Irony: How corruption helped Nigeria avoid $11bn fine

Nigeria was on the verge of paying $11bn in accumulated fines for breaching a contract to supply gas to the national grid, until a court found that the contract itself had been awarded in dubious circumstances.

The story began more than a decade ago, during the administration of President Umar Yar'Adua, who died in 2010. But the story of the murkiness surrounding the controversial contract only came to the fore last week.

The Business and Property Court in London, presided over by Justice Robin Knowles of the Commercial Courts of England and Wales, handed down a ruling on October 23 that spared Nigeria costs that could have brought it to its knees. 

The court overturned the $11 billion award against Nigeria in a case brought by Process and Industrial Developments Company (P&ID), an award that Judge Knowles found had been obtained by fraud. 

P&ID is a company registered in the British Virgin Islands, but its staff, address and assets are unknown, although they are owned by Irish intermediaries. 

Yar'Adua signed a gas supply agreement with the company in January 2010 to boost power generation by refining and supplying gas to the national grid.  

The contract to build a gas processing plant in Cross Rivers State was not implemented, nor was the gas delivered to Nigeria. 

Defraud the country

After two years of neither side fulfilling its obligations, and the eventual collapse of the project, the firm sued Nigeria in a UK arbitration court in March 2013, winning the case and seeking enforcement of the $11 billion in accrued compensation from 2023. 

By 2017, the company had won an arbitration award of $6.6 billion, which continued to accrue interest, rising to around $11 billion. 

P&ID claimed that Nigeria had breached the terms of its contract by failing to provide gas for the power plant it was building for the country.

Last month, the court said P&ID had been awarded a contract contrary to public policy and cleared the former Lagos Attorney-General, Olasupo Shasore, of wrongdoing in representing Nigeria in the arbitration. 

This week, Nigeria's Attorney-General and Minister of Justice, Lateef Fagbemi, said the British court had vindicated Nigeria.

“The judgment serves as a damning indictment of predatory international investors, who should now rightly be deterred from preying upon Nigeria and other developing nations to satisfy their greed,” he said on October 29.

“P&ID and its associates, Nigerians and foreigners alike, shamelessly attempted to defraud the country and enrich themselves through sharing Nigeria’s privileged documents, fraud, bribery and corruption on an industrial scale."

Corrupt officials

Former President Muhammadu Buhari, who refused to settle the case out of court, said on October 30 that Nigeria would have paid $15 billion if it had lost the case.

“The plant was never built. Construction was not started. P&ID did not even buy the land for the facility. But the contract, incredibly, was clear: P&ID could sue Nigeria, and claim all the profits it might have made over 20 years as if everything had been completed,” Buhari said last week. 

"Nigeria was in court in London, trying to talk down liability and costs. Back at home, fixers were looking to work out a quiet settlement. This is often the way. A lot of contracts end up in dispute. P&ID won a settlement in 2017 of $6 billion, with compound interest."

President Bola Tinubu on October 28, described the ruling as a landmark victory that proved conclusively that the nation would no longer be held hostage by economic conspiracies between "private firms and solitarily corrupt officials who conspire to extort and indebt the very nations they swear to defend and protect".

He said the victory was not just for Nigeria, but for the long-exploited African continent.

Former President Goodluck Jonathan's government reached an out-of-court agreement to pay the $850 million, but he passed the payment on to the administration of President Muhammadu Buhari, which came to power in 2015. 

Depth of corruption

However, Buhari refused to pay the negotiated sum and challenged the enforcement of the award in the English Commercial Court. However, the London court added $2.4 billion in interest, bringing the total to $9 billion. 

Shasore was accused of obstructing Nigeria's legal proceedings against the British Virgin Islands-based company and was charged with negligence and lack of due diligence in handling the case. 

In his defence, the former Lagos Attorney-General, who was appointed as Nigeria's lawyer in 2017, claimed that he had done everything in his power to secure the best outcome for Nigeria. 

Nigeria's House of Representatives, which investigated the matter, said on November 1, 2023 that the P&ID saga had exposed the depth of corruption and lack of patriotism on the part of Nigeria's officials and consultants, including lawyers, who had handled it with "shoddiness and corruption". 

It ordered Nigeria to review its procurement practices and investigate all concession contracts awarded by the government and its agencies in recent years.