LONDON COURT JUDGMENT: THE POTENTIAL LOSS OF 20% OF NIGERIA'S FOREIGN RESERVES TO IRISH FIRM P & ID

NINE BILLION DOLLARS! That's how much in assets that a London court has granted an Irish-owned company, Process and Industrial Developments Ltd (P&ID), the right to seek to seize from the Nigerian government as a result of an arbitration entered into by both parties in a gas supply and processing deal-gone-bad. The money which translates to about N3.24 trillion represents about 20% of Nigeria's current foreign reserves.

What Happened?
According to reports by TheCable and Vanguard, P&ID submits that it entered a gas supply and processing agreement with Nigeria’s Ministry of Petroleum Resources in January 2010. Pursuant to the agreement, P&ID claims that it would build the necessary facilities and then refine natural gas into non-associated natural gas for a period of 20 years. They were to build a gas-processing plant in the southern Nigerian city of Calabar. This transaction reportedly occurred in January, 2010 according to Reno Omokri, former media aide to Nigeria's ex-president Goodluck Jonathan. But according to reports by CNBC Africa and The Irish Times, in 2012, P&ID took the government to arbitration over the government's failure to meet their end of the deal, and won based on what it could have earned during the 20-year agreement. The Arbitral Tribunal on 31st January 2017 rendered its Final Award against the Ministry of Petroleum Resources in the sum of US$6.597 Billion together with pre-award interest at the rate of 7% per annum effective from 20th March 2013 and post-award interest at the same rate till date of payment. With interest payments, the sum now tops $9 billion – some 20 percent of Nigeria’s foreign reserves.

Reno Omokri (Right) with Ex-Nigerian President Goodluck Jonathan

Reno Omokri has tried to distance his former boss and the government he ran from the deal, claiming that the deal was entered into by a cabal loyal to then ailing Nigerian president, Umaru Musa Yaradua. Specifically, he fingers the then minister of petroleum, late Rilwan Lukman. According to him, the cabal kept his boss who was then vice president in the dark about the deal.

Nigeria's President, Muhammadu Buhari

Reaction from the Nigerian Government
Reacting, the Federal government through its solicitor general of the federation and permanent secretary, Federal Ministry of Justice, Dayo Apata, opined that it is making vigorous efforts to defend its interest in the matter and would not relent in exploring every viable option in doing so. The Nigerian government argued that the award should not be enforced because England was not the correct place for the case, and even if it were, that the amount awarded was “manifestly excessive.” But Mr Justice Butcher of the Commercial Court, London, rejected these arguments and said he would “receive submissions from the parties as to the precise form of order appropriate.” According to a report by Vanguard, Mr Apata claims that P&ID, in respect of the accelerated gas development project deal in Nigeria’s OMLs 67 and 123, never began the construction of the project facility although it alleges it incurred about $40 Million in preliminary expenses. P&ID’s claim in the arbitration proceedings was mainly for loss of profit for the entire twenty-year term of the deal, initially claiming the sum of US$1.9 Billion and later increasing its claim to US$5.9 Billion.

Nigerian High Commission, London

Legal experts said previously that assets used for diplomatic purposes – such as the Nigerian High Commission building in central London – are not eligible for seizure, but commercial assets are. Industrial Consultants International director Brendan Cahill, founder of P&ID with his late business partner, Michael Quinn, told African media earlier this year that P&ID was “open to a settlement on a reasonable basis” if it found someone in the Nigerian government willing to help resolve the dispute.

Can Nigeria really afford to lose upto 20% of her foreign reserves in this suit? Foreign exchange reserves is money or other assets held by a central bank or other monetary authority so that it can pay its liabilities. In Nigeria's case, these liabilities include payment for importation of certain goods for which CBN provides forex, etc. The items on the list of those goods have continued to be reduced by the current administration in a bid to retain more forex. The latest item to be dropped from the list sometime last week was food. In the wake of such a loss, if it happens, it is to be considered what effects that could have on inflation if more items are dropped for which Nigeria does not have the capacity to produce locally.