The notice of the reported $9.6bn world record award, by a UK based Arbitration Tribunal, against the Federal Government of Nigeria, has expectedly jolted the sensibilities of both Government and the public, in no small measure, as the award, clearly, represents over 20 per cent of CBN’s total external reserves.

Furthermore, this incredibly bloated fine, also represents about 40 per cent of the N8.91trn 2019 Federal budget! Consequently, any compulsion to immediately cough out an oppressive sum of $9.6bn (over N3trn), would invariably reduce the foreign reserve base, which CBN, seemingly, depends on to defend the Naira exchange rate! Invariably, the relative dollar scarcity instigated by such a huge exposure, may just push Naira beyond N500=$1, and quickly drive higher inflation rates that would, propel the number of Nigerians living below poverty level, to well above the, reported, present 100million people.

Furthermore, another major Naira devaluation would clearly spike, an already, high inflation rate and challenge any real possibility of successfully abolishing, recurring oppressive, subsidy values, between N1-2trn, from Nigeria’s Annual Fiscal burden. Predictably, any increase in fuel subsidy values, for any reason, will significantly also reduce the size of the Capital budget and therefore constrain impactful expansion of social infrastructure and those facilities that create more jobs and also improve easier public access to quality education, transport, and healthcare facilities. 

Conversely, abolition of subsidy to conserve funds, will more than double the present petrol price of N145/litre, and expectedly propel higher inflation rates that will challenge inclusive growth. Similarly, an irrepressible sliding Naira exchange rate will also sustain rising fuel prices which will ultimately drive higher inflation and interest rates that will further deepen poverty!

Nonetheless, since the present administration has shown little appetite to significantly reduce its annual operational expenses below 70 per cent, welfare programmes will, predictably, further diminish and may precipitate social discontent throughout the country, particularly, if fuel subsidy is also abolished, and instigate higher inflation rates, which in turn, lowers consumer demand and also make further devaluation inevitable. 

Indeed, any forlorn hope that the $9.6bn award, could be sourced from CBN’s $40bn plus reserves, would be clearly misplaced, as Government recognises that it does not have control over CBN reserves, after same Government and its Agencies have earlier collected Naira equivalent of CBN’s so called Reserves, as monthly allocations. Indeed, any resort to CBN reserves to liquidate the award would be akin to eating your cake and having it!

Consequently, besides, any major deduction from CBN reserves would further challenge the Naira exchange rate as a sudden outflow of $9.6bn, for example, may rattle foreign portfolio investors to quickly withdraw billions of dollars from Nigeria’s banks and Capital market to compel weaker Naira rates!

Evidently, the Nigerian economy and our people would be, seriously, adversely impacted, if P&ID’s $9.6bn award must be promptly settled! However, on 28 August, 2019, a Government Team comprising the Attorney-General, Abubakar Malami, the Minister for Information and Culture, Lai Mohammed,  Finance Minister, Zainab Ahmed, and Central Bank Governor, Mr. Godwin Emefiele, respectively individually, shared their perspectives with the Press, on the clearly disturbing $9.6bn award. 

Notably, the Solicitor-General, Mr. Dayo Apata (SAN), who was also at the Press briefing, confirmed that he has been directed to appeal the UK Commercial Court ruling, that P&ID “can seize Nigeria’s assets worth over $9bn as compensation for the breach of the 2010 Agreement”; Apata also expressed optimism that Nigeria will succeed in its appeal to seek a stay of execution of the recent judgement.” 

However, Nigeria’s Attorney-General, Abubakar Malami, suggested that there was a need for “a comprehensive investigation, to identify everyone who signed the contract agreement to supply a product that they did not produce!” Consequently, Malami insisted that “insinuations abound that the contract was originally designed to fail, fundamentally because, there ‘were’ inherent elements of hitches, that were (deliberately) designed into the agreement right from inception.” 

The Finance Minister, Zainab Ahmed, on her part, also noted that the $9.6bn award is actually equivalent to N3.5trn, an amount, which, she claimed would cover the Federal Government’s total personnel cost, estimated at about 3.2trn in the 2019 budget.  Invariably, the immediate settlement of P&ID’s $9.6bn award, would compel further debt accumulation to cover Government’s spending on both recurrent and capital expenditure accounts. Arguably, however, with present concerns about the subsisting N24.4trn national debt burden, which already gulps about 40 per cent of Government revenue to service annually, a fresh foreign loan of $9.6bn to pay the P&ID award may not be the right option! 

Nevertheless, Central Bank Governor, Godwin Emefiele, confirmed at the joint briefing, on the P&ID award that, “we do not have any information in our records to show that this Company brought in one cent into this country and we have accordingly written to EFCC and the Intelligence Department of the Nigerian Police, who are currently investigating this matter.”

In his own contribution, Lai Mohammed, the Minister for Information and Culture, confirmed that President Buhari has already ordered a thorough investigation of the circumstances surrounding the P&ID agreement and also called for a full scale criminal investigation of the case. Furthermore, Mohammed, similarly, chorused the Attorney-General’s suspicion that the agreement process was carried out with some vested interest, in the past administration,” who according to him “apparently, colluded with their local and international conspirators to inflict great economic injury on Nigeria and its people.”

Nevertheless, despite the arbitration award and the ruling on enforcement in August 2019, the Information Minister, assured his audience that Nigeria is not about to loose any of its assets to P&ID. Besides, Mohammed noted that “the enforcement of the award cannot even commence, until the UK Courts resume from annual recess in September to address Nigeria’s appeal.”

Notwithstanding, one John Ehiguese, who is the Nigerian Representative of P&ID, has confirmed that their Legal Team is working diligently to identify and target enforcement of the Tribunal’s award against Nigeria. There are speculations that P&ID could target Nigeria’s reserves in foreign banks, as well as oil cargoes anywhere in the world. Fortunately, Ehiguese, also suggested that P&ID have not ruled out the possibility of alternative resolution of the fine, but noted however, that the onus was upon Nigeria’s Government to show good faith and enter into reasonable negotiation.

In essence, the P&ID debacle is a reflection of the lackadaisical and possibly selfish attitude of Nigerian Leaders and Public Servants. The Attorney-General, for example, has not explained why they kept ignoring this Sword of DAMOCLES on our financial stability, from as far back as 2015, after this odious liability was reduced to $850m by the intervention of Goodluck Jonathan’s administration.

Furthermore, CBN’s comment on the absence of Capital importation is probably also self-serving, as the agreement did not preclude, any offshore, preliminary expenses incurred by P&ID. Besides, it will also be foolhardy to target CBN’s reserves for the payment of the $9.6bn award, since the quantum of CBN’s foreign reserve base, in the past, never stopped Government bids for modest foreign loans of $3bn or less, on which we pay as high as 7 per cent annual interest rates! 

Nonetheless, it is debatable, if a $40m loan with 10 per cent interest, can ever rise to $9.6bn, after, say, 10 years of compounded interest! Indeed, even with interest at 20 per cent, the total claim should really not exceed $300m, i.e. closer to the $250m recommended by Bayo Ojo (SAN), a member of the Triumvirate Arbitration Panel.  

P&ID’s statement also declared that Malami’s pronouncement is a clear attempt to cover up his own incompetence and that of the Buhari’s administration. P&ID has also warned that “Nigeria should hold the Attorney-General, Abubakar Malami, responsible for dilly dallying on the settlement, and concluded that Malami seems to have a case of Amnesia.” (See also “The Parable of a Fool and his Money” @ www.betternaijanow.com)