On 23 October the King’s Bench Division of the High Court of Justice of England and Wales dismissed an US$11 billion claim against Nigeria in a case that the country could not afford to lose. The judge agreed with its lawyers’ argument that Process & Industrial Development (P&ID) obtained the gas processing contract, on which its case was based, as a result of fraud and bribery and therefore dismissed its claim.
P&ID was awarded a contract to build a gas processing plant in Calabar State in 2010. It was to get free gas for 20 years and P&ID was supposed to process and sell it and then share the proceeds with the government. P&ID claims that it was never able to build the plant because Nigeria did not fulfil its part of the deal by providing the feedstock gas. It then took the country to arbitration and won a US$6.6 billion award in 2017. This has subsequently accumulated with interest to US$11 billion, which the firm demanded that it was paid.
Nigeria’s lawyers made a strong case in court that P&ID obtained the contract by bribing government officials and therefore does not deserve the award. P&ID countered that the failure to go ahead with the contract was due to the country’s negligence.
The US$11 billion demanded in the arbitration represents approximately one third of the current overall foreign exchange reserves of US$33 billion. Net reserves are far lower, with estimates anywhere between US$3.7 billion and US$17 billion because some reserves have been pledged as collateral in exchange for dollar loans from local and foreign banks.
A ruling against Nigeria would have sent yields on dollar bonds soaring and the Naira crashing further. Lateef Fagbemi – the Attorney General and Minister of Justice – said on 23 October, in reaction to the dismissal of the suit, that while it lasted, the country’s foreign assets were put at risk and its foreign reserves faced the risk of erosion. Fagbemi also disclosed that the government will go further and press for costs to be awarded against P&ID as compensation for the almost decade-long case that must have cost a fortune to defend as well as to deter others that may have similar ideas.This excerpt is taken from Nigeria Focus, our monthly intelligence report on Nigeria. Click here to receive a free sample copy.
The October 2023 issue of Nigeria Focus also includes the following:
- Tax reform is coming soon, but the impact on fiscal balance may be muted
- Stop Press: P&ID loses US$11 billion award but Nigeria will ask for more
Politics & Society
- INEC’s viewing portal in the spotlight again as gubernatorial elections approach
- Profile: Atiku Bagudu, a dodgy past and a huge challenge
- Opposition politicises Tinubu’s poorly managed certificate controversy
- Legislators purchasing luxury SUVs
Economy & Finance
- Weakening Naira will intensify pressure on businesses
- Distribution of US$1.5 billion cash to the needy is a waste
- NLNG missing global opportunity due to gas challenges
- No simple answers to fuel subsidy dilemma
- Seplat-ExxonMobil deal likely to be approved
- Israel-Hamas conflict exacerbates security concerns