Report of the Special Committee on the Review and Verification of Contracts awarded by the Nigerian Port Authority (NPA) from 2001-2003

Introduction: It is generally believed that the failure of many government establishments - ministries, parastatals and agencies - to deliver service effectively and fulfil their respective mandates, is one of the most endemic problems of the Nigerian economy. This failure is quite often attributed more to various irregularities and malpractices in the running of these organs, than the absence of potentialities.

By public perception, the Nigerian Ports Authority (NPA) is regarded as one of the parastatals where such irregularities and malpractices have become deeply entrenched in the management of its affairs. The NPA is widely perceived to be deeply plagued with massive corruption and inefficiency, especially in the award of contracts, which had been characterized by their indiscriminate and unscrupulous nature, with little or no regard to financial regulations or due process.

The problem of massive corruption had become so worrisome that the President, Chief Olusegun Obasanjo, on 15th October, 2003, approved the constitution of a committee to review and verify all contracts awarded by the NPA from 2001 to 2003.

However, when the committee accomplished its assignment and submitted its report to the Federal Executive Council, it fell short of the council’s expectation.

Consequently, the Federal Executive Council, informed by the demonstrable commitment of the present administration towards ensuring transparency, accountability and prudence in the conduct of government business and the need to fish out corrupt officials and corporate bodies in the system resolved at its 10th meeting of Wednesday, 9th March, 2005 to constitute a Special Committee, to carry out an in-depth investigation into contracts awarded by the NPA from 2001 to 2003.

Terms of reference of the committee: The Committee’s terms of reference were derived from the letter CM / 211/455 of 1st April 2005 issued by the Secretary to the Government of the Federation, Chief U. J. Ekaete, CFR, mni, as stated hereunder:

a) To carry out an in -depth investigation on all contracts awarded by the Nigerian Ports Authority from 2001 to 2003, and to examine all outstanding bills from its creditors;

b) To ascertain whether or not such contracts were awarded in accordance with extant government rules and regulations governing the award of contracts;

c) To identify the culprits and apportion blame as applicable;

d) To make any other recommendation that the committee deems necessary.

The committee, which was given six months within which to submit its report, had its inaugural meeting on 7th April, 2005.

Methodology: In order to adequately address all the relevant issues contained in its terms of reference, the committee adopted the following methodology:

•Collation, review, and analysis of relevant information/documents of all contracts awarded by the NPA during the period under review.

In order to achieve this objective, the Authority was requested to provide the committee with all information and documents pertaining to the contracts being reviewed, in a format specifically designed for this purpose. The committee also co-opted relevant professionals, particularly lawyers, quantity surveyors, civil, electrical and surveyors, mechanical engineers, accountants, information technology specialists etc. to assist in the review and analysis of all the documents relating to the contracts in order to determine whether or not extant government rules and regulations and relevant professional standards were followed in the award of the contracts.

•Site visits and physical verification of contracts said to have been executed.

The committee visited some of the locations where the can tracts were said to have been executed, for physical verification of such contracts.

The committee undertook such visits to the Apapa Port Complex, Apapa Dockyard, Tin Can Island Port, RORO Port, NPA Corporate Headquarters, Marina, Engineering Department of the Authority at No. 1 Joseph Street, Marina and the container Terminal Port. The committee also interviewed operators of equipment/vehicles, which were said to have undergone maintenance/repairs through contracts.

•Visit to the stores for an on-the-spot assessment of store inventories/records.

The committee visited the stores to confirm the delivery and physical existence of the items supplied or evidence of utilisation of such items.

Contract Pricing: Going by the large scale of contract price inflation, the committee made serious and painstaking efforts to establish fair prices for the contracts. The committee has been able to establish conclusively fair prices in respect of contracts awarded by the Board, the Management Committee, Managing Directors and the Executive Directors. However, due to constraint of logistics and time, the committee has not been able to carry out an exhaustive exercise required to arrive at fair prices for the numerous contracts awarded by the General Managers and Port Managers. But the committee is convinced that the results of such exercises, if conclusively carried out, would not depart significantly from the results obtained in respect of the awards by the Board, Executive Management, etc.

Repairs and maintenance jobs were verified by interviewing the operators of equipment/vehicle or the end users. Items directly supplied or installed to users’ office were confirmed by physical inspection to ascertain their value and level of execution. Some of the locations that were visited are Apapa Port Complex, Apapa Dockyard, Tin Can Island Port, RORO Port, Corporate Headquarters Marina, Engineering Department, 1, Joseph Street, Marina, Container Terminal Port.

In respect of supply contracts, the committee carried out market surveys on the prices of goods and equipment supplied to the NPA during the period under review.

Reference was also made to some established prices like those used in the Messrs J.K. Randle and Co-report, as well as Building and Engineering Price Book, published by Cosines Nigeria Ltd. The committee also used other criteria in determining the appropriate price range, which include the use of catalogue of equipment price from manufacturers, personal visits to manufacturers’ representatives, dealers and distributors, based in Lagos.

The Committee also obtained useful information through the following:

Review of the report of the Engineer Bukar Committee on Review and Verification of contracts awarded by NPA between 2001 and 2003.

Review of the report of the Economic and Financial Crimes Commission (EFCC) on NPA.

Review and analysis of submissions made to the committee by various stakeholders on issues relating to the committee’s assignment.

Use of government financial regulations and other relevant treasury circulars including the federal treasury circulars ref. No. F.15775, dated 27th June 2001 and Ref No. TRYA4 & B4/2002, dated 5th July, 2002, issued by the Federal Ministry of Finance and Office of the Accountant General of the Federation respectively regarding the award of contracts.

Interview of some key officials, contractors and other stakeholders:

Officials of the Nigerian Ports Authority interviewed

The following top management and other principal officers of the Authority were invited and interviewed by the Committee: Chief Adebayo Sarunmi; Managing Director/CEO; Alh. Abba M. Mohammed; Executive Director, Finance; Alh. Wasiu Yaro; Executive Director; Corporate Services; Mr. Felix Ovbude; Executive Director, Corporate Services; Mr. Desmond Akawor; Executive Director, Estate and Technical Services; MS C.A.O. Etseyatse; Ag. GM Legal/Secretary to the Board; Mr. Omotsola Aragho; GM Audit; Mr. Amechi Oraka, G.M Finance; Engr. U. E. Ekwo, GM (Land and Technical Services); Mr. N.B.C. Akani, former General Manager, Western Operations; Alh. Abdusalam Mohammed, former General Manager, Eastern Operations, and others.

The committee also invited and interviewed the following former Executive Directors and other principal officers of NPA: Mallam Bello Gwandu, former Managing Director; Engr. J. Y. Akagwu, Director Executive Director former Managing; Arc; Aminu Dabo, former Managing Director; Mr. D.I. Udensi, former Executive Director (Marine and Operations); Capt. O. Abidoye, former Executive Director (Marine and Operations); Alh. Zubairu Abdullahi Danbatta, former Executive Director Corporate Services; M.T. Ibrahim, former Executive Director, Finance; Engr. B. G. Yakassai, former Executive Director; Engineering and Technical Services.

Ministers and officials of the Federal Ministry of Transport interviewed:

The following present and former Ministers of Transport and officials from the supervising Ministry (Federal Ministry of Transport) were interviewed: Dr. Abiye Sekibo, Hon. Minister of Transport; Chief Ojo Maduekwe, former Hon. Minister of Transport; Alh. Isa Yuguda, former Minister of State for Transport; Mr. C. D. Adeola, Director, Planning, Research and Statistics; Alh. W. M. Kurawa, former Director, Maritime Services Department, Federal Ministry of Transport.

Former board members of the Nigerian Ports Authority interviewed:

The following former Board Members of the Nigerian Ports Authority were interviewed: Chief Olabode George, former NPA Board Chairman; Alh. W. M. Kurawa, former Director, Maritime Services Department, Federal Ministry of Transport, who was the representative of the Hon. Minister on the NPA Board, during the period under review.

Contractors of the Nigerian Ports Authority interviewed:

The Committee considered it necessary to invite and interview some contractors who handled critical projects of Nigerian Ports Authority. These were mainly projects for which Agreements and Memoranda of Understanding (MOU) were entered into. They include those represented by Eshel Pesti, Managing Director; African Circle Limited represented by Abubakar M. Mukhtar, Executive Director (Operation) Ayoade Emmanuel, Abdullahi N. Mangoro, Executive Director (F / A) ACL; Intels Nigeria Limited represented by Chuks Ihuoma, Deputy General Manager, Ishaku M. Shekaran, and Mike N. Epelle, Legal/ Corporate Affairs, Manager; Flour Mills Nigeria Plc, represented by Mr. Anthony Ogbebor, Technical Adviser, Alhaji Olalukan Saliu, Finance Director/Company Secretary, Capt. E. S. Omotayo, Executive Director Shipping: Gboye Ayoade & Co. represented by Mr. A. Akande; Messrs Aminu Ibrahim & Co. represented by Sunday Arowologbe and Ogom Chuks Ugoji, Partners; Rynwaal Nigeria Limited, represented by Mr. Eshel Pesti, General Manager; Marine Mutual, represented by Mr. V. Adcock, Managing Director; Nigerian Liquefied Natural Gas, represented by Mr. E. Bestman, Mr. Rick Hibbert, and Mr. J. Eke; Julius Berger Nigeria Limited, represented by Mr. Gunseh Matthias, Head of Department Road and Infrastructure and Site Manager, Apapa and Engr. Austin Gunwa, Chief Engineer; Intercontinental Port, represented by Mr. Eshel Pesti, Managing Director and Capt. R. I. Hassan; Mobil Plc represented by Mr. Val Ogu, Joint Interest Manager; Captain R. I. Hassan, Marine Consultant on the Dredging of Escravos Warri - Aladja Channel; Dr. A. A. Abubakar, Deputy Director, T. C.I.D. Federal Ministry of Transport was also invited and interviewed.

Appeals and petitions:
Based on the appeals and petitions written by some NPA contractors, the committee invited the following contractors for more clarification on their petitions.

Generic Consortium Ltd; Gima Nigeria Enterprises Cyrax Investment Ltd.; Transec Investment Ltd; Princadaz Nig. Ltd; Tajudeen Owoyemi & Co.; Project Wheel Engineering Ltd; The committee also received a petition from a company called Starz Ship Repair yard, on the award of contract for the repair of the thirty-two (32) vessels to Messrs Rynwaal Nigeria Ltd. by the NPA. The committee, therefore, invited the Managing Director of Starz Ship Repair yard, Port Harcourt, Mr. Greg U. Ogbeifun, for further clarification.

Findings:
Total number of contracts awarded: Information available to the committee indicated that NPA, during the period under review, awarded a total number of 24,252 contracts. However, the committee strongly believes that the figures could be considerably higher, but for poor record keeping by NPA.

Total value of contracts awarded: The total values of contracts awarded are as follows: N46, 942,402, 776.13 (Forty-six billion, nine hundred and forty-two million, four hundred and two thousand, seven hundred and seventy-six naira, thirteen kobo) $236,913,986.84 (Two hundred and thirty-six million, nine hundred and thirteen thousand, nine hundred and eighty-six Dollars, eighty-four Cents.) £24,905,588.23 (Twenty-four million, nine hundred and five thousand, five hundred and eighty-eight Pounds, twenty-three pence.)

DMI,461,936.65 (One million, four hundred and sixty-one thousand, nine hundred and thirty-six point sixty-five Deutch Mark. €147,926,597.99 (One hundred forty-seven million, nine hundred and twenty-six thousand, five hundred and ninety-seven point ninety-nine Euros). SEK 4,087,918.70. (Four million and eighty seven thousand, nine hundred and eighteen point seven zero SEK)

Outstanding contract bills: Substantial amount of the bills for the contracts awarded during the period under review have already been paid.

The total outstanding bills for the contracts awarded by the NPA during the period under review are as follows:

4'*9,264,411,701.94 US$1,634,772.60 Local currency Foreign currencies GBP £2,920,575.40; Euro €919,OOl.76 DM41,052.28

The above figures exclude those of contracts awarded by the General Managers, Western and Eastern Operations and Port Managers for the seven ports as well as that of Abuja Liaison Office. The committee was not furnished with the figures. Details of the outstanding contract bills are provided in Annexture 13.

There were six principal contract approving authorities in the NP A viz:

The Board; Executive Management; Managing Director; Executive Directors; General Managers; Port Managers.

The NPA Board and Management conferred upon themselves various approval limits, in clear violation of the extant government rules and regulations guiding the award of contracts as succinctly outlined in Federal Treasury Circulars Ref. No. F.15775 dated 27th June 2001 and Ref. No. TRY AS&B4/2002 dated 5th July, 2002, issued by the Federal Ministry of Finance and Office of the Accountant General of the Federation, respectively.

The circular under reference clearly stated that all contracts above N50 million should be referred to the Federal Executive Council, while those between N20 million and N50 million are to be referred to ministerial Tenders Board, contracts worth between one million Naira and N20 million are to be approved by the Board of Directors, One million Naira contracts by Permanent Secretaries and contracts worth seven hundred thousand Naira and below are to be approved by Chief Executives of Parastatals. However the NPA Board and Management, hiding under the canopy of a letter Ref. No. T.0160/S.103/T dated 4th May 1999 issued by Mrs. B. O. Williams, the then Director, Maritime Services, Federal Ministry of Transport, conferred the following approval limits on the various strata of the organisation.

The Board and Management of NPA, during the period under review did not take cognizance of the subsequent government circulars issued by the present administration to ensure transparency, accountability and prudence in the management and conduct of government affairs.

The Board, N60 million Executive; Management, N30 million; Managing Director, N10 million; Executive Directors, N2 million; General Managers, N700,000.00; Port Managers, N500,000.00. Based on the above approval limits, and information made available to the Committee, various hierarchies of the NPA awarded contracts during the period under review as follows:

The Board of the NPA awarded contracts with a total value of: (Nine billion, three N9,386,265,067.65 hundred and eighty-six million, two hundred and sixty-five thousand, sixty-seven Naira, ... sixty five kobo) $213,655,866.23 (Two hundred and thirteen million, six hundred and fifty-five thousand, eight hundred and sixty-six dollars, twenty three Cents) £9,698,508.02 (Nine million, six hundred and ninety eight thousand, five hundred and eight pounds, two pence.) Euro 204,395.00 (Two hundred and four thousand, three hundred and ninety-five Euros). DM 56,220.00 (Fifty-six thousand, two hundred and twenty Dutch Mark)

It should be noted that the committee could not obtain some of the documents in respect of vital contracts awarded by the Board of the NPA. The committee, however, relied on the various minutes of the board’s meetings in which such contracts were approved.

Contracts awarded by the Managing Directors:

Contracts awarded by Managing Directors of the NPA, during the period under review are as follows:

Mallam Bello I. Gwandu: Mallam Gwandu was the Managing Director of the NPA between January, 2001 and October, 2001. Within the 10 months period he was the Chief Executive of the Authority, the committee established that he awarded contracts worth the following: N3,095,953,055.52 (Three billion, ninety-five million, nine hundred and fifty-three thousand, and fifty-five Naira, fifty-two kobo) $2,414,345.85 (Two million, four hundred and fourteen thousand, three hundred and forty-five Dollars, eighty-five Cents,) £701,702.45 (Seven hundred and one thousand, seven hundred and two Pounds, forty-five Pence). DM382,226.65 (Three hundred and eighty-two thousand, two hundred and twenty-six point sixty-five Deutch mark) SEK 3,706,405.30.

Engr. J. Y. Akagwu: Engr. Akagwu was the acting Managing Director of the NPA between November, 2001 and April, 2002. During the six months period he was the Chief Executive in acting capacity, he awarded contracts with the following value: N1,611,188,705.64 (One billion, six hundred and eleven million, one hundred and eighty-eight thousand, seven hundred and five Naira, sixty-four kobo) . $1,970,865.29 (One million, nine hundred and seventy thousand, eight hundred and sixty five dollars, twenty nine cents. £349,532.17 (three hundred and forty-nine thousand, five hundred and thirty-two Pounds, seventeen Pence) Euro 110,556.60 (One hundred and ten thousand, five hundred and fifty-six point six zero Euros) DM 545,607.96 (Five hundred and forty-five Thousand, six hundred and seven point ninety six Deutch Mark. SEK 381,513.40.

Architect Aminu Dabo: Arc. Dabo was the Managing Director of the NPA between May, 2002 and October, 2003. During his 18 months tenure as Chief Executive, he awarded contracts worth the following: N17,008,214,715.81 (Seventeen billion, and eight million, two hundred and fourteen thousand, seven hundred and fifteen Naira, eighty-one kobo) $13,770,884 .80 (Thirteen million, seven hundred and seventy thousand, eight hundred and eighty four dollars eighty Cent). £4,840,515.65 (Four million, eight hundred and forty thousand, five hundred and fifteen Pounds, sixty-five Pence). Euro 569,411.49 (five hundred and sixty nine thousand, four hundred and eleven point four nine Euros.)

Contracts awarded by Executive Directors: Similarly, the Executive Directors awarded contracts as follows: OYEWOLE A. Mr. Oyewole was the Executive Director (Finance) of the NPA between January, 2001 and October, 2001.

During his 10 months tenure as Executive Director, he awarded contracts valued at N22,798,250.00 (Twenty-two million, seven hundred and ninety-eight thousand, two hundred and fifty Naira) M. T. Ibrahim Executive Director (Finance) from November, 2001 to October, 2003. He awarded contracts valued at N209,420,805.00 (Two hundred and nine million, four hundred and twenty thousand, eight hundred and five) in about twenty-four (24) months in office.

J. Y. Akagwu, Executive Director (Engineering and Technical Services) from January, 2001 to October 2001. He awarded contracts valued at N189,017,728.24 (One hundred and eighty-nine million, seventeen thousand, seven hundred and twenty-eight Naira, twenty four kobo) in about ten (10) months in office.

L. O. Udensi: Executive Director (Marine and Operations) from January, 2001 to April, 2002. He awarded contracts valued at N57,634,514.70 (Fifty-seven million, six hundred and thirty-four thousand, five hundred and fourteen Naira, seventy Kobo) in about sixteen (16) months in office. (See Annexture 10).

Zubairu Dambata, Executive Director (Corporate Services) from January, 2001 to April, 2002. From the records made available to the committee, he incredibly awarded contracts valued at N5,881,370.00 only (Five million, eight hundred and eighty-one thousand, three hundred and seventy Naira) in about sixteen (16) months in office.

Capt. O. Abidoye, Executive Director (Marine & Operation) from April 2003 to October 2003. He awarded contracts valued at N249,533,722.50 (Two hundred and forty-nine million, five hundred and thirty-three thousand, seven hundred and twenty-two Naira, fifty kobo) in about six (6) months in office.

B.G. Yakassai, Executive Director (Civil Engineering & Estate) from April 2002 to October 2003. He awarded contracts valued at N,307, 700,655.13 (Three hundred and seven million, seven hundred thousand, six hundred and fifty-five Naira, Thirteen Kobo), and $78,797.67 in about eighteen (18) months in office.

Contract pricing: Nigerian Ports Authority has a dismal contract pricing system. Prices were so arbitrarily fixed as if such a critical exercise is not governed by any principle whatsoever but solely the discretion of the approving officers.

There is little evidence that the prevailing price situation was ever seriously taken into consideration.

Although, the Authority has a Price Intelligence Unit, our investigation revealed that the Unit seemed to have been totally disregarded.

Emergency maintenance: One of the contributory factors to high contract prices particularly in respect of maintenance contracts, is the so-called “emergency maintenance” prevalent within NPA.

According to NP A officials, since the Ports are expected to operate without break, there was need for a mechanism to keep the plants and equipment going and avoid the delay that could be caused by bureaucracy of processing job order/contract for every break down. The Authority long evolved a policy of emergency supply by which the manufacturers of their plants had specific agents through whom the parts for machines could be procured. The Authority therefore had no choice but to enter into maintenance agreements with these agents who were mandated to supply the parts whenever breakdown occurred even before seeking approval from the management.

In this wise, there are as many as seven different contractors undertaking maintenance work on generators, power distribution, cargo handling equipment even cutting of grass/trees etc. The NPA officials claimed that their staff lack the appropriate skill to maintain these plants and commitment to equipment and that any attempt to adopt an in-house maintenance strategy would be ultimately more expensive. However, in our well considered view, this and to similar arrangements on which NPA exercised little or no control but simply opened its purse to various interests, often dubious, are clearly self-serving and a strong manifestation of poor resource management in total disregard of cost effectiveness and healthy financial returns.

The committee finds it inconceivable that with its core of seasoned professionals and skilled engineers, NPA should resort to a maintenance strategy in which it takes no input whatsoever into pricing of the spares / items / jobs; has no control of both quality and quantity of materials supplied; totally disregards quality and scope of job done at whatever frequency; ignores due process.

Contract splitting: Evidence before the committee shows conclusively that there were brazen cases of contract splitting. For example, eleven contracts for eleven Air Taser Cartridges bought by the Security Department on 10th March 2003 at about W9.8 million each totalling about W107.8 million at a go.

If proper procedure had been adopted, this contract would have gone to the Federal Executive Council. But the contracts were brazenly split and irregularly awarded by the then Managing Director, Arch. Aminu Dabo. There is even evidence that a contract of W900 million was split into hundred units and awarded to two contractors at 50 contracts each.

On 9th August, 2003, 12 contracts were, in similar vein, irregularly awarded to 12 different companies for the supply of Mitsubishi Double Cabin Patrol Van each at a cost of W8,900,000.00. Similar pattern of awards were replicated at all levels from the Executive Directors, General Managers, and Port Managers, etc.

Foreign currency denominated contracts: Numerous contracts were awarded in foreign currencies at highly inflated rates for the supply of items that are easily available in Nigerian markets. Some of these items include umbrellas, ballpens, fire service equipment, etc. For instance, NPA awarded contract NO.HQ/CA/OP/G.2/144 to Messrs Just Gold Ventures Ltd. for the supply of Female Umbrellas at a unit price of £25.00 (Great British Pound Sterling) which is about W5,000.00 at the rate of W220.00 GBP.

This practice was deliberately employed in order to siphon the foreign earnings of the Authority, as there is no justification whatsoever to award such contracts in foreign currencies as the items are available locally.

Breach of established procedure for award of contracts:

The committee confirmed incontrovertibly, that there are manifest breaches and non-compliance with established procedure for the award of contracts in NPA during the period under investigation. These irregularities can be grouped principally as follows:

There was no evidence of competitive bidding on most contracts and where they did exist, some do not seem credible enough. Selection process would not seem to be transparent as the criteria for selection of beneficiaries of contracts were not clear.

Numerous unjustified splitting of contracts contrary to the rules.

Contract agreements were rarely prepared nor signed, thus making default attractive as the possibility for penalty was very remote.

Gross over pricing of contracts significant values were entered thus into without contract agreements, ignoring the need to safeguard the integrity of contracts of substantial values from needless defaults.

Contracts were awarded in considerable quantity, frequency and circumstances that put in doubt the genuine demand for these goods and raised strong possibility of contract recycling.

Many contracts were paid for even though there were no incontrovertible evidence to suggest that they were executed.

Contracts under agreements and Memorandum of Understanding (MOU)

Intels Nigeria Limited: The NPA signed a Memorandum of Understanding with Intels Nigeria Limited on 27th April 2001, to the effect that Intels is to act as the agent of the NPA for monitoring the movement of support vessels within Nigeria’s territorial waters and for the collection of statutory charges levied by the Authority in the country’s Exclusive Economic Zone. Such charges include royalties, pilotage, dues, rents etc. Another agreement was also signed on 13th June 2003 between the two parties for each others mutual benefit in the oil related activities of the NPA. Based on the records at its disposal, the Committee established that Intels is owing NPA the sum N15,040,000.00 as excess charges on amortized projects. Furthermore, Intels owes the NPA a total of $482,753, being 100/0 withholding Tax which was not deducted on commission paid to Intels.

The committee also, as part of its findings, establishes that the sum of NI7,470,107.32 is being owed to NPA by Intels, as withholding tax on rent which had not been remitted to the Authority by the Company.

Messrs Rynwaal Shipyards S.A: The NPA entered into an agreement with Messrs Rynwaal Shipyards of Holland on 22nd January, 2003, for the refurbishing of 32 of its vessels/ crafts, at a total cost of Euro 49,150,000.00 (Forty nine million, one hundred and fifty thousand Euros) within 18 months.

The Committee notes the provision of Article 10 on Liquidated Damages under which the contractor is to pay NPA a sum of 30% of the contract summon every week for the period the vessels/crafts shall remain not delivered”. Already 30 of the 32 vessels have been delivered to NPA while two others, S. V. Argungun and M. T. Bajima, are still undergoing refurbishment abroad.

Article 11 (2) (c) also provides for the 50/0 of the contract price in the sum of Euro 2,457,500 as retention fee against any defect and shall only be released to the contractor at the expiration of six months guarantee period after the delivery of the last of the 32 vessels/ crafts.

NPA management should be directed to accordingly calculate what ought to be due to NPA under Articles 10 and 11 of the said Agreement and deduct same from whatever may be due to the contractor finally.

Intercontinental Ports Limited: The NPA entered into an agreement with Intercontinental Ports Limited in March 1999 for the dredging of the Aladja - Escravos Channel for the sum of U8$58,880,500 out of which sum mobilization fee of $17,962,000 was paid to the contractor in May 2000.

The contractor mobilized to site, actual dredging work could not but commence due to community problem, mainly youth restiveness. After several unsuccessful 39 efforts which involved intervention by the Hon. Minister of Transport and the Governor of Delta State to placate the youth so that work can go on, the Hon. Minister, based on the request of the contractor and the recommendation of NPA internal committee, sought and obtained the approval of Mr. President for the determination of the contract “in order to save costs arising from “idle time.”

The contractor subsequently demanded for the payment of the sum of $7,623,115 as demobilization cost after the contract had been declared frustrated by NPA internal committee. After some negotiation, the contractor was finally paid the sum of $6,623,115 as cost of demobilization and idle time.

While the committee could concede to the first payment - mobilization fee of $17,962,000, it does not see the rationale for the payment of the sum of $6,623,115 as demobilization fee/idle time.

Since the contract was declared frustrated, it is clear that neither the NPA nor the contractor was responsible for its non-execution. Therefore each party should have borne its own costs, since the Agreement implied equality of status by both parties.

Curiously, the NPA internal committee recommended the payment of demobilization and idle time costs, as if NPA was in a weaker position under the agreement.

Therefore, the committee recommends that the sum of $6,623,115 paid to the contractor as demobilization/idle time costs, be recovered from him (the Contractor).

Continental Shipyard: This company is owned by the NPA, and was incorporated essentially to undertake dry-dock refits and repair of vessels. The company entered into partnership agreement with Dockyard Engineering, in a manner that should be, at least in principle, beneficial to both parties. However, it appears Dockyard Engineering is benefiting more from the arrangement than the NPA.

It, therefore, is necessary that this Agreement be immediately reviewed to make it more equitable. Alternatively, the agreement should be terminated and NPA look for a more viable company with which to sign a fresh deal since the Committee believes that the Continental Shipyard is a viable venture.

African Circle Limited: The, NPA entered into an agreement with Messrs African Circle Limited on 1st September 2003, to build, operate and Transfer (BOT) Port reception facilities for the disposal of ship-generated waste.

This agreement was informed by the NPA’s desire to comply with the requirements of the International Maritime Organization (IMO) Convention for the prevention of pollution from ships.

Under the agreement African Circle Limited is to supply, install, and operate modern Port reception facilities for the disposal of ship-generated waste and cargo residue. The NPA is to collect all pollution control revenue directly from vessels and remit 75% to African Circle Limited on monthly basis and retain 25%. On the other hand, the NPA is to retain 75% of all pollution related fines imposed on vessels and remit 250% to African Circle Limited. However, the profit sharing arrangement on the pollution control revenues from vessels should be reviewed in favour of the Authority to be on 70/30 basis, as against the current arrangement of 75/25 basis.

Maintenance contracts: The NPA has entered into contract agreements with various companies for the maintenance of its plants and equipment which include generators, power distribution systems, Tug Boats, Cargo handling equipment and power sub-stations, among others.

The committee has established that at least seven different contractors are currently engaged in the maintenance contract. The committee, based on evidence at hand, believes that the NPA has with requisite adequate manpower the professional qualification and experience to undertake all forms of maintenance work, instead of wasting valuable resources in engaging outside contractors.

The NPA’s argument that it was part of its outsourcing programme to give out the maintenance contracts to outsiders is not plausible enough to warrant the huge expenditure that the Authority incurs in the contract system. Rather, the committee believes that this aspect of outsourcing programme is vulnerable to corrupt practices.

Superannuation fund: The NPA Superannuation Fund is a contributory pension scheme established under a Trust Deed which became operational in April, 1956. The rate of monthly contribution at the inception was 25% of the basic salary of serving employees.

In November, 2002, the rate of monthly contribution was increased from 25% to 40%.

The Fund has very wide-ranging investment portfolios even though some of them may not command much respect in terms of yield/returns. Currently, it has an investment value of over N3.5 billion, with an estimated market value of about N8 billion.

There are problems of financial recklessness and lack of probity in the management of the Superannuation Fund. This accounts for the reason why the funds could not meet up with its responsibilities.

As at 31st December, 2003, there were outstanding arrears of monthly contribution of over N1.4 billion while its actuarial deficit stood at N79.01 billion.

The committee observed with the funds investment portfolios. For instance, the dismay that the Trustees do not keep accurate records. The committee was informed of a case reported to Economic and Financial Crimes Commission (EFCC) by Securities and Exchange Commission, against a company called HALSEC FINANCE Limited. A sum of N15 million was given to HALSEC in 2001 by the Management of NPA Superannuation fund (then) for investment in capital markets. The amount of money was disappropriated by HALSEC Finance Ltd.

The company, till date, neither bought the said shares nor refunded the money to NPA Superannuation Fund.

Payments on unexecuted contracts: Messrs Aminu Ibrahim & Co and Messrs Gboye Ayoade & Co - The Federal Ministry of Transport, based on an alarm raised by the Central Bank of Nigeria on Foreign Exchange transactions of the NPA, commissioned two firms of Consultants Messrs Aminu Ibrahim & Co and Messrs Gboye Ayoade & Co on 23rd May 2002 to carry out investigation into the Management of the Foreign FMT I INA UD I 145 I I IV 01.1 I 11 05 of 24th April 2003 Exchange earnings of the Nigerian Ports Authority (NPA).

The letter of offer, Ref. ‘No. FMT/IAUD/145/I/Vo1.I/51 dated 23rd May, 2002 and another letter on the same issue Ref. No. FMT/INAUD/145/I/I/69 dated 17th June, 2002, stated that for every fraud discovered, 15% would be paid to the consultants. The consultants submitted a report to the Federal Ministry of Transport claiming that various frauds were discovered, and requested that NPA should pay them 15% of the amount of frauds discovered. The Federal Ministry of Transport vide its letter Ref. No. FMT/IAUD/145/1/ /103 of 7th February 2003 directed NPA to pay the Consultants. However, NPA vide its letter MD/10/FMT/Vol.XXl/97 of 20th March 2003 objected to the payments of the sum of $1,050,000 and $2,595,202, claiming that no fraud was discovered in those areas to warrant payment of such amounts as commission. The Federal Ministry of Transport, in its letter over ruled NP A and directed NP A to pay the consultants and the Consultants were paid accordingly. Our investigation revealed that the approval for the payment from the Federal Ministry of Transport was fraudulently obtained.

The committee also confirmed that the consultants’ claims which were disputed by NPA were actually false.

Therefore, the committee recommends that the consultants should refund the sum of $3,645,202. Messrs Aminu Ibrahim & Co and Messrs Gboye Ayoade & Co. Again, on January 23, 2003, the same consultants, Messrs Aminu Ibrahim & Co and Messrs Gboye Ayoade & Co were curiously commissioned by NPA to carry out reconciliation of transaction between NPA and INTELS and between NPA and NLNG/Mobil Producing Nigeria” Unlimited. The contract was awarded on a “no cure, no pay” basis which means that unless a definite sum of money is recovered into the coffers of NPA, no payment would be due to the consultants out of the exercise. Our investigation confirmed that the assignment was inconclusive as neither of the parties (INTELS, Mobil or NLNG) agreed with what the consultants submitted. The Internal Audit of NPA objected to the payment on the ground that the job has not been certified as satisfactorily done. Unfortunately, the Hon. Minister of Transport, Dr. Abiye Sekibo, in response to a letter written to him by the consultants demanding payment for the job, directed NPA to process and pay the consultants the sum of $9,186,701.00 (over N2 billion) as claimed by the consultants. The NPA management ought to have advised the Hon. Minister that the job has not been duly executed in accordance with the terms and conditions as contained in the letter of appointment but went ahead to process the payment.

The NPA had gone ahead and even prepared two payment vouchers in the sum of $8,962,148.00 and $224,554 at a time when all such contract payments had been suspended to enable this committee carry out its assignment. The payment vouchers were intercepted by the officials of EFCC and payment stopped. Subsequent investigation of NPA officials who were involved in processing the payment revealed gross negligence and a deep seated attempt to defraud the NPA and by extension, the Federal Government of Nigeria of such a colossal amount of money. It is regrettable to note the hasty manner in which the payment process was carried out by the NPA management without even confirming whether the job had been done at all. The entire payment process appeared to have been carried out inappropriately as there was no evidence whatsoever to show that it passed through the normal channel. All the NPA officials involved in the payment process including the Managing Director, Executive Director (Finance), General Manager (Finance) should be held responsible for this fraudulent action. The contract should also be revoked.

Thalia Solutions - Messrs Thalia Solutions entered into a contractual agreement with NPA in 2000 to provide consultancy services on its computerization projects and ‘train its officials under which they are to be paid W1.8 million and $81,000.00 monthly as service charge. The monthly payment of service charge was subject to the provision of Certificate of Satisfactory Job Performance to be issued by AGM, Data Processing. However, the certificate was not found in all the payment vouchers examined, which implies that the contractor was being paid without doing the job. The contract was terminated in July, 2002 for lack of performance. So far NPA has paid the contractor N36.0 million and $1.62 million for twenty months from November, 2000 to June, 2002. Memo from GM (MIS &CP) to ED (CS) dated 12th August, 2002 confirmed that the contractor was unable to perform in accordance with the terms and condition of the contract agreement yet the contractor was being paid. Ironically, this same consultant whose contract was terminated by the authority for lack of performance was re-awarded the same contract at the rate much higher than the first contract.

Under the new contract, the consultant is to be paid GBP70,000.00 (N17,710,000.00 at N250 per GBP) and N2,250,000.00 monthly totalling about N19,960,000.00 which is more than the monthly salary bill of the entire staff of the MIS Department. Despite this outrageous monthly bill, the consultant was also enjoying the following perks, which they are not entitled to consultant has collaborated with some officials of NPA Official car Estacodes for overseas computer training/workshops and demonstrations.

Attending meetings at various places in Nigeria at the expense of NPA. Analysis of documents obtained on this contract and information obtained through our interactions/discussions with some officials/staff of NPA, confirmed that the consultant was just being paid without any justifiable service to the authority which means the to defraud the authority.

The company is owned and managed by Nigerians but they use different addresses in Nigeria, London to get contracts appears in NPA is suspicious.

We invited the MD / CEO of the company, Mr. Mike Odumosu for an interview during which he admitted that his company was unable to perform some of the functions specified in the contract agreement. His statement was taken under caution and he was released on bail. He was supposed to report the next day but he failed to do so. All efforts, so far, made to trace him were fruitless .He should be declared wanted and if found, he should refund the contract amount already paid. The contract should also be terminated.

ROBERT Ade-Odiachi & CO. Messrs ROBERT Ade: Odiachi & CO was awarded the contract for the computerization of the NPA accounting system at the cost of N38, 312,870.40. The contractor was given 70% down payment. 25% is to be paid upon satisfactory performance. The 25% payment, which is subject to presentation of Certificate of satisfactory Job performance be issued by AGM Data Processing, as spelt out in the contract agreement, was not complied with, yet payment was made. NPA has been and is still paying the contractor annual licence renewal fee which was not part of the contract act Agreement. The license payment of yearly renewal fee started in 2001 when paid W5, NPA 269,927.11 to the contractor. So far, a total of W21, 079,708.44 were paid to the contractor as annual licence renewal fee. The NPA management should renegotiate the contract and formalize the payment of the annual renewal fees by reflecting it in the contract agreement.

Award of contracts for items that are not needed: We observed that the due process for the award of contracts was not followed at NPA. Most of the contracts reviewed were not awarded on the basis of need but just to create an avenue to siphon money from the system. In most cases the contracts were awarded based on request by the MD/CEO to departmental heads to put up a request. The usual communication language then was for the MD/CEO to write to a departmental/ sectional head: “Please, raise something within the MD’s limit”. The items may be relevant but they may not be in need at that time. A typical example of such contracts is the contract for the supply and installation of six computer sets at the Headquarters’ Legal Department - and in each of the Legal Departments located at the seven ports. Our investigation revealed that the user department (Legal Department) did not request for the computers and they did not even need such number of computers in the Legal Department in view of the fact that the actual number of legal officers in each of the ports was not more than two as at the time the contract was awarded.

Observations: Having thoroughly examined and carefully analysed the relevant documents and information at its disposal, the committee observes the following:

The NPA, during the period under review, operated a contract awarding system which flagrantly violated the extant rules and regulations guiding the award of contracts, as explicitly specified in Federal Treasury Circulars Ref. F15775 of 27th June 2001 and Ref NO TRY A4 & B4 2-002 of 5th July 2002 issued by the Federal Ministry of Finance and the Office of the Accountant General of the Federation, respectively.

The Board and Management of the Authority, instead of being guided by the above cited treasury circulars in the contract award process, conveniently relied on a letter Ref. T.0160/S103/T dated 4th May, 1999, signed by Mrs. B. O. Williams, the then Director of Maritime Services Department of the Federal Ministry of Transport, conferred upon themselves approval limits far in excess of those approved by government, and awarded contracts, the magnitude of which only the Federal Executive Council had the powers to do so.

The committee has enough evidence to believe that the Ministerial representatives on the Board of the NPA at various times, Alhaji W. M. Kurawa and Mrs. J. C. Okonkwo had consistently drawn the attention of the Board to the need to comply strictly with laid down rules and regulations in the contract award process. But the Board continued to rely on the letter signed by Mrs. B. O. Williams.

Outstanding matters:

Due to logistic and resource constraints, the committee was unable to carry out investigation on some advance payments made to some contractors at the London Office of NPA. Our preliminary investigation revealed that 100% advance payments were made at the NPA London Office in contravention of the provision of the government circular No.F.15775 of 27th June 2001, which stipulates a maximum of 25% for all up front payments. Between August, 2002 and August, 2003, NPA made 100% advance payments to 23 contractors at their London office, which amounted to US$625,647.00, Euros 1,822,356.49 and GBP £1,008,010.00. Some of these contracts are yet to be executed years after the monies have been released. NPA could not provide any document to confirm the execution of these contracts. Further investigation should be conducted on this matter. Other outstanding matters include the following: .

Investigation and confirmation of the authenticity of some contracts awarded in foreign currencies;

Site visits to locations outside Lagos to confirm the execution or otherwise of some contracts; review and investigation of some foreign exchange transactions especially in the London Office which the committee could not undertake due to financial constraints.

The committee could not obtain outstanding contract bills for contracts awarded by the General Managers Western and Eastern Operations and Port Managers for the seven ports as well as that of Abuja Liaison Office.

Recommendations: Based on the committee’s findings and observations and the need to sanitize the system in line with current government determination to ensure transparency and prudent management of resources, the committee humbly makes the following recommendations:

All contract approving authorities in NPA, including the Board and Management of the NPA, Managing Directors, Executive Directors, General and Ports Managers, other categories of approving authorities, as well as the appraising officers who served during the period under review should be held responsible for deliberate and flagrant violations of extant government rules and regulations, governing the award of contracts.

The Board and Management of the NPA and the entire contract approving authorities in the Authority, as well as appraisal officers, during the period under-review should be appropriately sanctioned for contract splitting and inflation of contract price in utter disregard to laid-down government rules and regulations.

The NPA Board and Management should immediately revert to the contract approval limits clearly stated in the Federal Treasury Circulars Ref. No. F.15775 dated 27th June 2001 and Ref No. TRY AS&B4/2002 dated 5th July, 2002, issued by the Federal Ministry of Finance and Office of the Accountant General of the Federation, respectively. However, should there be need for the enhancement of the approval limits, a request for approval of enhanced limits should be made to the Hon. Minister of Finance.

The EFCC should recover the sum of $3,645,200.00 (Three million, six hundred and forty-five thousand two hundred and two dollars) from Messrs Aminu Ibrahim and Co and Messrs Gboye Ayoade (Consultants ) for false claims of fraud discovery in the foreign exchange earnings of the NPA.

All the officials involved in the approval and payment process of the total sum of $9, 186,702.00 to the same consultants- Messrs Aminu Ibrahim & Co and Messrs Gboye Ayoade &Co, as mentioned in paragraph 5.26 of this report should be sanctioned accordingly and the contract be revoked.

The EFCC should recover the sum of $6,623,150.000 (Six million, six hundred and twenty three thousand one hundred and fifteen thousand dollars) from Intercontinental Ports Limited being additional sum, illegally paid to the company.

The EFCC should recover the following sums of money from Intels Nigeria Limited: N15,040,000.00 (Fifteen million forty thousand naira) being excess charges on amortized projects. $482,753.00 (Four hundred and eighty two thousand seven hundred and fifty three dollars) being 100% withholding tax not deducted on commission paid to Intels.

N17,470,107.32 (Seventeen million, four hundred and seventy thousand, one hundred and seven naira, thirty two kobo), being withholding tax on rent not remitted to NPA by Intels Ltd.

The NPA should exhibit a more reasonable degree of commitment and its contractual seriousness in agreement with INTELS Nigeria Ltd, as well as all similar agreements with other companies and also ensure strict enforcement of the provisions of the contract agreements to the letter

The contractual agreement between NPA and African circle limited in respect of port reception facilities for the disposal of ship generated waste should be reviewed particularly the area of the profit sharing arrangement to be 70/30 in favour of the NPA.

The contractual agreement between NPA and Continental Shipyard, on one hand, and Dockyard Engineering Limited, on the other hand, be revoked immediately, while the NPA should source for a more reliable and competent company to partner with the continental shipyard to develop the high level shipyard industry.

NPA should terminate immediately maintenance service contracts and NPA should take over the maintenance of its plants and equipment.

The EFCC to recover the sum of over $6,000,000.00 (Six million dollars from Chrismatel, being a long outstanding debt owned to NPA.

The committee recommends that all the contracts reviewed and verified by this committee should be paid in line with the payment modalities recommended in this report in order to alleviate the hardship experienced by the contractors. This is in view of the fact that most of the contractors took bank loans to finance the contracts and are now under serious pressure from those banks to repay the loans with outstanding balances almost double the initial loan as a result of high interest charges.

In view of the fact that all the contracts reviewed by the committee were found to have been generally inflated by over 100%, the committee recommends that 20% across board should be deducted from all unpaid contracts.

In pursuance of the above, the committee recommends that the Federal Government directs the NPA to make immediate provision for the sum of N10 billion in the first instance to be paid into a special account to be opened by the NPA for the purpose of the payment of the outstanding contract bills.

A special committee with representatives from integrity-driven Federal Government establishments be set up to effect the payment of the outstanding contract bills for all contracts verified by this committee and to recover the 20% of the contract sum as recommended in this report.

The Board of NPA should be expanded to include representatives from Federal Ministry of Finance and the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) so as to facilitate effective supervision of the collection and utilization of the huge revenue, (being generated by NPA mostly in foreign currencies.

The committee strongly recommends the introduction of monthly run-rate/expenditure limit for all contract awarding authorities in NPA.

All contract approving authorities in NPA including the Managing Director, the Executive Directors, the General Managers and Ports Managers, should be given a specific amount as monthly run-rate or budget within which they should operate.

Any expenditure above the approved monthly run-rate for any approving officer in a given month should be referred to a higher authority for approval, even if such amount is within the approval limit of the officer. This measure, the committee believes, will check the current practice where a Managing Director can singlehandedly approve over a billion naira worth of contracts at a go by deliberately splitting the contracts into several units that will fall within his approval limit.

The supervisory Ministry (Federal Ministry of Transport) should compel the NPA Board and management to operate within budgetary approvals in running of the organization, in order to ensure fiscal discipline.

In view of the overdependence of the Federal Ministry of Transport on NPA for most of its overhead expenditures, the committee recommends that Government should make adequate budgetary provisions for the Ministry to take care of its overhead costs.

All contracts awarded by NPA during the period under review, which are yet to be executed, should be revoked immediately.

The NPA management should immediately complete the full computerization of its operations, which has already taken so much resources, in order to enhance efficiency, effectiveness, transparency and accountability in the system.

NPA Management should effectively utilize its resident due process committee to enable the committee effectively discharge its mandate in accordance with the extant government rules and regulations governing the awards of contracts. This will ensure financial prudence, accountability and transparency in managing the resources of the authority.

The NPA Superannuation Funds should be repositioned and refocused in line with the current Pension Reform Programme of the Federal Government to ensure effectiveness, efficiency and prudent management of the fund.

The EFCC should recover the N15 million NPA Superannuation Fund trapped in Halsec Finance Limited.

The committee recommends that the Managing Director / CEO of Thalia Solutions, Mr. Mike Odumosu, should be declared wanted, and if found, he should refund the various payments already made to him totalling N36 million and $1.26 million.

In view of the serious foreign exchange malpractices observed in NPA, the committee recommends that the Federal Ministry of Finance and the Central Bank of Nigeria (CBN) should closely monitor the foreign exchange transactions of NPA in order to ensure transparency and accountability in the system.

The Management of NPA should calculate and recover liquidated damages from Messrs Rynwall Shipyards S.A in respect of the contract for the refurbishing of its vessels/crafts as provided under Articles 10 and 11 of the Contract Agreement.

The Management of NPA should review the contract agreement with African Circle Limited on disposal of ship generated waste. The profit sharing arrangement on the pollution control revenues from vessels, under the agreement, should be reviewed to be on 70/30 basis in favour of NPA as against the current arrangement of 75/25 in favour of the African Circle Ltd.

In view of the considerable pressure being, mounted on the management of Nigerian Ports Authority by top government functionaries, legislators, party leaders, traditional rulers and other influential members of the society for contract awards, we strongly recommend that Government should come out with a policy to discourage this practice. In addition, accounting officers should be made to follow the due process in the award of contracts notwithstanding the pressure.

All existing maintenance contracts of NPA should be revoked and such maintenance jobs should be handled by NPA staff, whom the committee believes have the capacity to handle the jobs.