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.
Showing posts with label Obasanjo. Show all posts
Showing posts with label Obasanjo. Show all posts
Saturday, March 14, 2009
Thursday, January 15, 2009
A Nation's Cash Cow
A ‘cash cow’ is a product or a business unit that generates unusually high profit margins: so high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes.
Risks of a ‘cash cow’ include complacency, with management ignoring the need for change as market forces erode value; and ongoing turf wars between the management in charge of the ‘cash cow’ and other managers trying to garner support for other products.
The above definitions succinctly describe the economic situation in Nigeria with particular regards to crude oil, which has become the nation’s ‘cash cow’ over the last few decades.
It is common knowledge that Nigeria has earned phenomenal revenue from crude oil sales, which culminated in the creation of the Excess Crude Account by the Obasanjo administration in 2004. Funds were drawn from the Excess Crude Account in the past to pay for special projects and debt servicing. During Obasanjo’s administration, about $12.4bn was withdrawn from the account to offset Nigeria’s debt to the Paris Club; $17milllion for two additional days for the 2006 National Population Census; and more than $2.3billion for Niger Delta Power Plants. Whilst it’s not the reason for my comments, it is worth noting that the so-called ‘Power Projects’ is still a dog’s breakfast!
It is not surprising that Nigeria has now become so complacent, even though market forces (ie the current global economic downturn) has eroded the value of crude oil from its peak of $147 to $40 per barrel. Whilst other countries (United Arab Emirates as an example) has looking at ways of generating revenue and reduce their dependence on crude oil, economic managers in Nigeria cannot see beyond their nose. Dubai is arguably the current largest construction site in the world, with the Monarch working extremely hard to turn the City into one of the world’s favourite tourist destination. The decision to diversify was based on the advice received on the depletion of its oil reserves and hence, the need to explore alternative ways of raising revenues. Dubai is now famous for its shopping malls and upmarket fashion label shops.
A report recently released on world commodities, did show that over the last decade, Cocoa has remained the most stable commodity. In fact, the price of Cocoa is trading at its highest for 37 years. I remember vividly been taught about ‘cash crops’ (Cocoa, Rubber etc) during my primary education. I don’t think at that point I knew the meaning of ‘crude oil’. The infrastructure built in the Old Western Region by the Late Obafemi Awolowo was mainly financed through Cocoa export. Instead of our leaders think outside the box, and use the current global economic crisis to retrace their steps, they are still busy speculating on future oil prices.
The 2009 budget is based on $45, which is higher than the current oil trading price. Which means the 2009 budget might be in deficit from the word ‘go’. Members of the Senate Committee on Budget Appropriation jumped for joy last week when oil price rose from $40 - $48 as a result of the Israeli-Palestinian crisis. The Senate Committee Chairman was quoted as saying the “benchmark for the 2009 budget should be been raised higher, and he went as far as speculating that oil will be trading at $50 and rise to $100 within the next two months”. When did honourable members of the Senate become ‘oil trading experts’?
Governance in the states of the federation (probably with the exception of Lagos) goes to sleep for 29 days everyone month, only for State executives to turn up in Abuja at the end of the month to collect their share of nation ‘booty’ from the Excess Crude Account.
It is my understanding that the Federal, State and Local Government shared N106billion in December alone from the account. The highest recipients were the oil-producing states, River (N15.5billion) Akwa Ibom (N4.5billion), Delta (N3billion), Bayelsa (N1.8billion). What has been the development in these states over the last eight years apart from allegation and counter allegation of corruption and fraud. It will be interesting to see how the states’ budget stacks up against the guaranteed monthly return from the Excess Crude Account. I’m sure their budget is 100% based on future oil revenue allocation. When a State receives N15.5billion monthly, why will the Governor be interested in ‘internal generated revenue’?
Anyway, as the Yoruba says ‘igba kan ko ni lo bi orere’ meaning ‘nothing last forever’, except for the Grace of the Almighty God. However in the meantime, it is business as usual – we keep milking the ‘cash cow’.
Risks of a ‘cash cow’ include complacency, with management ignoring the need for change as market forces erode value; and ongoing turf wars between the management in charge of the ‘cash cow’ and other managers trying to garner support for other products.
The above definitions succinctly describe the economic situation in Nigeria with particular regards to crude oil, which has become the nation’s ‘cash cow’ over the last few decades.
It is common knowledge that Nigeria has earned phenomenal revenue from crude oil sales, which culminated in the creation of the Excess Crude Account by the Obasanjo administration in 2004. Funds were drawn from the Excess Crude Account in the past to pay for special projects and debt servicing. During Obasanjo’s administration, about $12.4bn was withdrawn from the account to offset Nigeria’s debt to the Paris Club; $17milllion for two additional days for the 2006 National Population Census; and more than $2.3billion for Niger Delta Power Plants. Whilst it’s not the reason for my comments, it is worth noting that the so-called ‘Power Projects’ is still a dog’s breakfast!
It is not surprising that Nigeria has now become so complacent, even though market forces (ie the current global economic downturn) has eroded the value of crude oil from its peak of $147 to $40 per barrel. Whilst other countries (United Arab Emirates as an example) has looking at ways of generating revenue and reduce their dependence on crude oil, economic managers in Nigeria cannot see beyond their nose. Dubai is arguably the current largest construction site in the world, with the Monarch working extremely hard to turn the City into one of the world’s favourite tourist destination. The decision to diversify was based on the advice received on the depletion of its oil reserves and hence, the need to explore alternative ways of raising revenues. Dubai is now famous for its shopping malls and upmarket fashion label shops.
A report recently released on world commodities, did show that over the last decade, Cocoa has remained the most stable commodity. In fact, the price of Cocoa is trading at its highest for 37 years. I remember vividly been taught about ‘cash crops’ (Cocoa, Rubber etc) during my primary education. I don’t think at that point I knew the meaning of ‘crude oil’. The infrastructure built in the Old Western Region by the Late Obafemi Awolowo was mainly financed through Cocoa export. Instead of our leaders think outside the box, and use the current global economic crisis to retrace their steps, they are still busy speculating on future oil prices.
The 2009 budget is based on $45, which is higher than the current oil trading price. Which means the 2009 budget might be in deficit from the word ‘go’. Members of the Senate Committee on Budget Appropriation jumped for joy last week when oil price rose from $40 - $48 as a result of the Israeli-Palestinian crisis. The Senate Committee Chairman was quoted as saying the “benchmark for the 2009 budget should be been raised higher, and he went as far as speculating that oil will be trading at $50 and rise to $100 within the next two months”. When did honourable members of the Senate become ‘oil trading experts’?
Governance in the states of the federation (probably with the exception of Lagos) goes to sleep for 29 days everyone month, only for State executives to turn up in Abuja at the end of the month to collect their share of nation ‘booty’ from the Excess Crude Account.
It is my understanding that the Federal, State and Local Government shared N106billion in December alone from the account. The highest recipients were the oil-producing states, River (N15.5billion) Akwa Ibom (N4.5billion), Delta (N3billion), Bayelsa (N1.8billion). What has been the development in these states over the last eight years apart from allegation and counter allegation of corruption and fraud. It will be interesting to see how the states’ budget stacks up against the guaranteed monthly return from the Excess Crude Account. I’m sure their budget is 100% based on future oil revenue allocation. When a State receives N15.5billion monthly, why will the Governor be interested in ‘internal generated revenue’?
Anyway, as the Yoruba says ‘igba kan ko ni lo bi orere’ meaning ‘nothing last forever’, except for the Grace of the Almighty God. However in the meantime, it is business as usual – we keep milking the ‘cash cow’.
Subscribe to:
Posts (Atom)