Vice President Yemi Osinbajo recently blamed corruption for the frequent cases of poor contract negotiations in the country. He revealed that those entrusted with negotiating contracts on behalf of the country often allow their personal interests to override the national interest. He stressed the need to engage arbitrators and other experts in negotiating contracts, especially with foreign companies to avoid needless legal tussles.
The Vice President’s thoughtful remarks came during a capacity building workshop for negotiators, organised by the Independent Corrupt Practices and Other Related Offences Commission (ICPC), in collaboration with Inter-Agency Committee on stopping illicit financial flows from Nigeria. The workshop came on the heels of unresolved contract disputes between Nigeria and two foreign firms, P&ID and Strategic Alliance. In both cases, Nigeria is at the risk of losing huge amounts in foreign currencies due to poor contract negotiations. It has become urgent to help Nigeria improve its terms of engagement with the rest of the world as part of effort to stem illicit financial flows.
Therefore, Osinbajo’s advice is timely. For instance, the P&ID contract saga is a pointer that there are still more to learn on contract negotiations. In 2019, the UK-based P&ID was awarded a hefty $6.6billion in an arbitration decision against Nigeria by the Arbitration Court in Britain over alleged failed project to build a gas processing plant in Cross River State. With accumulated interest payments, the amount was reported to have risen to $9billion, which represents about 20 per cent of Nigeria’s foreign reserves. The firm has threatened to seize some of the nation’s assets. Nigeria had since appealed the Arbitration Court’s judgment.
There is no doubt that poor negotiations have fuelled corruption in the contract as some Nigerians may have connived with foreign negotiators to dupe the country. Apart from Nigeria, countries like Guinea and Pakistan have suffered huge financial losses in recent years as a result of poorly negotiated bilateral investment treaties. It is not hard to see where the problems emanated from. These include, but not limited to, lack of knowledge of the specific subject matter, lack of accountability and graft. That is why we agree with the vice president that professionals must be involved at every stage of contract negotiations. It is in the public interest to do so, because very often, foreign contractors exploit such lapses to fleece the country of billions of dollars in contracts that were either poorly executed or not done at all. This has also encouraged illicit financial flows from the country.
Not long ago, the Chairman of the ICPC, Prof Bolaji Owasanoye, disclosed that Nigeria accounted for about $10 billion (over N4trillion) that African loses annually to illicit financial flows (IFFs). This has increased the challenge of tackling illegal financial transactions. The $10billion represents 20 per cent of the estimated $50billion loss that African suffers, and about 30 per cent of the current federal budget.
For some years now, Nigeria has topped the list of nations in Africa in IFFs transactions. In September 2019, President Muhammadu Buhari disclosed that Nigeria lost an estimated $157.5billion to illicit financial transactions between 2003 and 2012. Based on current exchange rate, this is over N50trillion. The amount is more than Nigeria’s budgets from 2015 to 2020, and more than Nigeria’s debt stock, which now stands at over N3trilion.
Also, in 2015, a study by African Union (AU) panel led by former South Africa President, Thabo Mbeki, estimated that over $50billion illicit funds left the continent annually, thereby stunting Africa’s development. At his maiden address to the 70th General Assembly of the United Nations in 2015, President Buhari urged world leaders to strengthen mechanisms for dismantling safe havens for proceeds of looted public funds and to return the assets to their countries of origin. Unfortunately, not much has been done in that direction.
A 2020 report by the Nigeria Extractive Industries Transparency Initiative (NEITI) and Trust Africa revealed that Nigeria lost between $15billion and $18billion (about N5.5trillion) yearly to illicit financial flows. Over 92 per cent of the crime is reportedly committed in the oil and gas sector. NEITI’s revelation was corroborated by a United Nations report that between 1980 and 2009, about $1.4trillion illicit funds left Africa. This represents about half of the continent’s Gross Domestic Product (GDP).
The report blamed the massive illegal transfers to multinational oil firms, public officeholders, the elites and smugglers of commodities and others who swindle the country through trade mis-invoicing, tax evasion and trade under-pricing. Over all, if official corruption is to be reduced significantly, there is need to ensure transparency in contract negotiations with local and foreign companies.