Customs Modernisation : FG risk $2.5b litigation cost over contract tussle

 Customs Modernisation : FG risk $2.5b litigation cost over contract tussle

By Eguono Odjegba 

The National Assembly, NASS, has said the Federal Government risk incuring a $2.5b litigation fees if it goes ahead to implement the recently awarded $3.1m Customs Modernisation contract, recently awarded to Messrs E. Customs HC Project Limited, a Chinese firm.

This was contained in a recent report  by the House of Representatives Joint Committee on Finance, Customs and Excise and Public Petitions, which has investigated the contract deal, believed to have previously been awarded to Messrs Adani Mega Systems Limited/ Webb Fontaine.

The House Committee fear the FG may have ignored an advise by “the Solicitor General of the Federation to the Minister of Finance urging it to consider the strength and weakness as well as litigation fees of $2.5billion and lengthy time frame of embarking on this case and how that may affect the ultimate goal of government for revenue generation.

The House Committee in its report, a copy of which was obtained by our reporter  advised the presidency to take a critical look at the contract to ensure the FG does not take action that will be embarrassing or lead to unnecessary litigation and cost at a time the national economy is struggling.

Also revealed in the report is the ongoing litigation instituted by the consortium earlier given the job in a suit challenging the cancellation . The suit which was filed in December 2018 at the Federal High Court Abuja with suit No FHC/ABJ/CS/850/2017 will likely stall the recent award of the contract to another consortium.

The House Committee letter written in October 2019 reads:

“On the other hand, the Presidency through the office of the the Chief of Staff to the President issued a letter dated 17th September, 2019 engaging the consortium titled Presidential Initiative on Customs Modernisation  to carry out the same project awarded to Messrs Adani Mega Systems Limited/ Webb Fontaine seven months after they were engaged by CBN- CISS.

“It is the opinion of the Committee that the Presidency was not duly informed of the existing contract agreement and litigations filed by Messrs Adani Mega Systems Limited/ Webb Fontaine”

The report revealed that Federal Government acted in breach of an earlier contract award terms with Messrs Adani Mega Systems Limited/ Webb Fontaine consortium in response to a June 20, 2016 bid advert.

The House of Representatives Joint Committee report which was jointly signed by James Abiodun Faleke, Chairman Finance; Jerry Alagbaoso, Chairman Public Petitions; Yuguda Hassan Kila, Chairman Customs; Lawali Ibrahim, Clerk to Committee on Finance and Aliyu Maccido, Clerk to Committee on Customs revealed that the controversial cancellation and re-award of the contract took place during the time of the late Chief of staff to President Muhammadu Buhari, Mallam Abba-Kyari.

The Federal Executive Council, FEC, recently announced the approval of $3.1 billion for the ‘complete’ automation of the Nigerian Custom Service, NCS.

According to the Finance Minister:

“The main objective of this project is to completely automate every aspect of the customs business and to institutionalize the use of smart and emerging technologies that will enhanced the statutory function of the Nigerian Customs Service in the areas of revenue generation as well as trade facilitation and enhancement of security.”

Ahmed said the project, to be delivered by Messrs E. Customs HC Project Limited, will be financed by sponsors “who will in return look over the investment in the concessionary period of 20 years” while it has the potentials to generate up to $176 billion for the country.

“So this investment of $3.1 billion is broken down into capital investment of $1.2 million which will be done in three phases over 36 months by these investors and $1.1 million is our projection of the operational cost over the 20-year period of the implementation of this project.

Reacting, maritime lawyer, Emeka Akabogu faulted the award as lacking legality and transparency.

He said as soon as the Federal Executive Council of the country has given is seal to a project such as this, such deal ought to respected, particularly in terms of its critical business viability and value for money.

According to Akabogu,  there is no doubt that the country needs end-to-end customs modernisation, but it must be guided by the very reason for which it is needed, which is transparency and trade facilitation.

“Transparency will determine if the scope of the project justifies the investment. I certainly feel that the stated cost is not just high, it is mind-boggling. Automation will certainly involve new technology and innovation, but it is not rocket science. 

“The project being contemplated will probably incorporate complete automation of data submission and verification processes for cargo clearance in a formalities single window.

“I absolutely subscribe to it as it will resolve the current issues which bedevils import clearance efficiency including extortion by customs and under-declaration by importers. But it will not cost $3.1bn and does not need a 20-year concession.”

He noted that the more important element, which no reference was made to, is ensuring that the legal framework to drive the initiative is in place.

“Even though Nigeria is signatory to the Trade Facilitation Agreement, it is not implementing most of its highlight provisions which could greatly alleviate the challenges in the immediate term and which don’t need expenditure of ridiculous sums to achieve.

“Any investment in customs modernisation without starting from the legal framework and policy quick-wins will be cosmetic and self-defeating. 

“I advise we start from that point and from there define the technology requirements to facilitate compliance which will be the basis for a procurement such as has been done. We have put the cart before the horse,” he added.

Also reacting, a  former top management chief of the Nigeria Customs Service, name withheld , said the process was shrouded in secrecy and therefore in flagrant violation of the Public Procurement Act. 

He said “to the best of my knowledge , the entire process was fraught with so much secrecy and fraud. For instance, did you see any public notice in the National Dailies asking for bids? 

“How did they arrive at the preferred bidder? How was the technical team picked and what was the evaluation process?, he asked.

The ex-boss noted that the $176m dollars projection by the consultants was way too expensive when viewed against the background of a recent Senate report which said the Service lost a whopping N30b to revenue leakages between 2007 and 2017. 

He said Nigeria have very competent hands to carry out such a mandate and  warned about the dire consequences of creating capital flight at a time the global economy including Nigeria is undergoing recession.

“Does this imply that officers and men of the Nigerian Customs Service would now hands off revenue collection duties and concentrate only enforcement duties and anti smuggling?

“We also need to know if the $176m projection is for the entire 20 years duration of the contract or what would generated monthly?

The ex-customs chief worried that the development may lead to job downsizing in the customs. 

“You don’t expect that the concessionaires would retain the present workforce since the new arrangements would imply that officers would no longer be involved in revenue collection duties.”