$716m judgement debt too high


A treacherous minefield of financial liability awaits Nigeria’s incoming administration in May 2023. Apart from the huge national debt that keeps growing, the President, Major General Muhammadu Buhari (retd.), will also bequeath a judgement debt of $715.86 million, according to a document from the Debt Management Office. With the economy close to distress, battered by falling public revenues and bankruptcy, prohibitive debt repayment commitments, production contraction, and record unemployment and inflation rates, the economic horizon appears bleak and unpredictable. In the short time left of his tenure, Buhari should put a realistic plan in place to reduce the judgement debts.

At N42.84 trillion or 23.06 per cent of GDP, Nigeria’s current debt profile is staggering. The International Monetary Fund projects a debt service-to-revenue ratio of 92 per cent in 2022, up from 76 per cent in 2021. A DMO document titled, ‘Schedule of Promissory Notes Issued by Category as of March 2022, catalogues 18 such promissory notes (judgement debt) valued at $716.86 million. Two were due for payment in August and October; the other 16 notes will mature between October 2023 and October 2031. Perhaps, the timeline makes the regime complacent since its tenure ends next year. It should not, because government is a continuum.

This translates to the bitter fact the next administration will inherit a daunting mountain of short- and long-term debt. Worse is that some of these debts could have been avoided altogether if successive governments had been responsible, rigorous and proactive. In one trending case, a Federal High Court in Abuja, through a Garnishee Nisi absolute, has just reprimanded the Central Bank of Nigeria for not paying a judgement debt of $70 million to a litigant for the legal services he rendered to some states and the 774 local governments. This is just a tip of the iceberg.

Contractual breaches by government, negligence, failure to pay counterpart funding and diligently defend litigation have become habitual. In September, the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, said Nigeria would pay $496 million to settle a long-standing contractual dispute of $5.26 billion with an international investor. Under the late President Umaru Yar’Adua, the Federal Government refunded $721 million to Bluestar Oil consortium after its cavalier reversal of a deal privatising the refineries in Port Harcourt and Kaduna in 2007. The refineries have since remained comatose, deteriorating further since that ignominious decision.

Corruption and treachery by officials ensnare Nigeria in these avoidable financial liabilities. By signing contracts and reneging on them, Nigeria is losing money – and its integrity. Often, the contracts are skewed in favour of external parties and against the country’s interests. From negotiation stage, to signing of agreements and to arbitration, officials are primarily focused on self-enrichment at the expense of the country. Nigeria pays dearly, both in the financial penalties it incurs and in its reputation as a hostile investment jurisdiction where contracts are hard to enforce.

Currently, the country is locked in a bitter legal battle with British Virgin Island-based Process and Industrial Development over a joint venture to develop Nigeria’s gas resources that turned awry. From $6.5 billion in 2013, an international tribunal ruled in 2020 that Nigeria is liable to pay P&ID $8.9 billion. There are several other similar outrageous cases.

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After investing $3.2 billion in the Aluminium Smelter Company of Nigeria, a rigged auction saw the company being sold to Rusal for $250 million, instead of BFIG consortium that won the bid for $410 million. The government has ignored a Supreme Court judgement awarding the bid to BFIG. Nigeria lost money and ALSCON is producing well below capacity. In other controversial cases, Nigeria lost huge amounts in the Halliburton, Siemens, Global Steel and the Malabu oil mining licence sagas. In all these cases, corruption conflated with official negligence.

Government ministries, departments, and agencies seal agreements without due process, inflicting massive refund obligations on the taxpayer. Security personnel who infringe on fundamental human rights at will also incur liabilities for the government when their victims sue. A former Inspector-General of Police, Solomon Arase, said the Force was saddled with a judgement debt liability of N1 billion arising mainly from rights abuses as of 2016. In 2010, a Lagos court imposed a fine of N100 million on the Nigerian Navy and its officer, Harry Arogundade (a rear admiral), for assaulting a young lady in the traffic in Lagos.

In other parts of the world, public officials and private individuals behave in accordance with the law because they pay for infractions, or lose their jobs, even in the course of official duty. In 2005, the United States authorities demoted a one-star general, Janis Karpinsky, for abuses at the Abu Ghraib prison during the Iraq war. In December 2004, the United Kingdom education minister, David Blunkett, resigned from the cabinet after allegations emerged that he used his office to fast track the second visa of the nanny of his former mistress. In Nigeria, public officials sit tight even after more egregious misdeeds.

With the economy in turmoil, Nigeria needs all the money it can get. Corruption underpins all the failed agreements and penalties country has incurred. In the $180 million Halliburton bribe case, heads of state, ministers, military, and oil industry chiefs were indicted. Unlike in the US where indicted persons and companies were prosecuted, nothing happened here. This is blatantly wrong, and it encourages thieves to persist in corrupt acts. Nigeria must learn to prosecute and punish complicit officials.

The Ministry of Justice has been incompetent in representing Nigeria in critical contract matters.  Buhari must be strategic and radically reform the ministry, enabling competent professionals to represent Nigeria in signing agreements and contracts. The MDAs should sign only contracts beneficial to Nigeria and subjected to effective oversight.

On their part, the security agencies should stop abetting their officers who violate the rights of citizens by paying their fines for them. The guilty should pay from their assets and pensions. That way, they would be civil before engaging in abuses. Officers who abuse their position should suffer demotion, outright dismissal or both, as well as prosecution where applicable.


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