Posted by By PATRICK ASONYE on
A 56-page Administrative Panel of Enquiry report has sensationally recommended the immediate termination of the Concession, Share Sales and Purchase agreements that ‘sold' Ajaokuta Steel Company, the National Iron Ore Mining Company and Delta Steel Company Limited to Global Infrastructure Holdings Limited (GIHL).
A 56-page Administrative Panel of Enquiry report has sensationally recommended the immediate termination of the Concession, Share Sales and Purchase agreements that ‘sold' Ajaokuta Steel Company, the National Iron Ore Mining Company and Delta Steel Company Limited to Global Infrastructure Holdings Limited (GIHL).
GIHL is believed to be owned by former President Olusegun Obasanjo's son, Gbenga.
All things being equal, the Federal Government might in the days ahead take a decisive action against GIHL for the alleged breach of its terms of concession agreement.
Nonetheless, skeptics expressed fears weekend that some 'powerful forces" within the government might have compromised, and therefore capable of 'killing the report or doctoring it," hence its submission was done in 'planned and unusual secrecy".
A highly placed government source told Sunday Sun that the Panel's report into the operations of the three companies returned a damning verdict on GIHL, which in the first place reportedly ‘won' the concession bid by presidential fiat, not due process, as was being touted by the Obasanjo government.
By their brief, GIHL was required to rehabilitate, complete, commission and operate the Ajaokuta Steel Project (ASP) with a view to producing Liquid Steel within 12 months; increase the production capacity, maintain the existing facilities of the Township for the employees, complete the balance of the Civil Engineering Works necessary for the completion of the Project and submit within five months an initial Project Business Plan to the Ministry of Mines and Steel Development. It was also supposed to pay a concession fee of 1% of its annual turn over to the Federal Government coffers. It however failed to do any of these.
Bogus claims
Above all, GIHL, Sunday Sun further learnt, was, by virtue of the agreement, required to inject fresh funds from abroad to the tune of $200 million. But the Panel discovered that Global has thus far not injected a dime from outside the shores of Nigeria. Rather, it embarked on domestic borrowings from local commercial banks now aggregating about $192 million. As collateral, GIHL pledged the assets of the Delta Steel Company for the loans, which it secured from Zenith Bank, Ecobank, UBA, FBN, Oceanic, FCMB, Bank PHB and Sterling.
All the bank facilities were said to have been secured without the Board approval. Meanwhile the asset of DSCL as at 2006 was estimated at N184billion.
The Panel, however, came out with the impression that GIHL has been diminishing the values of both ASCL and NIOMCO to boast theirs.
The investigators were scandalised that there is nothing on ground to suggest that such volume of funds ($200 million) had been injected by GIHL into the companies.
Global also claimed that it bought ASCL for $325 million, but failed to produce documents to convince the Panel.
Rather, in what the Panel described as Statutory Obligations, Global is reported to have, in three years, outstanding debt profile of about N350 million with the Federal Government.
Loopholes
Throughout the agreement, GIHL was never pinned down to a fixed time schedule for the completion or implementation of any specific process in the ASCL. There is also nowhere GIHL was tied down to providing specific caliber of professionals to execute the Project.
The result, Sunday Sun learnt, was that GIHL was 'importing all manner of unqualified persons so-called professionals, to meet their expatriate quota, whereas Nigerians were the ones doing the job." Yet they ferried out cash in the name of those so-called expatriates. This, the Panel frowned at, as capital flight.
Breaches
If there was any indication that GIHL would not be straight forward about its assignment, it started from day one. For instance, the Panel discovered that as soon as GIHL took charge of ASCL and NIOMCO, 'their first action was to export the Processed Iron Ore at NIOMCO yard and at the River Port at Ajaokuta and Prime scraps from the premises of ASCL…" That provided them the initial funds with which to reactivate some units. Based on this revelation, the Panel dismissed the purported importation of $200 million by GIHL, more so, it was not backed by CBN confirmation.
Also revealed is the fact that GIHL was too eager to collect the N340million Insurance claims over the fire that gutted the ASCL stores. That, to the Panel, was sufficient indication that all was not well financially with the Concessionaire. Ideally, GIHL ought to have first remitted the money to the government, the Panel reasoned.
Other financial breaches allegedly committed by GIHL included but not limited to: Tax royalties N350, 607, 910; Spare parts fabricated for DSC valued at N22, 811, 78; Rent from ASCL staff N21, 905,750; Rent received from non-ASCL staff N41, 044,450; Billets met at ASCL $79, 372; NOTAP approval illegally utilized $17, 356, 896; Bank balances at take over N89, 143, 718; Compensation from Prestige Insurance N340, 000, 000; Sale of Premium Scrap at ASCL yard N203, 371, 260; Sale of Iron Ore at NIOMCO $1, 077, 545.
Others are: $14, 872, 039 recorded as loss on the sale of 303, 511 tons of Iron Ore Concentrates; Spares and consumables borrowed but not returned $596, 979 and N33, 770, 591; Mischannelled Stocks $1, 78, 405 etc.
Other breaches listed against GIHL include failure to provide documentary evidence of its Insurance Policy, excessive use of casual labour, default in keeping Financial records in accordance with Nigerian laws, failure to pay the 1% of its annual turnover as Concession Fee.
Above all, GIHL was alleged to have cannibalised and vandalised machines and equipment at the plants under the guise of modification, but without proper designs. The Panel reportedly expressed fears that it was most unethical. That is in addition to lax security around the project site, coupled with neglect of the residential neighbourhood.
Fraudulent concession
How did Global even ‘win' the concession bid in the first place?
Sunday Sun learnt that the BPE, as is customary, called for expression of interest by companies as Core Investors for Delta Steel Company. GIHL was said to be one of the companies that expressed interest but did not follow up with submission of either Technical or Financial bids.
Four companies namely Osaka Steels Ltd, BUA International Ltd, Niger Benue Transport Co and Dangote Industries Ltd reportedly submitted theirs on May 4, 2004. Accordingly, they were ranked first, second, third and fourth, in that order following evaluation the day after.
Thus, the first three were pre-qualified for Financial bid opening.
By June 18, the Technical bids were opened in public. BUA International emerged highest with bid price of $20.50, followed by Niger Benue Transport Company ($10m) and Osaka Steel Limited ($2.55m).
Therefore, it was announced that BUA had emerged successful but required the confirmation of the National Council on Privatization (NCP) - if it is satisfied with the bid price - as the 'preferred bidder".
But at the NCP meeting, some conditions - including the responsibility of dredging the Escravos bar, completing the remaining 32km rail line etc - were attached to the bid, as huge capital project for the eventual winner.
Subsequently, the BPE reportedly sought approval from the Vice President (Atiku Abubakar), then Chairman of the NCP. The VP, in turn, was said to have forwarded the BPE recommendation to the President (Olusegun Obasanjo), requesting his consideration and approval.
Obasanjo was said to directed thus: 'DG-BPE: We spoke. Negotiate to not less than $25million with other points agreed - dredging of channel and completing the rail line to Delta Steel. If agreed then approved. But ensure guarantee."
Following Obasanjo's directive, BPE was said to have gone into series of negotiations with BUA with a view to getting them to accept the terms.
Scandalously, somewhere along the line BUA claimed that it raised a Cheque for N332million to BPE, but the latter denied receiving anything of the sort.
BUA further claimed that sometime in December 2004, BPE reached them that the Presidency had directed discontinuance of the transaction, which the BPE reportedly confirmed to the Administrative Panel.
To convince the Panel, BPE reportedly tendered a memo Number Pres/143/89/128 through which the Presidency voided the transaction and, by fiat, gave the deal dubbed 'Purchase of Shares in DSC to GIHL".
It was learnt that GIHL had submitted their 'bid offer for the purchase of DSC" directly to President Obasanjo through a letter dated December 14, 2004.
Promptly, Presidential approval was conveyed on December 17, 2004: 'V.P, Minister of Power & Steel, DG-BPE: Approved as slightly amended subject to Global being responsible for rehabilitation and effective usage of Delta Steel Port or Jetty - not Warri Port which belongs to NPA".
The Panel, Sunday Sun further learnt, regarded it as reprehensible, the fact that GIHL which did not take part in the bid round, was awarded such a sensitive project by Presidential fiat.
Observations
But after a thorough and extensive probe, the Panel is of the opinion that the agreements covering the concession of Ajaokuta Steel Company Limited (ASCL), and the Nigerian Iron Ore Mining Company (NIOMCO) are not in the interest of the country, as they are reportedly skewed in favour of GIHL.
Observe the Panel: 'The Concession Agreements between the Federal Government of Nigeria and Global Infrastructure Holding Limited (GIHL) is a document crafted in a desperate hurry, carefully and purposefully skewed against the government and with open-ended obligations."
Continuing, the Panel observed that 'the obligations are impossible to achieve in the absence of built-in milestones…It was therefore designed to fail from the beginning; heaping blames and causing unquantifiable losses to the government and leaving GIHL with monumental economic leverages. The government was short-changed by all those that bought out and configured the agreements."
Not only that, the Panel also observed that GIHL went into ASCL and NIOMCO without the intention to see them through. 'This is why it did not conduct due diligence on both companies…GIHL was unprepared to face the challenges on ground. In both cases till date, GIHL has not recovered from the shock of having to manage the two projects beyond its technical and financial capabilities even for a short period."
Which is why the Panel believes that GIHL decided to concentrate on areas that would give it the highest advantage as quickly as possible, 'knowing that the day of reckoning will come sooner than later, and that the Agreements have ample provisions for their exit but not before inflicting lasting damage to both companies."
Sanctions
Based on its findings and others, the Panel recommended that the deal be revoked without delay.
Our source cited a clause in the concession agreement, which reportedly shocked members of the Panel. It read thus: 'The ASP Project shall be carried out by Global for the account of, and for the benefit of Global".
Not only has GIHL breached the terms of the concession agreement, the Panel, it was further learnt, discovered several unwholesome accounting practices such as running the three companies as one financial unit contrary to the provisions of the agreement. Besides, while the Federal Government gave GIHL and its financiers unfettered access to its records, books of accounts and title documents, the concessionaire failed or refused to reciprocate the gesture, even to the panel in the course of conducting their inquiry.
In addition to recommending the termination of the concession agreement in respect of ASCL and NIOMCO, the Panel, it was also learnt, observed that the circumstances that enabled GIHL to emerge 'Preferred Bidder" were faulty from the onset. That perhaps prompted the Panel to state as follows in its recommendations to the government.
'…This perhaps has emboldened GIHL to conduct its affairs in a way that does not meet international best practices."
'GIHL," the Panel continued, 'won the DSC through a Presidential fiat and not Due Process."
Sunday Sun also learnt that the two major conditions that were factored into consideration in arriving at the Technical Bid Price of $25million were the completion of Itakpe/Warri Rail Line and Dredging of the Warri River/Escravos Channel. But it alleged that that aspect of the deal was surreptitiously expunged from the final document that was signed with GIHL.
Thus, GIHL had undue advantage over that Federal Government and other bidders. Having found that, the Panel reportedly recommended immediate review of the agreement and urged the government to order the Bureau of Public Enterprises (BPE) to conclude the Due Process it had started before the Obasanjo presidency allegedly meddled into it.
Now, however, the Federal Government is said to be in a dilemma for two reasons. One, to muster the political will to ditch the contract. Two, how to handle the in-built 'poison" in the Concession Agreement, which provides for arbitration to be held in London, home country of GIHL's Chaiman, in the event that Nigeria moves to cancel the agreement.
Panel
The Administrative Panel of Enquiry was inaugurated on October 29 last year by the Minister of Mines and Steel Development, Alhaji Sarafa Tunji Ishola, with the mandate to examine the concession granted GIHL over the aforementioned companies with a view to actualizing the Federal Government's objective of making the country 'a leading Steel giant in Africa."
The five-member Panel, in its task, interviewed people from relevant institutions, stakeholders, professional bodies, staff unions and individuals connected one way or the other to Steel projects.
They also visited the sites of ASCL, Ajaokuta and NIOMCO, Itakpe, as well as the Governor (as he then was), Alhaji Ibrahim Idris, forgetting the Ohinoyi of Igbiraland, Alhaji Ado Ibrahim.
As a demonstration of the importance of the deal to the citizens, several persons, groups and organisations were said to have submitted memoranda to the Panel. It submitted the final report to the Minister of Mines and Steel Development in December last year.