nigeria Limited or Global Steel Holdings and however they are called, be terminated with immediate effect.”
If a fourth termination occurs it will end the modified NIOMCO concession and the settlement agreement that birthed it. The arbitration will re-start and damages will be calculated under the previous NIOMCO
concession agreement (with its longer duration and lower concession fees) as well as under the Ajaokuta agreements. There will also be damages for breach of the settlement agreement itself. Terminating the settlement is the equivalent of removing a plaster meant to halt a haemorrhage and looking askance at the inevitable bleeding. However, Ms Akpoti bizarrely provides the following advice:
[42.36] “Nigeria must be ready for sanctions. That is one thing I’m going to say. It is not easy to go against the Western block. We must be ready for sanctions because at the end of the day, we must dream of a big great Nigeria because for all its worth, trade is always better than aid.”
Nigeria has incurred sufficient debts (through rampant terminations) to have built multiple steel plants. To repeat our spate of terminations a fourth time and abrogate the very settlement agreement designed to halt the haemorrhaging of our national treasury would be a tragedy of epic proportions. The House of Representatives is full of Honourable men and women chosen by the electorate to support the Federal Executive through its legislative output in discharging its mandate to govern. They must not abdicate this responsibility nor use their oversight function to impermissibly intrude upon executive matters to disastrous effect.
2 The Presidential Committee on the Review of the Sale and Purchase/Concession Agreement of ASCL, NIOMCO and Delta Steel Company Limited was set up to review the Findings and Recommendations of the Administrative Panel of Enquiry set up by the Ministry of Mines and Steel Development on Developments in the Nation’s Steel Industry. The Presidential Committee advised that the agreements be terminated at great cost to the nation. Paragraph 3.15 of the report estimates damages payable to Global if termination proceeds (the very termination the report called for). “The referral and necessary defence of this action in the UK is likely to attract significant costs in legal fees… Any costs likely to be incurred must and should be weighed against the potential damages payable to Global, which according to the agreement could be in the range of $300‐$525 million”.
