Saturday, March 14, 2009

This is Criminal!

That former President Obasanjo has not been charged for corruption and misappropriation of public funds beggars belief.

Firstly, it was series of allegations on corrupt practices on the power projects. And as if that was not enough, another bombshell was dropped at the ongoing Public Hearing on the $8.5 billion Lagos-Kano Rail Modernisation Project.

The Nigerian government entered into a loan agreement with the Chinese government in order to finance the rail project. In return, the contract was awarded to the Chinese firm CECCC. Under the arrangement, $1.2 billion was dedicated as soft loan to Nigeria for the execution of the first phase of the double track Lagos-Kano rail project covering 1,315 kilometres. However, the Chinese government decided this year to commit only $500 million concessionary loan instead of the $2.5 billion it has earlier agreed with Nigerian under the past Nigerian government. The $2.5 billion was to have attracted an almost zero percent interest rate spread over about twenty years. But, according the Minister, the Chinese government changed its mind advising that that Federal Government may obtain the balance of $2 billion from Chinese Banks at prevailing interest rates. And to add salt to injury, the Federal Government is under obligations to pay between $1.1 billion and $1.4 billion for the cancellation of the project.

I have previously queried the need for upgrading the 1,315km of rail track between Lagos and Kano at a phenomenal cost of $8.5 billion. As far as I am concerned the rail upgrade will serve no useful purpose, and the money could be better spent on developing transport infrastructure in our major cities. The proposed Light Rail in Lagos is only costing a fraction of the Lagos-Kano project and it offers more benefit to commuters in a city of 17 million people.

The way and manner this project has been handled by the Obasanjo government is nothing short of being ‘criminal’. There are two key facts that emerged from the hearing which I consider very serious.

Firstly, it came to light that the project was awarded to the Chinese firm without any regard for the ‘competitive tendering’. It was alleged that President Obasanjo was in a hurry to the give the contract to CCECC as a 'thank you' project for the promised loan concession.

Secondly, it was confirmed that the rail contracts were awarded by the administration of Obasanjo without feasibility study and initial engineering design preparatory for the bill of quantity as required for a contract of such magnitude.

I find it hard to believe that a government will award a contract for $8.5bn without undertaking a feasibility study on its economic viability and also not bother to undertake a competitive tendering process. Why all the rhetoric about ‘due process’? How does the government know that it is getting ‘value for money’? I have once queried the reason behind procuring rail expertise from China, when the Chinese themselves import rail expertise from Europe. What is the track record of the Chinese firm in handling multi-billion dollar infrastructure projects?

It is plausible to argue that we wouldn’t be where we are if a feasibility study was undertaken in the first place. As a rail planner, decisions on whether to construct railways are not taken lightly. Railway infrastructure can be very expensive takes years from concept to implementation. Rail projects are subject to feasibility studies, which include rigorous cost-benefit analysis. I’m positive that if a cost-benefit analysis is undertaken on the Lagos-Kano project, the numbers will never stack up. What sort of patronage level will the rail corridor attract to justify the $8.5 billion cost. The govt should not be investing in long-distance railways at this point, until the transport infrastructures in our major cities are developed. Nigeria is not France, Japan, or Italy. If you check the history of these countries, they have developed a good network local transport infrastructure prior to building long-distance railways. .

Anyway, for Obasanjo to have entered into this contract without following ‘due process’ and undertaking proper ‘due diligence’ is a national tragedy and at the least, he should be prosecuted for misappropriation of public funds.

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