Shortly after the
current Managing Director of the Nigerian Ports Authority (NPA), Ms. Hadiza
Bala-Usman, was appointed by President Muhammadu Buhari, petitions began to
flood her desk against Intels Nigeria Limited. Some of them were written
by Intels competitors who claimed Intels collaborated with officials of the NPA
and Federal Ministry of Transportation to run them out of business. They
accused Intels of being a monopoly and demanded that Bala-Usman review existing
contracts so as to give all operators a level playing field. While the NPA
under Bala-Usman was yet to meet the demand of Intels’ competitors, another
challenge – finance – drove the Bala-Usman led management to begin to search
for leakages to plug. Given the barrage of complaints against Intels, the NPA
decided to investigate contracts with the company and at the end concluded that
there were infractions. As a result, the NPA in early February this year wrote
a letter to Intels, threatening to sanction the company for failing to
fully comply with the Treasury Single Account (TSA) while keeping $68,499, 838
(N20.892 billion) NPA money in its custody. In a bid to fight back, Intels
wrote a letter to the Chairman Senate Committee on Marine Transport, claiming
that the NPA owes it a whooping sum of $840 million out of the $1.29 billion
(N395.20 billion) revenue it collected for the agency from January 2010 to
September 30, 2016.
For those who don’t know, Intels is a terminal operator and concessionaire of
Onne Port, Rivers State. To ensure safe passage of ships within
Nigeria’s seaports, the NPA, through Intels as its agent, provides pilotage
services to guide ships into and out of the ports. The rule of thumb in the
maritime industry is that pilotage must be compulsory for all ships of 35 metres
overall length or greater unless a valid Pilotage Exemption Certificate is held
by the ship master.
In return for the
service, ship owners/companies are required to pay a pilotage fee, which Intels
collects on NPA’s behalf.
More Allegations
In its reply to Intels
letter to the House Committee, the NPA claimed that the jointly reconciled
service boat revenue collected by Intels for the period from January 2010 to
September 30, 2016 was $1.25 billion. In addition, it said the sum of $41.039
million being revenue for the period October to December 2016 had yet to be
reconciled, bringing the total revenue for the period of January 2010 to
December 2016 to $1.295 billion.
During the same period,
it said Intels remitted a total sum of $343.35 million from service boats
revenue collection to the NPA, representing 27 per cent of total service boats
revenue collected by Intels on behalf of the NPA.
The NPA added that the
total agency commission to Intels computed in line with executed agreements was
$353.066 million (N107.685 billion). This amount, it added, was deemed to have
been deducted electronically from service boats revenue by Intels in accordance
with subsisting agreement, still credit notes were issued to regularise the
deductions.
The NPA claimed Intels
was indebted to it in Onne and Warri Ports in respect to rents, lease and
throughput fees.
The debt, the NPA
revealed, was computed to the sum of $1.03 million (N316.60 million) for lease
and throughput fees while debt owed by Intels in respect to rent at Onne was
put at N3.343 billion.
NPA added that its only
exposure to Intels was limited to the portion of projects costs not yet
amortised which is the sum of $682.4 million.
“This exposure, upon
payment does not involve any cash outflow from the Nigerian Ports Authority, “
it stated.
Competent sources told
THISDAY that the executed agreement between NPA and Intels provides that the
contractor executing various projects shall source funds for the purpose of
implementing the projects.
“It was on this
recognition that the agreement provides for a finance cost computed at 180 days
plus 6 per cent LIBOR and 180 days plus 6.5 per cent LIBOR for some of the
projects, “a source told THISDAY.
THISDAY learnt that the
NPA was not involved in the negotiation for loans/loan amounts by Intels with
financial institutions to appreciate the portions liable to finance cost.
“The NPA pays interest
to Intels on interim certificates submitted but not amortised, whereas Intels
does not pay any interest on revenue collected which has not been applied for
amortisation due to budget ceiling. These unutilised sums are held tenaciously
by Intels which is believed to be utilised for construction of some projects
for which the NPA suffers financial cost.
“Reconciliations between
the NPA and Intels showed no clear distinction between the NPA’s revenue being
held back by Intels and the purported loan being sourced privately towards
project execution. The NPA suffer from two-edged financial sword of losing huge
revenue that negatively affects its liquidity and paying for finance cost that
ultimately increases the original contract price, “ a source stated.
Over a year ago,
the NPA, in a letter jointly signed by its former Executive Director, Finance
and Administration, Mr Olumide Oduntan and General Manager, Finance, Mr Simon
Anobi, and dated June 28, 2016, had expressed reservations about the
non-remittance of revenues collected on its behalf by Intels into the TSA
account.
The letter with the
title: “Transfer of service boats pilotage revenue accruing to Nigerian Ports
Authority to its Treasury Single Account domiciled in Central Bank,” said: “it
has been observed that revenue accruing to the Nigerian Ports Authority from
service boats pilotage operations is not being remitted into the Authority’s
Treasury Single Account domiciled with the Central Bank of Nigeria (CBN).
Consequently, we hereby direct that all revenues accruing from Service Boats
movement be paid directly to the Authority’s Treasury Single Account
sub-account at the Central Bank of Nigeria”
There were series of
correspondence between Intels and NPA after this 2016 letter from which
culminated in a letter from Intels dated May 5, 2017 at which point the
NPA sought the legal advice of the Attorney General of the Federation (AGF) and
Minister of Justice, Mallam Abubakar Malami (SAN).
The request to the AGF,
which was through a May 31, 2017 letter signed by Bala Usman with the title:
“Request for clarification of conflict between executed contract agreement and
federal government Treasury Single Account (TSA) policy,” explained the
situation that had transpired between the two organisations since 2010 and
efforts made to ensure compliance with the TSA. It concluded by praying as
follows: “arising from the observable conflict between the executed Managing
Agent Contract Agreement on service boats pilotage operations and TSA policy implementation,
the Authority is constrained to humbly seek the professional legal advice of
the Attorney General and Minister of Justice on the refusal of Intels to comply
with the Federal Government TSA policy”
Before this period, the
parties had agreed that the NPA should draft a supplemental agreement. This
agreement, presented to Intels through a letter on March 15, 2017, incorporated
the TSA requirement and designed a standard operating procedure to guide the
relationship between Intels and NPA thenceforth.
The agreement stated
that revenue generated on behalf of the NPA in each of its pilotage districts
must be paid directly into a TSA account. It explained that these accounts will
be available to the NPA and Intels for online viewing only without withdrawals
and that there would be monthly reconciliation meetings to determine the level
of monthly revenue. The document also committed the NPA to paying interests on
any payment made to Intels outside of an agreed seven-day window in answer to
concerns the company had raised about delays that may result from operating a
TSA account.
Intels however responded
in a letter dated March 27, 2017. Addressed to Bala Usman and signed by Andrews
Dawes, Intels Chief Executive Officer. In that letter, the company thanked the
NPA for its “ongoing engagement and support in reaching a resolution regarding
this matter” stating however that it would only accept that payment of 28% as
agency commission on service boat revenues and the 30:70 per cent ratio split
of the remaining 72 per cent of the collections as indicated in the SOP…subject
to the resolution of four issues.
These issues include
payments into the TSA account which Intels said would be difficult for it to
comply with due to its loan commitments to some banks, the issue of interest
rates on loans obtained from banks, reconciliation of outstanding payments on
the development of Phase 4B and mechanism for loan repayment.
The inability to resolve
these issues amicably forced the NPA management to seek clarification from the
AGF.
Constitutionality of the Contract
The federal government
in response to the NPA’s letter seeking clarification on the issue directed the
NPA to terminate the boats pilotage monitoring and supervision agreement that
the agency had with Intels, saying that the contract was void ab initio.
Conveying the decision
of the federal government to NPA, the AGF, in a letter dated September
27, 2017 to Bala-Usman, said that the agreement, which had allowed Intels to
receive revenue on behalf of NPA for 17 years, violates the Nigerian
Constitution, especially in view of the implementation of the Treasury Single
Account (TSA) policy of government.
Drawing the attention of
Bala-Usman to the illegality of the agreement, Malami made it expressly clear
that the agreement violates Sections 80(1) and 162(1) and (10) of the
constitution, and wondered that the parties – NPA and Intels – did not avert
their minds to the relevant provisions when they were negotiating the agreement
in 2010.
Section 80(1) of the
constitution states: “All revenues or other moneys raised or received by the
Federation (not being revenues or other moneys payable under this Constitution
or any Act of the National Assembly into any other public fund of the
Federation established for a specific purpose) shall be paid into and form one
Consolidated Revenue Fund of the Federation.”
Section 162(1) states:
“The Federation shall maintain a special account to be called ‘the Federation
Account’ into which shall be paid all revenues collected by the Government of
the Federation, except the proceeds from the personal income tax of the
personnel of the armed forces of the Federation, the Nigeria Police Force, the
Ministry or department of government charged with responsibility for Foreign
Affairs and the residents of the Federal Capital Territory, Abuja.”
While sub-section 10 of
the same section states: “For the purpose of subsection (1) of this section,
‘revenue’ means any income or return accruing to or derived by the Government
of the Federation from any source and includes: (a) any receipt, however
described, arising from the operation of any law; (b) any return, however
described, arising from or in respect of any property held by the Government of
the Federation; (c) any return by way of interest on loans and dividends in
respect of shares or interest held by the Government of the Federation in any
company or statutory body.”
In the letter titled:
“Request for Clarification of Conflict Between Executed Agreement and Federal
Government Treasury Single Account Policy,” the attorney general said: “I refer
to your letter dated 31st May 2017, ref: MD/17/MF/Vol.XX/583 in respect of the
above subject matter wherein you sought clarification on the legal issues
implicated by the continuous implementation of the Managing Agent Contract
Agreement dated 11th February 2010 executed between the Nigerian Ports
Authority (NPA) and Intels Nigeria Limited for the provision of boats pilotage
operations, in the light of the Federal Government of Nigeria’s Treasury Single
Account (TSA) policy.
“Upon my review of your
letter under reference and the relevant agreements, I have been able to
conclude inevitably that the terms of the agreement as agreed by parties and
the dynamics of its implementation which permits Intels to receive revenue
generated on behalf of NPA ab initio, clearly violates express provisions of
Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal
Republic of Nigeria, 1999 (as amended). It is thus curious that parties did not
avert their minds to the above provisions of the constitution whilst
negotiating the agreement.
“The inherent illegality
of the agreement as formed has since been expounded by the TSA policy issued by
the Head of Service of the Federation on behalf of the Federal Government of
Nigeria directing all ministries, departments and agencies to collect payment
of all revenues due to the federal government or any of her agencies through
the TSA.
“The objective of the
presidential directive (TSA policy) in exercise of the executive powers of the
president under Section 5 of the 1999 Constitution (as amended) was in
furtherance of the spirit and intent of Sections 80 and 162 of the constitution
and to aid transparency in government revenue collection and management.
“NPA being an agency of
the federal government is bound by the TSA policy and has not howsoever been
exempt therefrom. Due to the constitutional nature of the TSA, where there is a
conflict between the TSA and the terms of the agreement, the TSA shall prevail.
“Therefore all monies
due to the NPA currently being collected by Intels and any other agents/third
parties on behalf of NPA must henceforth be paid into the TSA or any of the
sub-accounts linked thereto in the Central Bank of Nigeria (information of the
account will be communicated in due course) in accordance with the TSA policy.
“For the avoidance of
doubt, the agreement for the monitoring and supervision of pilotage districts
in the Exclusive Economic Zone of Nigeria on terms inter alia that permits
Intels to receive revenue generated in each pilotage district from service boat
operations in consideration for 28 per cent of total revenue as commission to
Intels is void, being a contract ex facie illegal as formed for permitting
Intels to receive federal government revenue contrary to the express provisions
of Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal
Republic of Nigeria (as amended), which mandates that such revenue must be paid
into the Federation Account/Consolidated Revenue Fund.
“In the premise of the
above, the conflict between the agreement and the TSA policy presents a force
majeure event under the agreement, and NPA should forthwith commence the
process of issuing the relevant notices to Intels exiting the agreement which
indeed was void ab initio.”
Intels Fights Back
In a swift reaction,
Intels kicked against the termination of its Pilotage Agency Agreement by the
NPA, describing the action as “preposterous” and highly injurious to Nigeria.
Intels, in a statement
made available to THISDAY, disclosed that following the letter from the AGF, to
the Managing Director of NPA, directing NPA to terminate the pilotage
agreement, NPA promptly ended the contract on Tuesday, October 10, 2017,
without inviting it as the other party to the agreement for negotiation or due
recourse to the terms of the agreement that specify conditions precedent before
a party can exit the contract.
In a strongly worded
response, Intels said NPA’s action would force it to reconsider its
multibillion dollar investment at the Badagry deep seaport in Lagos, adding
that the investment would have created thousands of direct and indirect jobs
for Nigerians.
It said it had invested
too much in the country and if the Nigerian government was not prepared to
respect the sanctity of its contract, it was ready to head to the courts to
challenge NPA’s action.
Intels, which alleged
that the NPA was indebted to it to the tune of hundreds of millions of dollars,
gave the agency seven days, from last Wednesday, to reconsider the residual
critical areas of their relationship and to agree, to the possible extent, on a
common solution, failing which it would head to arbitration.
Though political motive
is being alleged in some quarters, which is the usual narrative in in Nigeria,
Intels has not suggested any extraneous intent to the termination of the
contract, and had even assured NPA that it would invoke the arbitration clause
in the agreement if the termination was not reversed. With government
insisting that its decision is in line with the constitution and in the
interest of the nation’s economy, there are no indications that it would
reverse its decision, thus setting the stage for arbitration as Intels’
seven-day ultimatum expires this week.
