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BALA-USMAN; With FG Paying Cost of Funds, It’s Impossible to Reimburse INTELS $2.7bn



A few years ago, the Nigerian Ports Authority on behalf of the federal government entered into an agreement with a sister company of INTELS Nigeria, Deep Offshore Limited to build 200 metres of the berth at Onne port, Rivers State. To recoup its investment totalling $2.7 billion, INTELS signed another contract with the NPA for service boats revenue collection and agents management with 72 per cent of the revenue going to NPA/INTELS to service the debt and the balance 28 per cent as commission to INTELS. The service boats contract expired last month and INTELS has insisted it must act as an agent to the federal government to collect pilotage revenue, while the NPA argues that the agreement does not reference INTELS or any agent, but revenue to offset the amortisation deal. After collecting the pilotage revenue for 10 years, the $2.7 billion has not been paid off. The Managing Director of NPA, Hadiza Bala-Usman, in an interview with Eromosele Abiodun, explains why

Recently, there were reports in the media that the NPA had terminated its pilotage contract with INTELS. What exactly is the situation?

The NPA had a contract with INTELS that commenced on August 9, 2010, and expired on August 8, 2020. It’s a 10 years contract for service boat revenue collection. The agreement we had with INTELS was for revenue monitoring, for managing agents, for service boat collection in our pilotage district.

They collect revenue and monitor operations on behalf of the Nigerian Ports Authority, and the NPA gives them 28 per cent of the revenues collected. That is the agreement that was entered into. And that was the agreement we had issues with INTELS regarding compliance with TSA. Where they are mandated that the revenues collected should come into the coffers of the government before any remittance of the 28 per cent. So the contract as I said, expired on August 8, 2020.

There is an existing contract for the development of Onne 4B by Deep Offshore, a sister company to INTELS. Part of the agreement with Deep Offshore is an amortization project where the NPA engaged Deep Offshore to develop Onne 4B. It is a total contract of $2.7 billion, and it is an amortization, meaning that they will invest their money, and the government will now reimburse them from revenues. Their investment would be reimbursed from revenues collected from service boats. The contract is to develop part of the port at Onne and I encourage you to research and determine if indeed there was value for money for a $2. 7 billion project to build berth 12 to 19 and certain works in 2013. I’ll like you to research and make a comparison with the Singaporean ports and other ports that were built at the same time. Look at the facilities and the cost they spent building that port, you would see the huge differentials. $2.7 billion is huge money that the Nigerian government decided to invest in building, not a full port actually, it is 200 metres of berth that was built.

I don’t want to give you that information but I would encourage you to research the construction of 2000 meters jetty berth 12 to 19, shore protection, water distribution system, road development, tower light system, upgrade of NPA facilities at the gate in Onne port. I will like us to do a global comparison as to what this amount of money would have built for Nigeria if indeed we had looked at it in a commercial sense, getting value for money for the country. I will take you on the linkage between the two contracts. As I said, the NPA would collect revenues on service boats and it would use that revenue to offset that amortization. But nowhere does it state that INTELS must be the ones that would collect the revenues. They are two separate contracts; it is directly linked to the revenue, not to the company.

I recall one of the issues that we have had in discussing the project is to do with indebtedness. Government owes Deep Offshore Limited, a sister company to INTELS for this development and monies are to be paid from that revenue sourced.

If you look at 28 per cent as an agency fee, that is completely high, agency fees are usually between 10 to 15 per cent across the board. In fact, there is a BPP directive around the fact that such commission should not go above 15 per cent. But here we are, INTELS is collecting 28 per cent, and one of the things that we have said is that we intend to reduce the cost of the agency commission to enable the government to have more revenues for itself, and consequently more revenues to settle its debt. When someone is continuously collecting 28 per cent, how do you see paying off that debt you have from the Deep Offshore project?

So, upon the expiration of the contract with INTELS and Nigerian Ports, INTELS now took Nigeria Ports to court. Just as the contract was expiring, we initiated a tender process to engage another company, to now provide that service.

INTELS has total monopoly across all the palliative districts, so, in this instance, what the NPA has done is to advertise and break it into pilotage districts. So that different agencies would work for each pilotage district. The NPA also reduced the commission to 15 per cent and we advertised. When we did the advertisement process, INTELS indeed participated and they made the bid.

Part of the criteria within the tender process was that all the lots are provided. If you bid, for example, the Warri pilotage district, you cannot bid for the Lagos pilotage district. This is to ensure that there is competition and allow more people to compete. INTELS went against the rules and bided for each of the lots. They formed a consortium, bided for Lagos, they bid for Warri, Onne and that automatically disqualified them because, in the advert that was public, we had mentioned that you can only bid for one lot.

And this is just to ensure that it’s all spread out, one company does not monopolize and get all the contract that we hitherto had were INTELS had all the pilotage districts under their belt.

INTELS bided, they were disqualified, and we issued a tender document, INTELS now went to court, and got an injunction against the Nigerian Ports Authority, preventing us from proceeding with the procurement process.

So we received that injunction, we noted it and we engaged our lawyers. Then the NPA now decided, upon expiration, it’s not about the tender process. Nigerian ports will take back their work. We must not necessarily tender it. This is a service that the government has, so the government now is taking back its work.

Your contract has expired, and in so doing, everything that relates to the service boat operations should now be reverted to the Nigerian Ports Authority. The NPA and the staff would see how we can now work on managing it before we exit the court case with INTELS around the project.

So upon this, we issued a notice to mariners, we now notified the IOCs, the companies that need the services, that henceforth, they should contact the government for this service because the INTELS contract with us has expired.

Now INTELS went back to court again and got an injunction against the government, that government cannot take back its own work.

The way that it was approached is very funny. How can the government be restrained from doing its own service? Government is being restrained from doing a tender process that ab initio, INTELS even participated. When they got disqualified, they now got an injunction that you can’t continue with the process. Now, NPA said we are taking back our own work because it is government work; INTELS got another injunction to prevent the government from taking over its own work.

You wonder the height and level of impunity and attitude of such a company that thinks they can come and use judicial manipulation to frustrate the government from realising its objectives of attaining the revenue that it needs in order for us to do our operations. So when I see INTELS spreading falsehood about their contract being terminated, it is pure falsehood, the contract wasn’t terminated, it expired. They’re also talking about the fact that there is a court order restraining NPA. Yes, there is. But let Nigerians know what it is, what that order is all about. So if you have an injunction saying, the government cannot do its work, I am curious as to what purpose, what the judicial system is seeking to do in this manner.

Of course, we have noted the injunction, we have our lawyers, and they are in court. We are going to see how that would pan out. But we just wanted to clarify the issue of termination, and also clarify that it expired, and also clarify that there is no linkage at all with the two projects. I will take you to the agreement, Article One, section 2.3 of the deep offshore agreement says, “The recovering of the project cost, through amortisation from ports charges and service boat operation revenue, shall be in respect of the completed portion and handed over to the authority.”

So, it references the revenue from the service board, there is no way where it references INTELS. For INTELS to go to court and say that they must be the ones that would collect the revenues on behalf of the government before the government can pay is quite ridiculous and laughable. Nowhere in the contract that they are linked in any way, the revenue can be realised through a third party, and also could be realised by the government itself. So you cannot say the government has to appoint you because you have an amortisation programme, it doesn’t even work that way.

But we are going to pursue the judicial process, and see where it culminates. But you should have an understanding of the level of mischief such companies perpetuate within our country. I think it is an important clarification that needs to be put out.

I will like you to explain this properly to Nigerians. Did you say the $2.7 billion contract to build berth 12 to 19 at Onne port was awarded 10 years ago and INTELS has been collecting service boats revenue for that period, part of which is being used to pay the debt and for 10 years the $2.7 billion has not been paid?

Yes, it’s an interesting question that you asked. NPA is required to pay for the cost of funds. This has been the battle that we took on when I became managing director of NPA. A company was given a contract to go and build berth 12 to 19, the cost of that is $2.7 billion. When you build it, the government would pay you. It’s like a contract. And every time when you award contracts, it is not government business how you go and source your money. Government does not pay for the cost of funds. And a normal contractor, if you go, you get your project, you go to a bank, they give you a loan, you give your bond, your bank guarantee, how does the government take up the liability of the cost of funds?

In this instance, the government has been paying for the cost of funds. And yes, it was stated in the contract, which is quite a shame that government will enter into a contract where it will pay for the cost of funds, it will pay for the interest on the loans its contractor collected to execute the contract awarded to it. So with that, it would be very difficult for the government to pay off these amounts within that period. There is nowhere were someone who gives you a contract pays for the cost of funds for the contract, it’s not done.

So how can the government ever pay off the $2.7 billion? The interest rates are there, there is a cost of funds payment and all manners of other things. So as a result, the government has not been able to reimburse them. Let’s look at this project critically. What did they build for $2.7 billion? As I said, please research and see what $2.7 billion will give so that we can have an understanding of the wastefulness.

There seems to be a conflict of interest in this whole exercise, a company executes a project and it acts as an agent to collect revenue to pay for the project. Is there a way the NPA verify this?

It is a huge challenge because when they collect revenue, they collect and hold. We don’t know what it is they collected at a certain extent, they are the ones to tell you we have collected X amount. Two years ago, we instituted a process where the monies would come directly into the government coffers, and the government would be able to see and remit.

So hitherto, they used to collect it, but now, in the last two years, monies are paid into our account. Even as at that, it’s a battle. INTELS has refused to fully comply with the TSA. So it’s something that I feel the contract, from the beginning was not done in the interest of Nigeria and Nigerians. And now that the contract has ended in its own volition, INTELS has gone to court to insist that this contract that was never done in the interest of Nigeria or Nigerians, should now be in perpetuity until a different contract is fully paid for.

Some of the wrong policies and agreements that have been entered into in the past, so even when they come to an end, we still have a mischievous company going to court to seek all manners of injunctions against the government and stop the government from performing its own function.

Is there anywhere in the agreement where the amortisation is tied to the contract, that is until the $2.7 billion is paid including the cost of funds the pilotage contracts will continue with INTELS?

No, it does not speak to a contract, it speaks to the revenue, the contract agreement with Deep Offshore to build berth 12 to 19 at Onne port, speaks to the fact that the amortisation would be repaid from revenue sourced from service boat contract. It doesn’t say who the contractor is, it doesn’t reference any contract, it references the revenue source. That revenue source could be derived from another contractor, could be derived from the government itself, from any third party contractor. So really, there is no linkage and the articles within the agreement are clear. There is no linkage between those two.

Is there any provision for automatic renewal of the service boats contract or as a right of first refusal in the agreement?

The contract is very clear that it shall continue to be in force for a period of 10 years till August 8, 2020. Thereafter, unless terminated in accordance with the terms and conditions of the agreement. There is no were it references in Article 2.1, first right of refusal, or automatic renewal or anything. There is no such thing there.

Comparing when INTELS started paying money into the TSA to when they were collecting to themselves, is there any difference, either increase or otherwise, in revenue?

We have had differentials in terms of how much has been collected, and how much has been remitted, but I don’t have the numbers right now. But what is more worrisome is the fact that INTELS also act as agents for IOCs, this is the other issue that we have. They are agents for the IOCs and they are agents for the Nigerian Ports Authority. They raise the bills on behalf of the IOC’S and they also would remit on behalf of the IOCs.

Even when we have told the IOCs that they should pay directly to us, because they have appointed INTELS as their agents, INTELS collect from them to pay to us. So it’s quite a huge web that has existed, but this racket has come to an end legally. There is nowhere in the agreement were there is compulsory renewal.

We learnt that INTELS took NPA to court when it failed to comply with TSA and the NPA decided to settle out of court because the pilotage contract was going to run out this year. Tell us about this.

We have been facing a lot of challenges with full compliance with the TSA by INTELS. We had initiated a termination process because they were not complying. And upon looking at the procedures of terminating, we decided to discontinue because the contract was coming to an end, and the government would take possession and take over its own activity. And here we are a year after, INTELS is now in court challenging why the government should reclaim its own services.

Now that INTELS has gone to court, where are we now?

There was a hearing recently in court, it’s been adjourned.

Given that situation, who is currently doing the job?

You know we have an injunction preventing us from taking over. So, INTELS, based on the injunctions and the fact that we are abiding by the injunction is still providing the service.

Is the NPA prepared to take over today should the injunction be vacated?

Yes, because as of August 8, we have written them, we have notified all the ports managers, we have put in place mechanisms in which we are going to take over. So we are prepared for that, we have notified our respective officers that are in charge, that have been working with INTELS over the years to make necessary provisions for that. We have received requests that each port manager needs to enable them to meet up with those requirements. So we are ready to take on the service. Importantly, there are certain infrastructures that we need to put in place, which is why a third-party contractor was sought for, and if you know the government is not very efficient in doing such services. Government is not very efficient in ensuring that it gets its full revenue, which is why INTELS ab initio was engaged from the beginning. And that is still a valid concern; it’s still a valid position, which is why we initiated a tender process to replace INTELS with another company.

So what we are doing at the NPA now is more like a stopgap measure before we conclude the tender process for having a private sector company take over the activities. While our staff should be able to do it, but over the years, I have seen that Nigerian Ports in itself will not effectively do the monitoring of the service boat and get the revenues that government need by itself as an agency.

One of the concerns INTELS has raised is that a lot of Nigerians would be out of jobs should the NPA take over. How do you intend to handle this situation?

The service they are providing is a service that would continue to be provided. It is not like the work would stop. Somebody would recruit people with those skill sets and they would continue to provide that service.

So, you don’t have to be employed by INTELS if you have a skill set for service boats monitoring. The company that would eventually replace INTELS would also need personnel, would also need staff, so they would recruit and employ the same number of staff or even more, to provide the service. So either way, I think it is cheap blackmail to say that people will lose their job because that service would still be provided, it is just that, it will not be INTELS that would be providing that service, which is why we have an issue. You are not the only employer of labour as relating to service boats. And people that have those experiences over the years would get priority considerations by their country because they need people that have experience.

Aside from the fact that the service boats contract that has expired, INTELS are terminal operators?

Yes, INTELS are terminal operators in Onne, Calabar, and Warri, their contract agreement for the operations of the terminals are valid and they remain operational to provide their services as a terminal operator. However, they have narrowed down everything to service boat collection. So it is not in the global picture of what INTELS represents. INTELS remains a concessioner of Nigerian ports.

Some reports have tried to give this matter a political narrative by linking INTELS to former Vice President Atiku Abubakar. Is there a political angle to this issue?

I am curious as to how you can call a contract, which has expired, and the government wants to take over, political. You had a contract, be it APC or PDP, Atiku or Buhari, or whoever it has a contract for providing a service. The contract has reached its terminal end. The government is taking over that work, what is political about that. So every time, that coloration is given, I always ask, if a company refuses to remit monies that are raised on behalf of the federal government to government coffers, what is political about that. For you to question and put it in a direct narrative that it is an Atiku’s company, they are the ones actually trying to politicise it. Any service that is being provided by anybody, if it has come to an end, it should be taken over. It is if you retain the service then that means that you are being political because you want a political beneficiary to continue benefiting even when a contract has reached its lifespan.

Before you took NPA to the court about a year ago over TSA, I learnt you were advised to terminate the service boats contract because INTELS was withholding several millions of dollars belonging to the federal government in its coffer, have those monies been remitted to NPA, and if not, what is the value, and how do you intend to get them?

What it is is that, we collect the total sum of the amount, INTELS gives an invoice for 28 per cent, and we give them 28 per cent. Then the balance is now shared 70 by 30 per cent between Nigerian ports, and Onne 4B project. So the amortization project now gets the 70 per cent. So for us to pay the 70 per cent to them, and the 28 per cent, they need to bring the monies, we need to collect. We cannot pay you what we have not collected. One of the arguments they have made is that they want the government to take other revenues and pay them, and we maintained that the Onne 4B project is meant to be serviced through this revenue source.

So you are the one collecting the revenue source, so you ensure the revenues are collected and brought to us, and you give a certificate as it relates to the 4B, and you give us your invoice as it relates to the 28 per cent, and we pay you. Monies have to come before it will go. I will give you the details of how much we are being owed on both sides, so you can see it clearly that INTELS is still refusing to make the payments as at when due, especially for companies that they represent as agents. We have reported the case to the Economic and Financial Crimes Commission (EFCC), the EFCC is investigating them right now on their non-remittance to the government. Following the withdrawal of the court case, we felt the need to draw the attention of the EFCC so that they can investigate and reclaim the monies on behalf of the government.

For the 10 years the contract lasted, do you know how much they have paid the government, and how much is left from the $2.7 billion owed INTELS for the Onne 4B project?

I would give you these numbers. We have the numbers of how much we have paid, and how much is the cost of funds for the project so you would be able to see for yourself the $2.7 billion, how much it is on the books of the government when you include the cost of funds so that you have an idea of what it has translated into.

Give us an overview on the year so far, given the impact of COVID-19 on ports activities. How does it affect the government revenue, and what is the NPA considering as a solution?

NPA has maintained the numbers of vessels that have been calling. As you are aware, the shipping industry remained functional globally despite the pandemic. So it was one of the sectors that globally remained operational during the COVID-19. And we have remained optimistic that it will continue. We have equal numbers of vessels calling, our cargo still remains in the volumes that it were. One of the concerns we had is ensuring that we remain operational and optimal by providing other inflows into the country. I am sure you would have seen how a larger vessel called into Onne, that is a way diversifying and allowing other parts of Nigerians to receive cargos so that we don’t have continued congestion in Lagos. The vessel that called into Onne, was to for Maersk Line, to bring in the vessel for the first time so that it’s known that a 300 LOA can call in Nigeria. Now that a 300 LOA has been seen to have safely called in Nigeria, they are now preparing on having a voyage with consignments that are meant for Nigeria. So prior to this, as far as the shipping industry is concerned, 300 LOA cannot call into Nigeria, so they don’t make preparations for such a large vessel.

As we said, that was a trial call to show that vessel can call, and also for the catchment area for consignees within the eastern parts of the country. Now the shipping companies will market directly to them, so that they can take on the opportunities of having vessels calling in Onne. Also, the attending linkage is to do it having the necessary inter-model transportation system for cargo evacuation from the Onne. So, even if a vessel comes to ports and you are unavailable to have a seamless outflow of that cargo, it is also very frustrating.

I have reached out to the minister of Niger/Delta. The road linking Onne Ports out is East-West road, parts of a project that the Ministry of Niger/Delta has awarded. So the minister has committed to restarting the project and ensuring that there is necessary funding for the project is in the 2021 budget so that the road can be fully rehabilitated for articulated trucks to navigate fully out of Onne Ports, into locations within the eastern parts of the country. We are quite excited about that. When we had the successful birthing of 300 LOA in Onne, the terminal operators in the Lagos Ports are not agitating for the same. Because now they see that there is an attraction to the other locations, some of the terminal operators have written us that they also want to see the necessary expansions that can be made, to enable them to accommodate a big vessel of that nature.

What is stalling the Badagry Deep Seaport project?

Well the proponents, we have asked them to make a deposit of $500,000 in an escrow account to signify their commitment towards the project. In the last year, we have tried to engage them; they haven’t been as forthcoming as they should.

Interestingly, they made the payments into the escrow account a month ago; we are going to conclude on the final business case. If you recall, the concerns that we had on the Badagry seaport was the fact that the transaction adviser, put in all government service into the outline business case as the service that would be provided by the Port.

So in fact, determining the rate, toll wage services, and all manner of marine services that are responsibilities of government through the Nigerian Ports Authority were now handed over to the proponents as parts of what they would do in managing the Ports. So NPA kicked against that, we reviewed the outline business case, we forwarded our comments. Our comments are now being integrated whereby these functions would be removed from the Badagary project.

I also want to clarify that INTELS were amongst the proponents of Badagry Seaport. So the NPA had to look very closely into the outline business case to ensure that government is not again shortchanged in the Badagry Deep Sea Port project the same way that INTELS had shortchanged the Nigerian government in the Onne 4B project agreement, and also the service boat contract. So we are through with that, and we are going to go to the next step where the final business case would reflect all the comments of the NPA were all our duties have now be reclaimed as duties of government.

Recently, there were reports that the NPA cancelled barge services. Is that correct?

No. It was actually wrongly reported. Across the Marina here, we inspected the location with the governor and the Minister of transportations. There were concerns about companies utilising Marina to offload cargo. And we needed to establish who gave the necessary permit for those companies to operate on the Marina. We found out that it was the Federal Ministry of Works that granted Millennium Shipping Limited the approval to use that land at Marina. And they have been using it for utilization of offloading cargo, and that is not the place for offloading cargo.

And Millennium shipping had taken Nigerian Ports to court when we asked them to stop that operation. So in order for us to abide by the judicial process, but at the same time prevent the activity from happening in Marina, we now cancelled the badge license for Millennium Shipping that is operative on the Marina. So it was wrongly reported, I saw that too. So, it was Millennium Shipping LTD that has had its barge license permit cancelled, because it’s been operating on the Marina which it should not.

Because of all these activities within this period, a joint committee been setup, it is consisting of the NPA, Nigerian Inland Waterways Authority (NIWA), and the Lagos State Government, to determine the activities that are on the Marina, if they have the necessary approval and permits, and in furtherance to that, also to agree on the usage for the Marina. You must have seen that on one portion of Marina, you have a private jetty, NIWA jetty, then you have another place that is defence jetty, so Lagos State Government is concerned about the different types of activities. So we need to have a clear land use for the whole of the Marina and ensure full adherence by the users of the Marina. So, those were the directives that were given.

As a result, we have directed that everybody on the Marina should suspend his or her activities pending the committee report. And for Millennium Shipping, specifically, its barge license has been cancelled and the ministry of works has been notified to withdraw its approval for the lease to the premises.

What is the situation on the LADOL matter?

Samsung has gone to court challenging the termination that was issued to them.

The oil rig at Marina we understand the owners are paying a certain amount to NPA. Is it true?

Between NPA and NIWA, the Ministry of Transport has been trying to determine who should receive the payment for the rig. It was even discussed recently with the minister, and NIWA has claims to it, just as Nigerian Ports Authority has claims to it. But that has not been fully resolved to determine who would generate that. In fact, amongst the things that were raised during the inspection yesterday included the fact that the place should be sanitized. All manners of rig should not come and anchor on the Marina. Globally you don’t see that. You just don’t come and pack a rig and be paying. No, such location is not meant for such type vessels. Marina should actually be a walkway, a green area; there should be no construction, maybe a few shops for recreation and refreshment. If you see, there is a rig here. There is another somewhere, a few of them closer to Naval Dockyard. So the outcome of the committee’s work will determine how they continue to be anchored in the Marina going forward.

The NPA embarked on a port terminal concession review recently. Has that process been concluded?

We have literally concluded with some recommendations to the ministry. We also made recommendations to our board. To the ministry, we sent it over a month ago; they have not reverted to us. I will just reiterate that we were able to get technical supports from the World Bank. World Bank engaged a technical adviser that really guided us so much so that the outcome of the assignment he did will be pioneering in the African continent where the experience of reviewing the concession agreement would be a model that would be used on the continent. The World Bank wanted NPA to give them the go-ahead for that document to be made public so that other ports will be able to learn from what we did with the World Bank in developing, monitoring indexes, developing metrics on ensuring that there is compliance on obligation. That is if the government, for example, doing dredge, there will be a computation, the government will be liable, there will be clarity in terms of none performance. If the government doesn’t do its own obligation, the government will lose revenue directly from the concession agreement.

I think this is one of the integral successes arising from that. So, any non-performance on both sides will be penalized. And the penalty would arise from revenues on both sides. So if you don’t perform or build in line with your development plan, you will have a penalty. And if the government does not do its own dredging or rehabilitation of the keys as required, the government will lose revenue. I think those parameters will keep everybody on their toes, and ensure that there is clarity or if you perform or you don’t perform. I think that ambiguity allows the government to dodge its responsibilities and also for the terminal operators to dodge theirs. But with this now, I believe upon getting all the necessary approvals; it will really assist us in monitoring, going forward.


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