Power Project Probe: How Obasanjo, Imoke, others wasted N2.5tr

The Power Probe Committee found that the sum of $13.28 billion (N2.5 trillion) was expended on the Power (Electricity) Sector during the period, with further unfunded commitments of over $12 billion. Yet there is nothing to show for the huge money spent.

                             Power Project Probe: How Obasanjo, Imoke, others wasted N2.5tr

AS political power groups reposition in the ongoing power play in Abuja, Nigeria’s seat of power, a fresh wave of Machiavellian masterstroke is already rearing its head. A document– Report of Investigation into the huge sums of money spent on Power Generation, Transmission and Distribution between June 1999 and May 2007 without Commensurate Result– long thought buried and forgotten by the core participants has recently resurfaced. Otherwise known as the Power Probe Report, it is a summary of the findings of the House of Representatives Committee on Power and Steel, finalised on July 2008 and presently generating its fair share of controversy with various interest groups working hard to ensure that the outcome favours them. 

National Daily findings showed that Acting President Goodluck Jonathan has suddenly found himself in the eye of the storm once again. Report has it that the Acting President is under enormous pressure to recall the report for necessary attention. Jonathan’s recent promise to revamp the country’s deplorable power sector has emboldened some political gladiators to prod him to go after the identified culprits. 

Authentic Report

Since the news of the availability of the report broke, concerned interests have worked very hard to make sure that it was not made public; but the actual report signed and prepared for release by Honourable Ndudi Godwin Elumelu and Mallam S.Y. Ahmed, Chairman and Committee Clerk respectively, was made available to National Daily. 

The report condenses the findings of the Committee on the investigation conducted into the huge sums of money spent on power generation, transmission and distribution between June 1999 and May 2007. In the course of the investigation, the Committee reviewed 105 sets of memoranda from public officials, private citizens, corporate organizations and non-governmental bodies. 

In addition to the memoranda submitted, the Committee held public hearing from 11th March till 12th May, 2008. Activities of the Committee climaxed with a tour of project sites across the country. The Committee found that the sum of $13.28 billion (N2.5 trillion) was expended on the Power Sector during the period, with further unfunded commitments of over $12 billion. 

The Public Hearing also revealed that many strange things happened in the power sector during the period, including financial, technical and legal irregularities. The most striking revelation was the flagrant disregard of Sections 80(3 and (4) of the 1999 Constitution, which states clearly: 

“(3) No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorized by an Act of the National Assembly. 

“(4) No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.” 

On many occasions, legal processes in the appropriation and release of funds for the power projects were circumvented. Project costs were routinely and massively inflated; in a number of cases up to 1000 per cent project over-pricing was reported. Most troubling was the extremely low performance level after three or four years of commencement of projects. 

In about 50 per cent of the projects visited, contractors collected billions of Naira and disappeared from project sites while most project consultants maintained a conspiratorial silence. 

The investigation showed beyond doubt that the major problem of the Nigerian power sector during the review period was not the means to execute projects but efficiency in the management of resources. The weakest point in the project failure was in plan execution, a key factor in the success of any project. Project management teams treated planned time schedules as if they did not exist. 

The intended power projects were part of a larger reform programme of the administration but as it has turned out, the infrastructure reforms have not made a difference in the country. It was also found that failure to execute plans did not arise from technical incompetence but from weak management and institutional processes. What is lacking is not capital or technical expertise but fiscal discipline, programme supervision by responsible consultants and a willingness to bring erring contractors and officials to book.

The report noted that with the phenomenal revenues accruing to the country from crude oil over the past 10 years, resources have never been as generously available as they are in Nigerian history. Unfortunately, huge sums were spent but there was little or nothing to show for the expenditure in terms of increased megawatts of electricity.

The technology to deliver sustainable power and other infrastructure solutions in Nigeria is available in the world market. Our problem is mainly human and managerial rather than technological. The Report came in Eight Volumes. The Committee took the contents of all the volumes into account in arriving at the findings and recommendations.

Background to the Investigation

On 31st January, 2008, the Minority Leader Hon. Mohammed Ali Ndume and 103 other members brought a motion urging the House of Representatives to review the Power Reform Programme Performance. After a vigorous and robust debate in which numerous members took active part, the House, by Resolution No HR/07/2008 of Thursday, 31st January, 2008, resolved to: 

“Mandate the Committee on Power and Steel to carry out a comprehensive and thorough investigation and conduct a Public Hearing into how the huge sums of money was expended on power generation, transmission and distribution without any commensurate result and report back to the House within 4 weeks.” 

Estimates of the power needs of the country in 2008 were put at over 14,000 Mega Watts (mw) but as at January 2008, generation capacity was around 2,000 mw. In order to bridge the wide gap between the demand for electricity and existing supply, it was absolutely necessary to achieve rapid increases in power generation, transmission and distribution capacities. Regrettably, efforts made in the recent past involving huge financial outlays failed to produce the desired results. 

President Umaru Musa Yar’Adua gave expression to the strong concern of Nigerians in this regard when, on Monday, 14th January, 2008, he wondered aloud why the “US$10 billion (N1.2 trillion) invested in the power sector between 2000 and 2007 has not translated into power generation, transmission and distribution”. The President made these remarks when he received the World Bank Vice President for Africa, Dr. (Mrs.) Obiageli Ezekwesili at the State House, Abuja.

A natural question that arose was: what happened to the huge sums spent on electric power during the eight years of President Olusegun Obasanjo? 

Immediately the House Resolution was forwarded to the Committee by the Clerk of the House of Representatives vide his letter Ref. No. NASS/CHR/B/4/Vol.111/48 of 5th February, 2008, the Committee in carrying out the mandate broke up into five ad-hoc sub-Committees, each designated to take charge of the various activities involved in the investigative exercise: Finance and Logistics; Information; Media and Publicity; Organising; and Technical Committee for Report Writing, headed by Hon. Ndudi Godwin Elumelu.

Terms of the investigation

The investigation intended to: determine the total expenditures and commitments in the power sector of the Federal Government, its agencies and other parties such as the NNPC joint venture partners for the period, encompassing expenditures already incurred as well as outstanding commitments; to establish the extent of work carried per project as per specifications within the scopes provided; determine the reasons/factors why the huge expenditures failed to produce the desired results; verify the scope and pricing of projects and contracts; determine to what extent Due Process was complied with in the awards and payments for major projects; and to determine the effectiveness or otherwise of the Project Development and Management frameworks, processes and procedures in the implementation of the programs and projects by the various agencies.

It’s brief also included the following: to identify financial, engineering/technical and legal/administrative lapses which resulted in huge expenditures without commensurate result; Assess/evaluate the economic and social cost to the nation of the financial, engineering/technical and legal/administrative lapses that may be discovered; Identify individuals and organisations responsible for these lapses and recommend actions to be taken by the appropriate agencies; Identify key areas (projects and programs) if any, where money would be recovered or savings made for the Government; recommend measures to avoid future lapses of such magnitude and their attendant economic and social costs to the nation; and Suggest the forward for the power sector. 

More money, little impact

On Tuesday, 11th March, 2008 hearing commenced at the Conference Hall of the House of Representatives (New Building), National Assembly Complex, Abuja, and lasted for an initial period of eight days (between Tuesday, 11th March and Thursday 20th March, 2008) from 10.00 am to 7.00 pm each day, as well as on the 12th of May, 2008. 

Former President of Nigeria, His Excellency Chief Olusegun Obasanjo and his Vice President, His Excellency Alhaji Atiku Abubakar were both invited to appear before the Committee at a later stage of the public hearing. Both of them were unable to attend for reasons which they duly communicated to the Committee and which the Committee accepted. 

Late Mrs. Fatima Balaraba Ibrahim, Hon. Minister of State for Energy (Power), opened the can of worms when she detailed the amount spent on the power sector between 1999 to 2007: 1999 N6.697 billion, 2000  N49.78 billion, 2001-N70.927 billion, 2002-N41.196 billion, 2003-N55.59 billion, 2004-N54.49 billion, 2005-N70.39 billion, 2006-N72.393 billion, 2007-N61.10l billion. 

On the National Independent Power Project (NIPP), she disclosed that N25.535 billion, US$2.404 billion and Euro 303.877 million were released, altogether totalling $3.07 billion. The loans from the World Bank for power projects, she said, were $0.46 billion. She put Internally Generated Revenue (IGR) at N505.9 billion. Differences, she explained do happen due to differences in exchange rates. All the figures given summed up to $13.278, 939,409.94. 

Information given by Dr. Abdullahi Aliyu, then Permanent Secretary, Federal Ministry of Energy (Power) was equally useful. He gave details of Federal Government expenditure on power sector between 1999 and 2007 which amounted to $13.28 billion.

Undue process

Clarifying the role of the Ministry in awards and payments for NIPP contracts, he said there were over 300 contracts in respect of the NIPP, all of which were signed by the then Minister of Power and Steel, Senator Liyel Imoke. He said that a total of 340 different payments were made by the Accountant General of the Federation in respect of various projects. He also averred that NIPP projects did not go through the Ministerial Tenders Board. The Minister became the Due Process Office. The Permanent Secretary was also not accepted as Accounting Officer for NIPP projects.

However, there was a Presidential Implementation Committee (PIC) responsible directly to the President. But there is no record of inputs by the Ministry. He admitted that a number of NIPP projects had problems and that the Ministry had set up a Task Force to obtain status reports. There were payments that were not supposed to be made that had been made, he averred. In many cases, contractors were given advance payments but consultants supposed to monitor the contractors had not been paid. 

Some of the monies paid and the companies that benefited in foreign currencies were: General Electric (Supply of Gas Turbines)-$196 million, Marubeni Corporation-$49.935 million, Marubeni Corporation-$40,281,302.57, Marubeni Corporation-$16,718,334.93, G. E. Energy-$19,622,410.95, Rockson Engineering Company Limited-$13,494,753.93, Rockson Engineering Company Limited-$14,999,249.l3, Rockson Engineering Company Limited-            $16,718,334.93, Rockson Engineering Company Limited-$16,007,450.00, North China Electric Power-$20,373,889.99, Hoquado Limited-$7,966,290.40, Pivot/Kalapataru-$4,045,507.36, Pivot Engineering Limited-$108,939.98.

Those paid in Euro were: North China Electric Power-EU519,326.36, Matelec-EU11,095,058.08, Nigeria Management Group-  EU6,47l,558.29, Selta S.p.A.-EU620,367.28,Pivot Engineering-EU620,367.28.

Engr. Joseph Makoju, former Managing Director of PHCN, Special Adviser to the President on Power at the time of the investigation who served as Managing Director of NEPA, later PHCN from 2000 to July 2006 and was also a member of the Technical Board chaired by the then Minister of Power and Steel, Senator Liyel Imoke was confronted with some damning allegations, particularly relating to huge spending on procurement, especially transformers, without consuming existing inventories of transformers and spare parts in PHCN stores. Speaking in general terms, he admitted that there were some cases of mismanagement and bad eggs in the marketing interface.  He agreed that a lot of money went into power and accepted a share of responsibility for what happened but insisted that provision of electric power was quite costly anywhere in the world.

Alhaji Ibrahim Dankwambo, the then Accountant-General of the Federation gave the summary of disbursements from his office to power sector institutions from 1999 to 2007. He gave details in terms of amounts approved/released in warrant/cash backed year by year from 1999-2007. According to him, the budgetary allocation released to the Power Sector from 1999 to 2007 was N435, 115,676,963 equivalent of $3,718,937,409. 94.

The last official to appear before the Committee was Mrs. Nenadi Usman, former Minister of Finance who appeared before the Committee on Monday, 12th May, 2008.On the amount spent on power sector within the period under investigation, the former Minister said that to the best of her knowledge, the figure stood at about $3.2 billion just before she left office on 29th May, 2007. On the amount spent on NIPP during her tenure, from June 22, 2006 to 28/May 2008, she said that it was about $1.2 billion. On the reason for paying 25 per cent mobilization when site of a project was not yet located and also why some NIPP contractors were paid 50 per cent, some 80 per cent and some 100 per cent or more, she said she was not part of the negotiation. She suggested that it might depend on the negotiating power of the various contractors but that only Senator Liyel Imoke could answer that question. 

Former Vice President Atiku Abubakar was then the Chairman of the Implementation Committee on Emergency Power Projects set up by the President in 2004 to take emergency steps to improve the power situation in Nigeria, revealed that the Ministerial Steering Committee, chaired by the then Minister of Power and Steel, Senator Liyel Imoke, was assigned to work under and to report to the Presidential Implementation Committee. 

In his written submission, the former Vice President claimed that the Implementation Committee ceased to function after only two meetings. According to him, “In these two meetings, the Implementation Committee did not receive any report from the Steering Committee, nor was it invited to approve any projects.” 

“The Steering Committee which was set up to prepare the ground for the actualisation of the objectives of the NIPP by the Implementation Committee continued to function even after it completed its assignment by coming out with a blue print on the concept; the cost and location of the power projects. The Steering Committee went on briefing the President and receiving funding from him without reference to the Implementation Committee. Applications were made directly by the Minister to the President and/or through the Minister of Finance.”

The investigation revealed large scale failure on the part of important institutions of state, particularly the former Federal Ministry of Power and Steel (now Federal Ministry of Energy (Power)), the National Council on Privatization (NCP) and strategic role occupants such as the Minister of Power and Steel at that time as well as high officials in the PHCN to perform their constitutional duties that would have resulted in improved electric power for Nigerians.

From all available evidence, the strategic plan for transforming the electric power sector envisaged in the EPSRA, 2005, has not been faithfully prosecuted or diligently implemented. The investigation revealed widespread and flagrant abuse of legal process, resulting in avoidable waste, continued power failure and inestimable human suffering on the part of the Nigerian masses.

Unfortunately, all NIPP payments were made without following Due Process. In its place, a process called “Waiver of Due Process Certification for Payment” was adopted in flagrant disregard of Due Process Policy, thus paving way for dubious and highly risky payments to contractors and consultants by the Federal Government of Nigeria.

Some key examples are worthy of note: Over N58.8 billion (more than 100%) up-front payment to SEPCO III in respect of Papa Lanto Phase II (conversion to combined cycle) project, without following due process in the award of the contract; Over =N=14 billion up-front payment to CMEC in respect of Omotosho; Payment of more than 100 per cent of total contract sums to Marubeni (aggregate of over USD350 million) in respect of Calabar, Sapele and Eyaen power plants; Payment of over 80 per cent of total contract sums to Rockson International in respect of Omoku, Egbema, Gbarain-Ubie and Alaoji Phase I.

Pundits believed that developments in the upcoming months would prove whether the Acting President is ready to comply by the Committee’s Report recommendation which stated in part that, “In view of the huge amounts involved, the Committee recommends that the Economic Financial Crimes Commission (EFCC) and Independent Corrupt Practices and other related offences Commission (ICPC) should investigate the allegations with a view to prosecuting anyone found culpable”.

 Power Project Probe: How Obasanjo, Imoke, others wasted N2.5tr