The Federal Government of Nigeria has announced that it is seeking a stay of execution of a British court judgment that has determined that it pays 9.6 billion dollars to an Irish company, Process and Industrial Development (P & ID), over a breach of contract. The court also determined that the firm could seize Nigerian foreign assets worth the amount.
Backdrop: Minister of Information, Lai Mohammed expressed Nigeria’s reservations concerning the judgement at a press briefing with top government officials (including the Attorney General, Finance Minister and Central Bank Governor) in attendance. Nigeria’s reservation against the judgement, is based on two key issues; the first being national sovereignty and the second is the possibility of illegalities in the process leading to the doomed contractual arrangement. The country has vowed to investigate the process, challenging claims previously made by the P&ID.
How it started
- The Ministry of Petroleum Resources, under Ridwan Lukman (late former President Yar’Adua’s minister), struck a Gas Supply and Processing Agreement agreement in January 2010 with P&ID.
- Nigeria had a dispute with P&ID which led to the cancellation of the contract. P&ID then served Nigeria a notice of arbitration before a British Court. (Although P & ID never really began operations in Nigeria, it claimed that it spent about $40 million in the planning stages)
- Nigeria tried to reach a settlement agreement to pay P&ID about $850 million in installments which was signed off by former President Goodluck Jonathan in May 2015.
- The Buhari government dishonored the agreement and tried to obtain local court judgement to block the British court.
- The British Court awarded P&ID $6.7billion in damages in a 2017 court judgement. A decision that was ignored by the Nigerian government.
- P&ID sought enforcement of the 2017 judgement in 2018 and obtained a judgement in August 2019 that awarded $9.6 billion against Nigeria.
Nigeria’s resistance against the payment of the settlement award will have implications on its ability to raise raise sovereign capital and attract Foreign Direct Investment (FDI). The messiness with which Nigeria handled the court process and deliberate disregard for the pronouncements of the courts is a reflection of what it does at the home front. In November, a British member of parliament advocated against Nigeria’s quest to raise money from British investors if it does not pay up its P&ID when Nigerian officials visited the United Kingdom to pitch its bond offerings.
Nigeria’s stay of execution might not fall through, and if this happens, it would mean that Nigeria would lose its assets now worth N3.5 trillion Naira. This amount is worth more than the country’s annual personnel costs of N3.2 trillion. And more than that, it means that Nigeria will also lose the potential gains on these assets.