Report: FG Risks $2.5bn Litigation Fees over Customs Automation Contract

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By Eromosele Abiodun

The federal government is facing the risk of paying $2.5 billion as litigation fees if it goes ahead to implement the recently awarded $3.1billion Nigeria Customs Service (NCS) modernisation contract.

The Federal Executive Council (FEC) had last Wednesday awarded a $3.1 billion contract for the full automation of the operations of the NCS.

According to the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, the $3.1 billion project, which will not cost the country a dime, will be concessioned to E. Customs HC Projects Nigeria Limited for a period of 20 years.

She listed sponsors of the project as Bionica Technologies West Africa Limited, and Bargain Securities and Supplies Nigeria Limited.

She also listed the Africa Finance Corporation (AFC) as the lead financier and Huawei Technology as a technical service provider.

THISDAY, however, gathered that a recent report by the House of Representatives’ Joint Committee on Finance, Customs and Excise and Public Petitions had warned that the new deal breached an earlier contract with Messrs Adani Mega Systems Limited/ Webb Fontaine consortium.

The House of Representatives Joint Committee report was jointly signed by the Chairman of the Finance Committee, Hon. James Faleke; Chairman of Public Petitions Committee, Hon. Jerry Aguigbo; Chairman of the Committee on Customs, Hon. Yuguda Kila; Clerk to the Committee on Finance, Mr. Lawali Ibrahim, and Clerk to the Committee on Customs, Mr. Aliyu Maccido.

“We are aware of the Solicitor-General of the Federation’s advice to the Minister of Finance urging her to consider the strength and weakness as well as litigation fees of $2.5 billion and lengthy time frame of embarking on this case and how that may affect the ultimate goal of government for revenue generation

The committee stated: “On the other hand, the presidency, through the office of the Chief of Staff to the President, issued a letter dated 17th September 2019 engaging the consortium titled Presidential Initiative on Customs Modernisation to carry out the same project awarded to Messrs Adani Mega Systems Limited/ Webb Fontaine.
“It is the opinion of the committee that the presidency was not duly informed of the existing contract agreement and litigations filed by Messrs Adani Mega Systems Limited/ Webb Fontaine.”

The report also noted the ongoing litigation instituted by the consortium earlier given the job in a suit challenging the cancellation.

The suit, which was filed in December 2018 at the Federal High Court Abuja with suit No FHC/ABJ/CS/850/2017 will likely stall the recent award of the contract to another consortium.

Speaking after last Wednesday’s FEC meeting, Ahmed had said the award of the project, to be delivered by Messrs E. Customs HC Project Limited, would be financed by sponsors “who will in return look over the investment in the concessionary period of 20 years.

The project has the potentials to generate up to $176 billion for the country.

“So this investment of $3.1 billion is broken down into capital investment of $1.2 million which will be done in three phases over 36 months by these investors and $1.1 million is our projection of the operational cost over the 20-year period of the implementation of this project.”

When contacted, a maritime lawyer, Mr. Emeka Akabogu, faulted the contract, describing it as lacking in legal backing and transparency.

He explained: “When the Federal Executive Council of the country has given a seal to a project such like this, I would assume that it has been given a 360-degree consideration, particularly relating to viability and value for money. There is no doubt that the country needs end-to-end customs modernisation, but it must be guided by the very reason for which it is needed, which is transparency and trade facilitation.

“Transparency will determine if the scope of the project justifies the investment. I certainly feel that the stated cost is not just high, it is mind-boggling. Automation will certainly involve new technology and innovation, but it is not rocket science. The project being contemplated will probably incorporate complete automation of data submission and verification processes for cargo clearance in a formalities single window.

“For increased assurance, it may be carried on blockchain technology and even involve the deployment of smart contracts. I absolutely subscribe to it as it will resolve the current issues, which bedevil import clearance efficiency, including extortion by customs and under-declaration by importers. But it will not cost $3.1billion and does not need a 20-year concession.”

He noted that the more important element, which no reference was made to, is ensuring that the legal framework to drive the initiative is in place.

“Even though Nigeria is a signatory to the Trade Facilitation Agreement (TFA), it is not implementing most of its highlight provisions which could greatly alleviate the challenges in the immediate term and which don’t need expenditure of ridiculous sums to achieve,” he added.

The President of National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero, said any investment in Customs’ modernisation without starting from the legal framework and policy quick-wins will be cosmetic and self-defeating.

“I advise we start from that point and from there define the technology requirements to facilitate compliance which will be the basis for procurement such as has been done. We have put the cart before the horse,” he stated.