Govt’s new deal on Ajaokuta, NIOMCO under attack 

*Stakeholders allege fraud *Say agreement with Indian firm unfavourable *Deal originally rejected by Jonathan govt

President Muhammadu Buhari-2Kunle Kalejaye

16 September 2016, Sweetcrude, Lagos – Federal Government’s recent deal on Ajaokuta Steel Company and the National Iron Ore Mining Company, NIOMCO, in Itakpe, Kogi State, has come under heavy attack from the stakeholders in Nigeria’s steel sector.
The government had last month signed a new agreement to reclaim Ajaokuta Steel Company and concession the National Iron Ore Mining Company, NIOMCO, to Global Infrastructure Nigeria Limited, GINL, owned by the Indian, Pramod Mittal.
Industry experts and stakeholders, however, said the deal with the Indian company was unfavourable to Nigeria and that the decision which would see the company commence production of iron ore through NIOMCO was born out of greed rather than positive national consideration.
Of serious concern to them is that whereas Ajaokuta Steel was not anywhere near take off, NIOMCO, which is positioned to provide iron ore as raw material to Ajaokuta Steel, has been handed over to GINL with the mandate to commence iron ore production.
“This new deal is questionable. By the way the nation’s steel sector is structured, Itakpe (NIOMCO) is tied to Ajaokuta,” a retired director in the Federal Ministry of Mines and Steel Development, who pleaded anonymity, disclosed.
He continued: “Itakpe is tied to Ajaokuta because it is supposed to supply it (Ajaokuta) iron ore. But, Ajaokuta is not anywhere near take off, not with the state of things in the country. Certain things have to be in place for Ajaokuta to function even if it is completed today. These include infrastructure such as constant power, rail line to transport raw materials, among others. With Itakpe now in the hands of Global Infrastructure with a mandate to commence iron ore production, what this means is that Global lnfrastructure will produce for export. The question to ask is, why are we in a hurry to hand over Itakpe for commencement of production?
“We appear to be making the same mistake we have made with crude oil as a nation, in that the iron that Global Steel will export will be used out there to produce billets which we will now import to support our rolling mills and other smaller steel plants. This is like exporting crude oil and then, importing it as petroleum products”.

House of Reps kicks
In his reaction to the development, Chairman, House of Representatives Sub-Committee on Steel, Mr. Gabriel Kolawole, said despite the agreement, there was no way Ajaokuta could take-off, citing the same issue of absence of “external infrastructure”.
By implication, according to Kolawole, GINL, which he accused of incompetence and having an image problem, will mine the nation’s iron ore, and export it without giving Nigeria the raw material that will enable Ajaokuta to work.
Vowing that the House would not allow GINL to commence any activity at NIOMCO, he noted that government would need about N2 billion to get Itakpe up and running.
“What we are saying as a House Committee and House of Representative members is that we will not allow Global lnfrastructure to commence any activities at NIOMCO without ensuring that government meets its obligation.
“As we speak, the government will need about N2 billion to get Itakpe at 100 percent completion for the benefit of GINL and the N2 billion is not included in the last budget and in the 2016 budget. .
“We must ensure that government meets its obligations, ensure that outstanding salaries are paid, severance benefits are paid and we must ensure that GINL this time around does the right thing. If the right thing is not done, we are not going to allow them to commence any activities at the site,” Kolawole said.

BPE distances self from new deal
The Bureau of Public Enterprise, BPE, the government agency in charge of relinquishing government parastatals to private concerns, has distanced itself from the Ajaokuta Steel and NIOMCO deal, questioning the process that brought back GINL. Speaking at an investigative hearing on the concession agreement, acting Director-General of BPE, Mr Vincent Akpotaire, said the concession was carried out by the Ministry instead of the appropriate process of going through BPE.
“The concession of NIOMCO was not done by the BPE but by the Ministry. BPE  has severally mentioned that it never participated in those agreement regarding NIOMCO in Itakpe and Ajaokuta Steel. The agreement, therefore, is null and void as far as we are concerned. That is my conclusion,” he said.

Mines workers also against deal
The Nigeria Union of Mines Workers, NUMW, are also kicking against the agreement. The union said it was concerned that NIOMCO, an artery required for the success of Ajaokuta Steel Company would be handed over to a company that has been accused of bank fraud in Nigeria, asset stripping at NIOMCO and non-payment of workers’ salaries.
It asserted that GINL had no track record of successful mining business anywhere in the world, maintaining that it was for this reason of incompetence in the handling of Ajaokuta and NIOMCO that the company’s initial agreement with the government on the two companies was revoked by late President Umaru Yar’Adua after three years of failed operations.
Chairman of NUMW, Mr. Ogboko Newlife, informed SweetcrudeReports that before late President Yar’Adua terminated the GINL contract, “the company grounded NIOMCO, sold parts of facilities on ground, owed workers 13 months salaries and left the country”.
“Why will the Federal Government hand over NIOMCO back to the same company that ripped off the company and owed workers salaries?” Newlife asked.

Minister copies 2014 concession agreement
Also, SweetcrudeReports can authoritatively reveal that the agreement the government recently signed with the Indian company is not new. Minister of Mines and Steel Development, Dr. John Olukayode Fayemi, copied and pasted an agreement dated December 12, 2014, and addressed to former President Goodluck Jonathan.
The agreement prepared by the office of the Honourable Attorney General of the Federation and the Federal Ministry of Justice (under the leadership of Mohammed Bello Adoke) was, however, not ratified under the Jonathan government following refusal by then Minister of Mines and Steel Development, Architect Musa Mohammed Sada, to sign it on the basis that it was strongly against Nigeria’s interest and therefore, unfavourable to the country.
The 2014 Modified Concession Agreement with GINL obtained by our correspondent, which was forwarded to President Jonathan with a memo titled, “HAGF/SH/2014/Vol.2/121” is the same agreement signed on August 1, 2016 by Dr. Fayemi, representing the Federal Government, and Mr. Pramod Mittal of Global Infrastructure Nigeria Limited. It signing ceremony was witnessed by Vice President Yemi Osinbajo and representatives of the London Court of Arbitration.
The similarity of the old and new documents is so obvious that mistakes made in the 2014 version were repeated in the latest agreement.
For instance, page 9, section 7.1.2 of Adoke’s 2014 concession agreement contains a typographical error, saying ‘complete’ instead of ‘compete’. The same error was repeated on page 9 section 7.12 of the agreement signed on August 1 by Fayemi and GINL, meaning that it was Adoke’s deal Fayemi executed.
After the signing of the August 1 agreement, Dr. Fayemi said that he negotiated a better deal for Nigeria whereby GINL will pay an increased concession fee from three percent turnover to four percent turnover to the Federal Government. This is contained on page 7 section 5 under the sub-title “Concession Fee”. The same terms are contained in Adoke’s memo to former President Goodluck Jonathan on page 3 (b) under the subtitle, “An increase in the Concession Fee”.
Another evidence of copy and paste on the part of the Ministry under Dr. Fayemi was his comment before and after the signing of the August agreement to the effect that he saved the country from paying between $500 million and $700 million to GINL, which he described as a substantial achievement. However, on pages 2 and 3 of Adoke’s memo under “(a) Zero Damage”, he (Adoke) said he was able to negotiate zero damages and a waiver of $525 million on behalf of Nigeria.

Unfavourable terms
Of serious worry to industry experts is the provisions of the agreement, which they say are tilted in favour of GINL, and which if implemented as it is, will see Nigeria losing greatly.
For instance, contrary to the seven years period given to GINL to complete their initial 10 years concession agreement, page 6, section 4 of the August 1, 2016 agreement and Adoke 2014 agreement under “Commencement and Duration”, there is an option to renew the concession agreement for another 10 years with GINL.
More worrisome is that the August 1, 2016 agreement contains terms asking Nigeria to pay for the deterioration of equipment which occurred during the eight years pendency of an arbitration case, which the Indian company dragged the Federal Government into after late President Umaru Yar’Adua had terminated their initial agreement with the Olusegun Obasanjo government on the grounds that it was not in Nigeria’s interest.
On page 6 section 4A 1 under the sub-title “Condition Precedent”, the agreement states: “The Obligations of the Parties under this Agreement are conditioned upon the performance of the following matters (each, a “Condition Precedent”) by the Grantor to the reasonable satisfaction of the Concessionaire and or waiver thereof by the Concessionaire:
(a) provision by the Grantor of full access to the Concession Area and all related documentation and information for the conduct of the Due Diligence and the preparation of the Due Diligence Report;
(b) rehabilitation of all plant, equipment and other facilities comprised in the Concession Area to the state in which such facilities were as at 1 April 2008, including remediation of all loss of material, deterioration of equipment, theft, loss of design drawings, spare parts or consumables provided that the Concessionaire may undertake the performance of this Condition Precedent upon commercial terms to be agreed by the Parties after the completion of the Due Diligence.
(c) full hand over to the Concessionaire of the Concession Area, including all uncompleted facilities, spares and other assets comprised therein, and all design document drawings, catalogues, manuals and other related documents
By implication, page 6, section 4A (b) means that Nigeria is also going to pay to rehabilitate NIOMCO to the state it was in 2008, pay for any missing documents and design etc.
The commercial agreement to settle the condition precedent is that if Nigeria fails to undertake the repairs, GINL shall do so and pass the bill to Nigeria. The rehabilitation cost is estimated at €500 million. Section 7 which runs from page 9 to 10 contains obligations of Grantor (Nigeria) to GINL in the course of their operations.
7.1.14 of the agreement states that “any competent authority in Nigeria or any part thereof will not directly, or indirectly, levy or impose on Concessionaire and each such company shall be exempt from any fiscal charge arising out of the generation and/or consumption of power and energy made available from captive sources”. This means that NIOMCO under GINL will not pay electricity bills.
Also, 7.1.15 of the agreement states that Nigeria has the responsibility for the payment of salaries, allowances and all emoluments of the staff of NIOMCO.
7.2 (b) added that “the Grantor (Nigeria) hereby agrees to facilitate all necessary lawful exemption from Fiscal Charges required to enhance the profitability of the Concession”. This means that GINL is to benefit from all fiscal incentives, including tax exceptions and waivers on export charges when selling Nigeria’s ore overseas but will sell iron ore to Ajaokuta Steel Company Limited at the normal commercial prices.

Pressure for signing agreement under Jonathan
In the recent signing of the agreement with GINL, it is not certain whether Fayemi acted under pressure. But there was pressure for the signing of the deal during the Jonathan government which the Minister of Mines and Steel Development under that administration, Mohammed Sada, resisted till the end of the regime.
Former Attorney General of the Federation, Bello Adoke, who drafted the 2014 Modified Concession Agreement with Global Infrastructure was alleged to have been in favour of the signing of the agreement. He was said to have been furious that Sada refused to sign the document.
Sada, in refusing to sign the document, had claimed the terms were unfavourable to Nigeria and that the reasons why late President Musa Yar’Adua revoked the initial deal with the Indian firm were not addressed by Adoke’s agreement.
It also became known that Sada was not carried along in the making of the Adoke draft.

The Obasanjo connection
In 2004, the Federal Government under President Olusegun Obasanjo signed a 10-year concession agreement with GINL to manage Ajaokuta and NIOMCO, after Solgas, the original firm who received Ajaokuta and NIOMCO following an earlier government concession, was deemed to have failed in its handling of the companies.
Three years into the deal with GINL (in 2007), late President Yar’ Adua cancelled the agreement on the grounds that the terms were unfavourable to Nigeria and that the Indian firm had breached some terms of the agreement.
The breach of contract which led Late President Yar’Adua to revoke the deal included allegations of asset stripping of NIOMCO and indebtedness to major banks in Nigeria.
Thereafter, GINL dragged the Federal Government to the Court of Arbitration in London.

Govt escaped paying $525m to GINL – Minister
Giving more insight into the new deal with GINL, Minister of State for Mines and Steel Development, Mr. Abubakar Bawa-Bwari, said Nigeria escaped paying damages in excess of $525 million to the Indian firm by signing a modified concession agreement with the company.
Curiously, this is exactly the same amount claimed as waiver obtained from the Indian company in the Bello Adoke draft agreement on pages 2 and 3 under the title, “(a) Zero Damage”.
Bawa-Bwari, who disclosed this as he spoke in Abuja, also said the government had in the last 35 years spent a whopping $10 billion on the Ajaokuta Steel project.
“The most important thing is that everybody agrees that Ajaokuta should work. We have spent over $10 billion over 35 years and we cannot afford to continue to waste more time.
“This modified agreement is the best option available to government today. This agreement will free us from all the legal issues. We will monitor it and ensure that the GINL too keeps to its promise that they have turned a new leaf,” the minister said.
According to him, the government signed the agreement to free NIOMCO, Ajaokuta Steel Company and the Delta Steel Company, Ovwian-Aladja, from the ‘legal encumbrances’ that had stalled the operations of the steel firms for several years since they were first privatised in 2004.

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