Why FG wants $418m Paris Club Consultancy Debt Paid
The Federal Government may proceed with the payment of US$418 Million judgment debts accruing to four consultants that facilitated the London-Paris Club refunds to states and local governments. Opposition of the current leadership of Nigeria Governors Forum (NGF) to the settlement of the category A debts despite presidential approval has led to the suspension of the payment.
The NGF hinged its opposition on two major planks. First, the governors contend that the debts are too bogus for them to shoulder and second that the indemnity issued by the former NGF Chairman was not valid because it was not based on the consent of the 36 state governors plus approvals from FEC and NASS. The judgment creditors under category A are Hon Ned Nwoko, Riok Nigeria Limited, Ted Edwards and Panic Alert Security.
In furtherance of its objection, the NGF is calling for the institution of an independent forensic audit of the debts. The NGF has tabled its opposition before the National Economic Councils (NEC) and NGF said authorized the recruitment of a forensic auditor to verify the debts.
The Attorney –General of the Federation and Minister of Justice, (AGFMJ) Abubakar Malami in a memo to the Minister of Finance, Budget and National Planning dated July 12, 2021 on the liquidation of judgment debts on behalf of Federal Ministries, Departments and Agencies (MDAs), States and local governments gave reasons why it is imperative to pay the consultants.
They include the fact that enforcement actions have already been carried out against the Federal Government in various cases through garnishee orders absolute made against the Central Bank of Nigeria (CBN) attaching Federal Government funds.
Other reasons adduced by the AGFMJ were as follows: “The current situation is that FGN (Federal Government of Nigeria) is bearing liability over the actions of NGF and ALGON and yet NGF is resisting efforts by FGN to defray the liability without providing any buffer or safety net for FGN. Should FGN accede to the request of NGF, the implication is that the judgment creditors will continue to threaten or take actual steps against the assets/funds of FGN and its agencies with the accompanying adverse effects and legal burden that will be suffered by FGN and its officials and not NGF.”
The AGFMJ memo faulted the condemnation of the indemnity issued by the former NGF Chairman, Governor Abdulaziz Yari by his successor and the incumbent Chairman, Governor Kayode Fayemi as untenable and not in the best interest of the forum. According to the AGFMJ, the argument of Fayemi that the London-Paris Club refund is a sovereign debt which ought to be predicated on the consent of the 36 state governors plus approvals by the Federal Executive Council (FEC) and the National Assembly (NASS) cannot suffice due to the fact that the states under the NGF have already received payments from 2016 amounting to trillions of naira without recourse to FEC and NASS approvals.
For instance in 2016, CBN paid NGF, on the authorization of the Minister of Finance following presidential approval, the sums of US$86,546,526.65 and N19,439,225,871.11. “It is to be noted that these payments were made from the Paris Club refunds without commensurate approvals from the 36 state governors, FEC and NASS. The said indemnity has not and cannot be withdrawn since it was issued by the Chairman of NGF and NGF have taken benefit there from, it therefore remains valid and binding,” the Attorney-General’s memo clarified. If the line of argument of the incumbent NGF Chairman is followed, the NGF itself is not supposed to be a beneficiary of the refunds based on its status as an association and not a government entity.
It should be recalled that the AGFMJ had earlier given a legal advice which is yet to be countered on why FEC and NASS approvals are not required for the Paris Club Category A debts. In the advice conveyed through his letter forwarding the Judgment Debt List to the Chief of Staff dated 17th July, 2020 with Reference Number HAGF/SH/2020/VOL.1/40, he stated that “the judgment debts in the Paris Club related cases arose from actions of the States and Local Governments and as such their settlement ought to be charged to funds belonging to the States and Local Governments.”
The implication of this, the AGFMJ pointed out is “that Promissory Notes to be issued in respect of the Paris Club cases do not require FEC or NASS approval. This is because their eventual or final reimbursement is not tied to the Consolidated Revenue Fund of the Federation which requires NASS or FEC resolutions.”
The Attorney-General further advised that “the process of issuing the Promissory Notes in respect of Category A cases should continue as approved by Mr. President unless there is a positive or categorical court order to the contrary so as to insulate the Federal Government from any contingent or further liability. What subsists for now on the judicial front is the retention of the services of Falana and Falana as solicitors by the NGF to challenge the liquidation of the judgment debts under Category A with not consequential court declaration.”
For several years dating back to 2004, some foreign debt consultants led by Hon Ned Nwoko, at personal risks and costs, pursued and fought the powerful 22-member country creditor organization (London/Paris Club). What they discovered in the process was mind-boggling.
Their early findings revealed that in almost all the cases, the amount of the actual loans taken had ballooned due to multiplicity of tangential costs and factors such as alleged penalties, rescheduling, handling and sundry bank charges.
Their clients (States and the LGAs) who were initially skeptical about their success in the battle were disinclined to commit a dime to the project. Rather they signed off as much as 20% of the amount recovered to the consultants as consultancy service fees. The deals were signed between 2004 and 2012 with Adamawa, Taraba, Anambra, Ondo, Ebonyi, Imo, Niger, Bayelsa, Kogi, Abia and Edo among others before all the states and local governments entered into class agreements with the Ned Nwoko led team under the NGF and ALGON.
When against the grain of widespread expectation, they triumphed over the powerful cartel and the over $13 billion London-Paris Club refunds became a reality, the song changed for the governors under the Nigeria Governors Forum (NGF) and the local government councils under Association of Local Governments of Nigeria (ALGON) who began to contend that the consultancy fee was bogus.