Daily Independent (Lagos)
Festus Owete
24 November 2008
Abuja — Former President Olusegun Obasanjo's quest for a third term influenced the 2005 bid round for oil blocks, the House of Representatives Committee probing the Nigerian National Petroleum Corporation (NNPC) has discovered.
It also found out that he ignored the advice of the World Bank and the International Monetary Fund (IMF) that the cost of the Lagos-Kano rail line was inflated.
Last week, the government cancelled the $8.3 billion rail contract awarded to China Civil Engineering Construction Corporation (CCECC) because it did not follow due process.
Presidential Economic Adviser, Tanimu Yakubu Kurfi, explained in Abuja that the project was not known to the National Assembly and was not budgeted for.
A report by the Committee headed by Igo Aguma (PDP, Rivers) recalled that "the Obasanjo government had opted to replace the existing track, narrow gauge line with double track standard gauge. CCECC was appointed, bypassing the normal open tendering process. The initial price quoted for the job was an astronomical $15.4 billion.
"After intense negotiations and some amendments to the design, the final price was $8.3 billion, and the work was to take four years from the start date. But, according to the World Bank, this was still double the cost it should have been. They duly recommended that the Obasanjo government rethink.
"Although the Due Process Unit in the Presidency had reviewed the CCECC proposal, it was far from a thorough exercise.
"It passed the proposal because of political pressure to do so. The contractor was allocated a mobilisation fee of $250 million, a sum taken from the Excess Crude Account in January 2007, but no work was started."
The Committee noted that in November 2006, Nigeria had signed a loan agreement with China for the $2.5 billion, out of which $1.3 billion was to be dedicated to the first phase of the new Lagos-Kano rail line.
The loan comprised two facilities - the first valued at $500 million provided by the Chinese Exim Bank, on concessionary terms, with an interest rate of three per cent, a repayment period of 20 years.
The second, for a loan of $2 billion provided directly by the same bank on the same terms, both linked directly to the lifting of crude oil by Chinese companies and the allocation of four oil blocks.
The Committee disclosed that the IMF equally advised against the loan "on the grounds that the terms did not meet the required concessionality defined by the Policy Support Instrument (PSI)."
According to the panel, the Chinese embassy in Abuja confirmed in May this year that the memorandum of understanding (MOU) was still outstanding.
"(Besides), a clear conflict of interest emerged between a President seeking support for a new Presidential term and a President who was conducting exploration rounds as the Minister of Petroleum.
"With the third term lost and a new President set for the end of May 2007, it seemed unlikely that another bidding round would take place. On the contrary, Obasanjo was determined to award more acreage before he left office.
"The targets were still in place - to raise reserves to 48 billion barrels and production capacity to four million barrels but the round was hastily organised and suffered as a result of the consequences.
"The licensing round was a last minute affair, held within two weeks of the Presidential handover. There were other last minute decisions too, including the sale of the Kaduna and Port Harcourt Refineries."
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