A White Paper on Failed and Non-Performing Contracts awarded between 1976 and 1999 reveals how government officials waste and siphon public funds irresponsibly
By Tayo Odunlami
The findings of the committee were mind-boggling as the recommendations in the White Paper that emanated from them were far-reaching. But like most reports that went to the Federal Government from committees it set up itself, especially on matters regarding reckless waste, embezzlement and mismanagement of public funds, the White Paper on the Report Of The Commission of Inquiry For The Assessment of Failed or Non-Performing Federal Government Contracts For Construction, Supplies and Services was hardly made public and most of the recommendations therein not implemented.
Former president, Olusegun Obasanjo, mouthing a commitment to fight corruption, had, on 21 June 1999, inaugurated a Commission of Inquiry to assess contracts “which have failed or deemed to have failed” for construction, supplies and services awarded between 1 January 1976 and 31 December 1998. The Commission, headed by Alhaji Iguda Inuwa, was mandated to ascertain whether all rules and regulations pertaining to the award of such contracts were complied with, particularly with regard to the processes by which the contractors were retained, the justification for the contract price, the competence for the contractor and the relevance of the project. The body was also told to ascertain the extent of work done, the amount so far paid to the contractors and whether the payments so made were done in accordance with the rules, regulations and procedures governing such matters and proportionate to the works done or services rendered. In cases where illegalities were discovered in payments, the committee was given powers to “identify person or persons responsible for any irregularities or malpractices attendant on such payments and recommend appropriate disciplinary or remedial action”.
The Commission spent three years investigating a total number of 1646 affected projects scattered across the country. On 5 November 2002, it submitted to the Obasanjo administration a 44-volume report in which it confirmed that trillions of naira, indeed, went down the drain on failed and non-performing projects. Award of contracts, the Commission averred, was characterised by, among other factors, disregard for extant rules and regulations, lack of transparency, duplication, conspiracy with contractors and arbitrary upward review of contract sums.
A seven-man committee, chaired by Professor Turner T. Isoun, that the federal government constituted to draft a White Paper on the Inuwa committee’s report corroborated these submissions. The failed and non-performing contracts, the confirming committee stated, underlined the “decadence and rot that has pervaded our national life.” The failure and abandonment of the contracts, the body wrote, made nonsense of the country’s development plans and the rule of law. Moreover, they said a lot about the condemnable disposition of government officials towards official contracts. “The result,” the White Paper drafting committee asserted, “was the undue wastage of public funds as these projects would now be completed, in some cases, at sums more than 1000 per cent of the original contract sums.”
The committee was understating the magnitude of how government officials, indeed, fritter away public funds through contract awards. In one of the numerous instances of profligacy, the Federal Ministry of Transport, on 26 September 1979, awarded a contract worth N129.3 million to Messrs Adrian Volker Civil Engineering International BV 71 for the construction of an ocean terminal at Onne in Rivers State. In 1983, the contract was reviewed upward to N242.79mn. The contractor did the job nearly half-way and was paid a total of N61mn but abandoned the site because its clients deprived it of funds. By 1997, when the project was revisited, it was estimated that a sum of N14bn would be needed to complete it. The White Paper directed that the Federal Ministry of Transport re-tender the contract with a view to completing it. The wide difference in the initial contract sum and the amount that was estimated would complete it was noted as one irresponsible manner that government officials expend public funds recklessly.
In 1982, the University of Calabar authorities awarded a contract worth N16.97mn to Messrs Reynold Construction Company, RCC, to build the Faculty of Arts complex. The following year, the contract was suspended after the contractors had been paid N7.18mn. In 1998, after receiving its capital grant, the university authorities remembered to revisit the project and engaged a new set of consultants and contractors without formally terminating the subsisting RCC contract. It was the new set that completed part of the project at a cost of N39.11mn. When the Inuwa Commission of Inquiry was assessing the project in 1999, it was told the sum of N530mn would be required to complete it.
Messrs Olive Company Nigeria Limited bagged a contract in December 1992 from the Federal Ministry of Agriculture to construct, among seven other similar jobs, a 25,000-metric tonne grain silo at Ulonna, Abia State. The initial price of the contract was £1.9mn for the offshore component and N19.mn for the onshore. For the short period that the contractor worked on site, quality of work, the White Paper stated, was very low while vital parts on the generator it installed was missing, thereby rendering it useless. Although the contractor was said to have collected the sums of £1.9mn and N19.5mn, the Commission assessed percentage of work it completed as only 15 per cent. It abandoned site due to refusal by the Agriculture Ministry to implement the report of a Ministerial Committee which purportedly reviewed the contract price. Rather, it submitted a fluctuation claim for N82.7mn. The Isoun committee was furious that the then Agriculture Minister unilaterally awarded eight silos to only one contractor and banned him from ever holding public office in Nigeria.
The Pipelines and Products Marketing Company, PPMC, also frittered money away on one project it later considered irrelevant. In September 1996, the PPMC awarded a contract for the construction of a kero dyeing and injection facility, comprising eight sites, at its Aba depot. The government parastatal paid the contractors, Messrs Crystal Pipeline Chemical Products, an advance payment of N21mn, being 60 per cent of the entire contract sum of N35mn. Crystal did move to site but achieved only 20 of the job. The Isoun committee was miffed that PPMC officials gave the contractors up to 60 per cent and directed that the officials responsible be identified and sanctioned.
Former Minister of National Planning, Silas Daniyan, was indicted by the White Paper committee for what amounted to insider abuse. On 26 April 1993, the National Planning Commission, NPC, awarded Messrs Cappa and D’Alberto a contract worth N235.81mn. Daniyan was then chairman of Cappa and D’Alberto. On 13 August 1993, NPC obliged the contractors its request to be paid N32.26mn to buy materials. After Gen. Sani Abacha assumed office in November 1993, his security agents forced the contractors away from the site twice, citing a security consideration of proximity of the site to the official residence of the Head of State. Work finally stopped on the site in February 1994.
Messrs Cappa and D’Alberto later forwarded a claim of N41.21mn for alleged inconveniences. Daniyan approved the entire claim, although the NPC paid the contractors only N35mn “in flagrant violation of laid-down procedure and against the advice of the consultants”, as stated by the White Paper. When the then Minister of the Federal Capital Territory set up a committee which assessed the value of work done so far by Cappa and D’Alberto, the naira value was put at only N12.65mn, although the contractors had collected a total sum of N67.26mn. Consultant to the project, Messrs Aiguoba Alofoje, commissioned on 12 August 1992, also allegedly played a smart one on the clients. It was paid N9.55mn. based on the old scale of fees on the advice of the Federal Ministry of Works and Housing but later claimed an extra N8.73mn purported to be the balance based on the new scale which came into effect in November 1992. But the White Paper pointed out the claim was fraudulent as Alofoje was commissioned when the old scale was in force.
The committee also wrote: “The Actions of the former Minister of National Planning, Chief Silas Daniyan, who at the time was Chairman of Cappa and D’Alberto (contractors to the project) and who irregularly approved N41mn out of which N35mn was paid for very unconvincing reasons had breached the oath of office whereby his personal interest overrode national interest. The Commission, therefore, recommends that he be reprimanded…The Consulting Architects, Messrs. Aiguoba Alofoje should be made to refund the extra sum of N8,735,246.25 with interest.”
Another contract the Commission of Inquiry seriously frowned at was the award, by the National Conference of Local Government Chairmen of Nigeria, NCLGCN, of contracts for the supply of vehicles to the Nigeria Police Force to beef up its logistic requirements in the detection and prevention of crime. Funds for the supplies were sourced from the Stabilisation Accounts of the Local Goverments controlled by the Federal Ministry of Finance. In August 1993, the Ministry awarded three contracts for the supply of vehicles to the NPF of behalf of the NCLGCN. The Finance Ministry awarded the contract for the supply of 300 units of Peugeot 504 Station Wagon and 100 units of Peugeot 504 Pick-Up vans at a sum of N180.33mn to Messrs. Stronghold Nigeria Limited. The contract price for the Station Wagon was N412,300 per unit while a Pick-Up was N566,400. The contract agreement provided for the payment of 75 per cent of the contract sum on signing the Contract Agreement and final payment on completion of delivery within four months. In accordance with that provision, the Finance Ministry released a down payment of N135.24mn to the contractors on signing the Agreement.
Messrs. Stronghold supplied 100 units of Peugeot 504 Pick-Up and 149 units of Peugeot Station Wagon, leaving a balance of 151 units of the Station Wagon not supplied. But the company failed to deliver that balance on the pretext that the Peugeot Automobile of Nigeria and the SCOA, manufacturers and distributors respectively of the brands, had increased prices of the vehicles.
Another contractor, Messrs. AMC Limited was awarded a contract for the supply of 300 units of Peugeot 504 Station Wagon at a total contract sum of N123.69mn on 13 August 1993. A unit was put at N412,300. In accordance with the terms of the Agreement, AMC was, in September 1993, paid N92.67mn being 75 percent of the contract sum. The contractors delivered 209 units of the wagon, leaving a balance of 91 vehicles, which it failed to deliver on the same excuse that the prices had gone up. It requested for an upward review.
The third contractor, Messrs. Urashi Enterprises (Nigeria) Limited, was on 13 August 1993 awarded contract for the supply of 500 units of Peugeot Pick-Up for a contract sum of N283.20mn. The unit cost was N566.400. The company was given a down payment of N212.4mn, being 75 per cent of the contract sum in September 1993. Messrs. Urashi supplied only a total of 305 Pick-Up vans, leaving a balance of 195 units, pleading the same reason as the other two contractors. On 1 March 1994 and 5 July 1994, the Finance Ministry met with the contractors and agreed with them that they should limit their supplies to the amount not higher than their contract sums. But the Isoun committee condemned this decision as arbitrary and running contrary to the terms of the contract agreements. One, the decision failed to establish whether PAN and SCOA had actually increased the prices of the vehicles during the period under review. It also failed to take into cognisance the date the advance payment was made to the contractors, i.e. September 1993. It also failed to take into account when the contractors made payment (if they indeed have done so) to the manufacturers and distributors of the vehicles.
These factors, the committee stated, cast a slur on the decision of the Finance Ministry. The Department of Home Finance which handled award of the contracts could not lay its hands on the records, especially as it relates to the date the 75 per cent advance payment was made to the contractors. Similarly, the Office of the Accountant-General of the Federation which made the payments in 1993 could not furnish the committee with the exact dates the advance payment were made. Each of the two arms of the same Ministry kept passing the buck when the committee requested for records of the transactions. The buck-passing, the committee asserted, indicated fraud.
To give the contractors the opportunity to present their own sides, the Isoun committee invited them to a meeting. But they brazenly ignored the invitations. “In fact, the letters of invitation which were sent to them through DHL were receipted but returned to the Commission through the same channel,” the White Paper declared. This action, the committee concluded, “gives the impression that they are guilty.” Mr Banji Olatona, Chairman of the NCLGCN, who signed the Agreement on behalf of the Local Governments, also refused to respond to the Committee’s invitations and inquiry. “This confirms that the entire transaction, especially the decision by the Ministry of Finance to endorse the tenuous position of the contractors on the price increase without probing into the assertions as a conspiracy between him, the contractors and officials of the Federal Ministry of Finance.
It was the Nigeria Police Force, beneficiaries of the contracts, which thoroughly investigated the matter and exposed it for what it was. From the efforts of the police, the Isoun body was able to establish that 75 per cent of the contract sums were indeed paid separately to the contractors; that none of the three contractors placed any orders for the supply of the vehicles with PAN during the contract period, i.e. August-December 1993; that Peugeot Automobile did not increase prices of its brands throughout 1993, so the purported increase claimed by all the three contractors was false and the price increases claimed by the contractors were mere ploys to defraud the government. Consequently, the committee directed that Messrs. Stronghold, whose Chairman was Alhaji Sale Jambo; AMC Nigeria whose chairman was Major-General Muhammed Magoro and Urashi Enterprises whose chairman was Chief Rochas Okorocha “should be blacklisted for their roles in the fraud.” Similarly, Banji Olatona of the NCLGCN, who signed the contract agreements and shunned the invitation of the committee to clarify issues, “should be banned from holding public office for his role in the fraud.”
Two contract awards affecting the military also raised the committee’s eyebrows. One was for the rehabilitation and maintenance of two Cessna 172 aircraft for the Nigeria Civil Aviation Technology, NCAT, Zaria, given to Solid Base Limited in 1990. The contractors collected the full amount of 334,960 pound sterling and simply disappeared into thin air without executing the contract. Members of the committee wondered how the contractor should be paid the entire contract sum in advance. The second was the award of a $24,338mn and DM35.90mn contract to Mercury Aviation Services Limited, London, on 10 May 1996 for the procurement of 25 single-engine trainer aircraft at the NCAT, Zaria. Abacha directed that the contract be so awarded. But both the Federal Ministry of Aviation and Commandant of the NCAT informed the Isoun committee that the actual cost of the aircraft should not be more than $9.743mn. The contract was grossly inflated. Worse, the scraps that were delivered in the name of the aircraft could not be flown even only once.
The mother of all contract scams perpetrated by top government officials and investigated by the Isoun committee, will unarguably be the National Identity Card scheme. The scheme was created via Decree 51 of 1979. In 1982, the Federal Government signed the principal agreement on it with Messrs Avant Incorporated of the United States of America. The contract was worth $100mn. Two years later, the contract to Avant Incorporated was cancelled and reawarded to Messrs Afro Continental Nigeria Limited. But unknown to most Nigerians, the whole thing was a big fraud as both Avant and Afro were controlled by Mr. N.D. Goan, the principal shareholder in both companies.
In 1986, the Federal Government signed a new contract worth N70m with Afro Continental. The contract was reviewed in 1992 and subsumed under a new one that integrated the Automated Fingerprint Identification System, AFIS. It was worth $74.3mn as offshore and N200mn as onshore components. The offshore was agreed to be financed through a foreign loan to be secured by Messrs Nogafin. As it was later discovered, Nogafin was owned by the same Goan, who had it all worked out in connivance with some top Nigerian civil servants. As Goan neglected to perform, the Federal Government suspended repayment of the loan. Goan headed straight to a court in London. The case was settled out of court when the Federal Government agreed to pay Afro Continental the sum of $14mn.
Yet, the Federal Government, in 1998, reawarded contracts on the Identification Card scheme totalling $38.4mn and N65mn to Sagem S.A. of France and Chams (Nigeria) Limited for the supply of hardware, licence for software and service for implementation and for the delivery of personalised identity card printing machines and plastic cards. Thus began another round of fraud on the ID scheme. In 2001, government awarded a $214mn contract to Sagem to produce ID cards that would be distributed across the nation. But it was discovered later that Sagem’s agent in Nigeria, its Regional Area Identification Manager, Jean Pierre Delarue and a Nigerian, Niyi Adelagun, distributed bribes to seven top government officials to facilitate the project. Each of the officials, who included Chief Sunday Afolabi, now deceased, received, at least, $2mn in bribes. Afolabi, then Internal Affairs Minister, signed the contract for implementation of the contract on behalf of the Federal Government with Sagem. But Afolabi, together with Dr. Mahmud Shata, former Minister of State for Internal Affairs and later Minister of Labour and Productivity; Dr. Okwesiliezie Nwodo, former Secretary of the Peoples Democratic Party; Christopher Agidi, former director, Department of National Civic Registration; Hussaini Akwanga, former Minister of Labour and Productivity and Mrs. R. Akerele, were alleged to have collected bribes from Sagem on the project. Agidi, who was allegedly offered $500,000 and resigned to take his loot to the United Kingdom to bank, was arrested in the process by security agents who suspected the amount was either drug or terrorism money that he was laundering. It was Agidi who spilled the beans during questioning.
Most of the government officials indicted in the White Paper and recommended to be banned from holding public offices are today top government or party officials. Once again, they are the ones calling the shots, mostly as political appointees.
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