The House of Representatives Committee on Public Procurement recently conducted a public hearing into the alleged breach of the Public Procurement Act 2007 in the engagement of consultants for pre-shipment inspection, monitoring of crude and gas exports. The revelations are disturbing, writes Damilola Oyedele
The Public Procurement Act (PPA) of 2007 was enacted to ensure probity, accountability and transparency in the procurement process, through the application of fair, competitive and transparent standards and practices for the procurement and disposal of public assets and services. Enforced by the Bureau of Public Procurement, the Act is also intended to promote cost effectiveness and professionalism in the public sector procurement system.
The PPA is considered one of the most effective tools that can be deployed in the anti-corruption fight, as it is also intended to ensure that only companies that adhere to regulations and enacted legislations secure government contracts to provide goods and/or services.
The Act however continues to be violated often by government officials themselves, allegedly so, when awarding contracts. They are said to willfully award contracts to firms that have defaulted in their tax requirements, and who do not meet their obligations to the Pension Commission of Nigeria, Nigeria Social Insurance Trust Fund and Industrial Training Fund, among others.
In some cases, such as found during a recent investigative hearing into procurement processes in the Niger Delta amnesty programme, firms that were not registered with the Corporate Affairs Commission (CAC), were discovered to have been awarded contracts running into millions of dollars.
The latest discovery by the House of Representatives Committee on Public Procurement is that companies that did not meet the PPA requirements were engaged by the Ministry of Finance as Pre-shipment Inspection Agents (PIAs) for pre-shipment inspection and monitoring of crude oil and gas exports from Nigeria.
Allegations of Breach of PPA
The investigation followed a motion on March 1, 2017, and sponsored by Hon. Babatunde Kolawole (Ondo PDP) in view of allegations that the Minister of Finance, Mrs. Kemi Adeosun, had overseen a process that saw to the selection of non-responsive companies that did not meet basic statutory requirements like possession of valid PENCOM Certificates as required by the Public Procurement Act.
President Muhammadu Buhari, in June 2015, in a memo obtained by THISDAY had approved that the Finance Ministry could process engagement of pre-shipment inspectors through selective tendering approved by the Bureau for Public Procurement (BPP). He specifically directed that only companies that are experienced and already active pre-shipment agents should be shortlisted, thus rejected a recommendation, in the memo, that new set of pre-shipment inspection agents should be engaged. Due to the directive, 65 companies were selected to participate in the bidding stage.
Interestingly, however, in what has been interpreted as disobedience to a presidential directive, the Minister of Finance, in December 2015, reportedly cancelled the tendering process on the grounds of lack of transparency, accountability and on the basis of a formal complaint from the BPP.
The Ministry thereafter initiated a fresh tendering process, which was fraught with allegations of abuses, lawmaker Kolawole noted, adding that the entire pre-shipment process was being undermined, and could lead to significant revenue losses.
Understanding the Pre-shipment Act
While the Ministry of Finance has taken over the process of pre-shipment inspection of crude oil and gas exports from Nigeria, the pre-shipment of Exports Act 1996, actually puts the responsibility on the Central Bank of Nigeria. Section 13 of the Act reads (1): The Central Bank shall be charged generally with the responsibility for the administration of the provisions of this Act. (2) The Central Bank shall make regulations and prescribe such forms as may be required for the purpose of carrying out the intendment of this Act.
The Act also provides that a special account for the purpose shall be established and maintained by the Central Bank, for “all expenses relating to the remuneration, fees and other charges payable to the inspecting agents shall be defrayed from the special account”. The account is named Nigerian Export Supervision Scheme (NESS) account.
Thus, the role of the Ministry of Finance in pre-shipment inspection, according to the Act, is to serve on a technical committee to assist the CBN in its administration of the Act. Other agencies on the technical committee include the Federal Ministry of Commerce, the Federal Ministry of Industry, the Ministry of Petroleum Resources (Inspectorate Division), the Federal Ministry of Agriculture and Rural Development, the Nigerian Customs Service; and the National Agency for Food and Drug Administration and Control.
It is therefore an aberration, the lawmakers reckoned, that the Finance ministry has completely taken over the administration of the Act, and relegated the CBN to a member of the technical committee.
Revelations at the Investigative hearing
The Minister of Finance, Adeosun failed to honor the invitation of the Committee, on Monday, to explain the alleged infractions, she however sent the Ministry’s Director of Legal Services, Mr. Chris Gabriel, to represent her. Gabriel however told the committee that he had no position paper to present on the issues raised, as he got the directive to represent the minister, very late.
Chairman of the Committee, Hon. Oluwole Oke (Osun PDP), lamented that the minister failed to honour the invitation of the parliament despite letters sent to her. He also frowned at the many alleged infractions of the PPA and other legislations, at a period when the government had put the anti-corruption fight at the fore-front of its administration.
Hon. Gabriel Onyewife (Anambra APGA) expressed disappointment at the manner members of the executive disregard invitations to public hearings by the legislature. His sentiment was echoed by several members, who voted that the representative of the minister should not be allowed to stand in for her, particularly as he was not prepared to tackle the questions that could arise in the course of the investigative hearing.
While presenting the opening remarks, Speaker of the House of Representatives, Hon. Yakubu Dogara, maintained that pre-shipment inspection is necessary to determine actual value of export goods.
Dogara, who was represented by the Deputy Minority Leader, Hon. Chukwuma Onyema, added that the engagement of contractors for the process must be in tune with the requirements of the PPA.
“The House of Representatives has always been worried about transparency and accountability in the lifting of crude oil in Nigeria. The World Bank also estimated that $300 billion of government funds generated from crude oil cannot be accounted for, as it may have found its way into the pockets of some individuals,” he said.
At the investigative hearing, however, the committee also found out that all of the Pre Shipment Inspection Agents (PIAs) qualified by the new process, lacked one requirement or the other like Tax Clearance and PENCOM certificates.
Documents from the Office of the Accountant General of the Federation detailing payments to PIAs between January 2011 and April 2017, showed that Trobell International Ltd was paid N2.53billion while JBIS Integrated Resources Ltd was paid N15.2 billion. Both companies were found to have evaded tax remittance, and did not have PENCOM certificates.
Cobalt International Services was paid N11.3 billion, while Swede Control Intertek received N5.62 billion. Both firms are in breach of the requirements from the NSITF and were not registered with the fund, documents revealed. It was also revealed that Stera Maritime Agency, Opsmoserve Global Limited, Q & Q Control Services Ltd and Ghengis Development International Ltd were not registered with the NSITF as required by the PPA.
It was further revealed at the hearing that over $163.7 million had been expended to engage pre-shipment agents to monitor crude oil and gas export between 2009 and 2016 without appropriation by the National Assembly, in violation of Sections 80/81 of the 1999 constitution, as amended. Breakdown of the figure includes $46 million (2009), $17 million (2010), $20 million (2011), $20 million (2012), $20 million (2013) and $20 million (2014).
The lawmakers therefore frowned at the failure of the Nigerian National Petroleum Corporation (NNPC) to remit its contribution of N25 billion, into the NESS account, alongside the non-remittance of unspent $20 million back to the federation account, at the end of the 2016 financial year.
The hearing also revealed that most of the appointed Pre-Inspection Agents, at inception, failed to carry out inspection of export terminals where all exports are carried out by the NNPC, revealing also that inspection of crude oil and gas shipments is part of the mandate of the Department of Petroleum Resources. The agency’s position paper said it had employed a digital platform to monitor crude oil production and export in Nigeria. The platform said National Production Monitoring System is expected to go real time very soon.
“That infact DPR is better positioned with the NPMS to sustain the capacity to effectively monitor crude oil export than the Pre-Shipment Inspection Agencies (PIAs) engaged by the Ministry of Finance,” he said.
This therefore raised the pertinent questions as to why the responsibility requires engagements of contractors, constituting a waste of scarce resources.
The lawmakers also grilled the new Director General of the Bureau of Public Procurement, Mr. Mamman Ahmad, who admitted that the process for the engagement of the inspectors was flawed. He added that the entire process ought to be cancelled if not that the services were time bound. He however drew the ire of the lawmakers when he queried why the aggrieved parties petitioned the presidency over the flawed process.
Speaking with THISDAY in a separate interview, Hon. Oke lamented that government officials, who are supposed to be at the fore-front of the campaign to uphold the PPA, are the ones found to be violating its provisions.
“It would be impossible to fight corruption if our procurement processes are not foolproof. If we are not ready to adhere to the Act, we could as well jettison the anti-corruption fight. We have cases where some of these companies did not even pay tax, which is a duty even private citizens owe the country, talk less of these firms that are making millions from the country. We have conducted investigations and found that some companies did not even meet the most basic requirement of being registered, yet they were awarded contracts. These should not be unheard of,” he added.
Oke assured that the people that the committee would not be deterred in its bid to ensure that public sector officials adhere to the requirements of the PPA.
“It is our mandate spearheaded by the Speaker, Rt. Hon. Yakubu Dogara, and our Legislative Agenda at the beginning of the eighth assembly, that we must ensure thorough oversight of Ministries, Departments and Agencies of government. This is necessary as a way to strengthen the institutions and deepening our democracy,” the chairman added.