Makinde and the Law of Contract: Why we must set the right precedence

BY LEKAN ADEKUNLE

Public Private Partnerships (PPPs), especially the Build Operate and Transfer (BOT) system are a model for the future. Many experts call it the best of both worlds; private sector efficiency and public sector enablement. For a country like Nigeria that is in somewhat of a fiscal crisis, the PPP model seems to be a globally tested remedy. Well, one would think that. However, happenings in Nigeria, particularly in Oyo State seem to negate this thought.

Only recently, an advertorial published in the national dailies by ENL Consortium Limited, an infrastructure development company and announcements attributed to Governor Seyi Makinde of Oyo State indicate a purported cancellation of the concessionaire contract on the 32km East West Wing of the proposed 107-km Ibadan Circular Road. The concessionaire contract had been awarded to ENL Consortium by the previous government of Late Senator Abiola Ajimobi on a Build, Operate and Transfer (BOT) model for a period of 35 years in 2017. The contract is wholly funded by ENL Consortium. The vision for the project was compelling. Have a road network that lightens the burden of the traffic congestion suffered by road users who travel within and through Ibadan, one of Nigeria’s most commercially active cities.

The government states that the reason for the purported contract cancellation is the contractor’s slow pace of work. Well, people familiar with the matter know that this is not the case, as the optics of the purported cancellation looks more like a political gambit by the governor to reverse real progress made by his predecessor. There is some evidence to support this school of thought. The governor’s reported refusal to write the Letter of Comfort required by ENL’s lenders to facilitate funding for the project leaves a lot to be desired.

Let us put the project in context. To start with, the contractor was granted exclusive rights to design, finance, construct, operate and maintain the Ibadan Circular Road for a period of 35 years. With the understanding and agreement in effect, ENL has made significant progress with the work. The contractor had done the commissioning of the survey and construction designs with incorporation of bridges, culverts and drainage systems for the 32km road, clearance and removal of topsoil from about 30km of the road, construction of earthworks on about 5km of the road, blasting of heavy stones and laying of stone base on about 1km of the road, completed 2 kilometer asphalt and 1 kilometer stonebase and installation of streetlights on about 2km of the road.

They have also paid compensation to farmers and landowners for the acquisition of portions of land needed for the road construction. Before all of these were done, ENL also faced a major hitch, which it surmounted. Fourteen years earlier, ICECON, an Italian firm, worked on the engineering designs and drawings but ENL found out they did not hand the drawings over to the Oyo State Government because the latter did not pay for the services. Upon execution of the contract, ENL established links with ICECON, who had gone back to Italy, to negotiate and pay for the release of the designs and drawings. Something that was the responsibility of the state government. All of these have cost the company about $9.51 million, which is over N3.9 billion.

Talking about the law of contract, for the government to enforce any purported cancellation of the contract in the way it is currently proposing, it needs to refund the contractor all monies spent on the contract thus far. It is, therefore, in order to say ENL has the right to demand to be refunded what they have expended. In addition to that, Oyo State Government is also liable, as contractual terms of agreement demands, to incur a penalty of 10% of the value of the contract, which is N6.7 billion. Putting these together, ENL Consortium is due N10.6 billion from the Oyo State Government. So far, the government has not made any public statement on the settlement of these funds that are due ENL.

Little wonder ENL Consortium sounded a note of caution to the general public, especially “investors, lenders and contractors to disregard any invitation by Oyo State Government to participate in any tender, offer, bid, solicitation or any other procurement process, as ENL remains the lawful concessionaire of the project , under the terms of a Concession Agreement, which is currently subject to dispute resolution process.”

This is the basis of my argument. We live in a country of laws. Laws guide relationships between entities. Laws constrain the actions and inactions of various economic, social and political stakeholders. Obviously the Governor is empowered by law to act in the best interest of the state. But that is a privilege that also comes with its obligations; a call to do so within the ambits of the law he swore to uphold. A situation where he decides to pick and choose which side of the law to uphold seriously discourages progress.

It is time for all well meaning Nigerians to speak up. Governor Makinde’s decision on this purported contract termination sets a bad precedent that has negative impact on the people of Oyo State. Let us be guided.

Adekunle, a real-estate developer writes in from Ibadan, Oyo State