FLASHBACK: What Former President Obasanjo Said in 2008 on The ‘$16bn’ Allegation
In May 2008, former President Olusegun Obasanjo was summoned by the house committee probing the expenditure on power sector between 1999 and 2007 when he was in office. His successor, Umaru Musa Yar’Adua, had alleged that Obasanjo’s administration spent $11 billion on the sector “with nothing to show for it”. This prompted the probe, with the alleged figure rising to $16 billion. Below is the full response of Obasanjo to the allegation in a letter dated May 12, 2008 which he sent to the house committee on power and steel.
The Chairman and Honourable Members of the House of Representatives Committee on Power and Steel, I thank you for your letter of the 3rd of May 2008 received on the 9th of May 2008 inviting me to appear before you. In the said letter, you said that the invitation was to give me “a fair hearing on allegations and counter-allegations which were made behind me in respect of my role in the execution of projects in the power sector from 1999 to 2007″.
Your letter which came to me on the 9th of May 2008 inviting me to appear on the 12th of May 2008 (the 10th and 11th being Saturday and Sunday respectively) did not specify or include details of the particular allegations and counter-allegations made before you by some persons who appeared before you to which you want me to reply or respond.
As much as I would like to assist your investigation, fair hearing which you referred to demands that these particulars ought to be forwarded to me and adequate time ought to be provided for me to prepare before appearing before you. The need for adequate time becomes more imperative since I have left the government since 2007 and I have no access to government data and information which are in the custody of the government.
It is my view that your task is not an easy one and nothing should be taken for granted. Since you have taken it upon yourselves to strengthen our practice of democracy which was re-established in 1999, and for which I was a key participant and nourisher between 1999 and 2007. As a democrat, I will like to do whatever is possible within the Constitution, the law and decency to help as you establish a new precedent of investigation and putting searchlight on the executive actions and duties after office. It is a precedent that may serve the country well or serve the country not so well. It is seen by me as healthy for our young democracy if it is carefully, fairly, justly and honestly carried out. I will hope that my response to your invitation will not be taken as precedent for other former Presidents to be so invited in future. It may be regarded as being in bad taste and that may be right. I chose to be here not because I see it as compulsory or mandatory. It is absolutely voluntary.
In general sense, democracy is a system of government in which the ultimate power rests with the people. In institutional sense, it is a system in which powers are divided or shared among institutions: Executive, Legislative and Judiciary. With the concept of democracy and good governance, we have a system based on good leadership, respect for the rule of law and due process, accountability and transparency. Your task must be to enhance these pillars of democracy and good governance and I am here just to assist you in doing that as a means of continued nurturing of our young democracy. Having said this, no institution of government should use its power to prevent or hinder the other institutions of government from being able to function properly, effectively and appropriately. I appreciate Section 88 of our Constitution which says that the National Assembly has powers to investigate any matter in which it can make laws for the purposes of making law, and that power and energy is part of such laws.
However, in Section 148, the President has power to grant executive responsibilities to ministers, to hold regular meetings with ministers for determining the general direction of domestic and foreign policies and to coordinate the activities of ministers in the discharge of their executive responsibilities. The President leads a team and galvanises, mobilises and inspires that team into action. What I am saying here is that the privilege and the collective responsibility of the members of Executive Council must not be hindered by the way the National Assembly carries out its function, otherwise it may be difficult, if not impossible, for the Executive to carry out its domestic and, certainly, its foreign duties, policies and responsibilities.
Each institution should carry out its functions in such a way to enhance its own performance and the performance of other institutions of Government. Going on from this point, I could say that having granted executive responsibilities to the minister responsible for power and, believing in the concept of collective responsibility of the Executive Council, I do not need to appear before your Committee since the Ministers responsible for Power and Finance have appeared on their own separate behalf and on behalf of the Executive Council. I have chosen not to go that way because I, personally, believe that we must all carefully, justly, fairly, sincerely and honestly continue to nurture and strengthen democracy, if the exercise you have embarked upon is not working to a pre-conceived answer.
May I draw your attention to the letter of 3rd of May received on the 9th of May headed “Invitation to Appear at the Public Hearing on the Power Sector”. I observed that the letter was not authored or signed by the Chairman of the Committee, Hon. Ndudi Godwin Elumelu. The signature is that of one Sahmed. As a matter of comment, I believe that courtesy and decency will suggest that a letter from any Chamber of the National Assembly to me as former President of this country, on a matter of this nature, will be signed by the head of the chamber concerned on behalf of the Committee or the Clerk of the National Assembly or, at the minimum, the Chairman of the Committee itself and not by a third party.
For the reason of the way and manner your invitation came as well, I may choose not to appear and merely object to the manner of invitation. Again, I have chosen not to go that way. As Africans, we must respect age and authority. It is also a product of birth and breeding in an African culture. I hope members of the Committee will have something to learn from this exercise. Be that as it may, let me go to the points that will “give an insight and perspective into what” I know and my role in the execution of projects from 1999 to 2007.
What was the position of Power in May 1999 when our Administration took over? The following is the summary:
1. Non-serious investment in generation and transmission between 1981 and 1999, a period of eighteen years, except the completion of Jebba and Shiroro hydro power plants which my military administration began and Egbin thermal plant initiated also by military administration all of which were completed by President Shehu Shagari administration. And yet, for a developing country like Nigeria, we should be increasing the rate of our power generation as close to the rate of our population increase as possible. Our Administration thereby inherited eighteen years of non-investment in power generation and seeming apparent neglect of the sector. Serious determination to understand where we are and how we are in the power situation today must understand this background.
2. Although 6000 MW capacity was claimed in 1999, only 1500MW was being generated. Ijora and Oji River thermal based on coal have completely closed down for lack of coal production and early gas thermal units at Afam and Delta were obsolete and needed replacement.
3. The hydro power plants of Kanji, Jebba and Shiroro suffered seriously from silting and/or inadequate flow of water into the dam and poor maintenance.
4. The Egbin thermal unit suffered from disruption of gas supply through vandalism and poor management and maintenance by NEPA staff.
5. Because the transmission system was not a closed loop, any disruption by vandalism or any other cause meant power would totally be cut off from the part of the country affected.
6. NEPA was a den of monumental corruption and malpractice which were deep and widespread and revenue generation was grossly below expectation. There was massive illegal connection and avoidance of payment of bills.
CLOAKED IN MYSTERY
This situation was not thoroughly understood, identified and clarified until after the first two years of my first term. Late Chief Bola Ige, who was my first Minister in charge of power and who, by any standard, was a bright and smart person, thought he could deal with the problem of power within six months and he made such public pronouncement to the world. But after twelve months, he could not unravel, in details, the problems of NEPA let alone proffer a satisfactory solution. It was not because he did not try, but rather it was because NEPA was cloaked in near mystery.
After late Bola Ige was moved to Ministry of Justice, Dr. Segun Agagu took over and, with him, I paid a little more direct attention to the power issue. I was surprised, after one year, to discover the situation described above.
With such discovery, we sprang into action. First, NEPA leadership had to be changed and we brought in an accomplished Engineer from the private sector in person of Engr. Joe Makoju to assist with giving the organisation the leadership it lacked and to shape up the entire structure of organisation and change their attitude and orientation. The aim was to sanitise and reposition NEPA to perform its roles, functions and duties to the nation. Then, we started to tackle the issue of repairs, maintenance and replacement.
In replacement, we started with Afam where a new 276MW thermal unit was installed and commissioned.
We requested the Oil Companies to join in providing power to sell to NEPA. Mobil Oil started talking to us locally but due to lack of interest from their Headquarters in the US, they gave up. In spite of all efforts in this direction, only Agip Oil showed enough concern and commitment to build a 480MW thermal unit with transmission line to the grid system which I commissioned at Okpai. Until I left government in May 2007 and, in spite of pressure on the Oil Companies, no other Oil Company made commitment in this regard to the point of commissioning. It must also be mentioned that the delay in getting the Energy Regulatory Bill passed by the National Assembly also contributed, in some way, to the private sector slow commitment to power generation. In spite of power being on the concurrent list in our Constitution, only Rivers State paid serious and appreciable attention to power generation and transmission, Akwa-Ibom followed later with Federal Government support.
Meanwhile, we embarked on building thermal units in four locations where existing gas pipelines are sufficiently close to minimise cost of gas provision to these sites. These sites or locations are Papalanto, Omotosho, Alaoji and Geregu. Each of these sites could be made to ultimately provide close to 1000MW. It must be remembered that the first term of our Administration started with the price of oil at $8 to $9 per barrel. Our budgets were not realised due to poor revenue intake from oil. For these four locations, we had to seek loan from China at concessionary rate to support two of the sites. Three of these sites – Gerengu, Omotosho and Papalanto – were built to the point of commission before I left government in May 2007.
As at today, Papalanto, Omotosho and Geregu are generating power for the grid. Gas pipe vandalism has affected them all. Since they were to be expanded, there was work continuously going on for adequate gas provision, transmission and additional turbines to reach the ultimate magnitude or capacity of about 1000MW each. The problem of vandalism of gas pipelines remains with them as with Egbin.
During our Administration’s first term and going into the early part of the second term, we studied all the available and possible sources of power and energy. These include solar, wind, tide, biomass, thermal from gas, thermal from coal, thermal from nuclear and hydro. We realised that technology for mass production of power from solar, wind and tide is still some distance away, and, therefore, the unit cost is prohibitive. They will do for smallholding or domestic use and we instituted concessionary policy to encourage such domestic or small-holding installation and use.
For large scale power production, we are left with thermal from gas, thermal from coal and hydro. We set for a twenty-year programme of nuclear energy only after we have almost exhausted what we can obtain from other thermal sources. After a visit to Omoku where Rivers State was building a thermal unit close to an Agip gas source to eliminate long distance gas pipelines that could be subjected to vandalism, we embarked on the study and search for similar available gas sources close to which other thermal plant could be located. Six of such sites were located at Sapele (Delta), Ehobor (Edo), Egbema (Imo), Gbaram (Bayelsa), Calabar (Cross River), Omoku (Rivers). That is the beginning of what is today called NIPP. It would be short in gas pipelines but might be somewhat long in transmission to grid line.
We have to coordinate and harmonise five aspects of the building of generation and evacuation unit in each site – turbine, gas provision, civil works, electrical station and transmission or evacuation. Unless all these are synchronised and brought together, expenditure on four, leaving out one as uncompleted, will still leave out power generation let alone having the power at our homes and factories. No matter what resources you may have, it will take a minimum of three years, if there are no interruptions or disruptions and with hard driving, to complete any one of these units. Without hard driving and with any disruption, it may take up to five years or more.
Now, with ICT taken over by the private sector, we identified energy, transportation and water supply as major infrastructural needs to make 20 20 20 a reality. If South Africa, with a population less than one-third of Nigerian population, has a power generation of some 40,000MW and yet still only an industrialising country, Nigeria will need close to 100,000MW of power generating capacity to become a serious industrialising country. But with the existing power generation capacity, the four thermal units earlier embarked upon and the seven NIPP, if pursued vigorously, Nigeria was to have 10,000MW generating capacity by 2007/2008 and then move by leaps and bounds to some 20,000MW by 2015. That programme is feasibly put in the pipeline but it has to be driven to be achieved. As a people who are desirous of making rapid economic and social progress, we have no alternative. Talking of any alternative can only be an idle talk or borne out of ignorance.
Fortunately, revenue from oil had improved from 2003 and we have managed to keep some reserve to prevent the boon and burst of the past when we spent all when we had money and went flat when the oil price ebbed. After consultation with the Governors, the Chairmen of Local Governments and the National Assembly, it was agreed to finance NIPP from reserve of unallocated oil revenue since energy touches every life and everywhere. It was to be an investment contribution which is on the basis of revenue allocation formula and to be refunded when NIPP is privatised on the same basis of revenue allocation. At that time, everybody agreed and we moved to finance NIPP on that basis.
In every case, to the best of my knowledge, all contracts for NIPP were based on open-publicly-advised tender system except for the turbines where the four major producers in the world – GE, Siemens, Hitachi and Alshtom – were invited to submit tender. GE was the cheapest with the best terms all round but particularly including establishing a repair and maintenance centre in Nigeria. Turbines which were custom-produced will only be produced when there is assurance of payment in form of down payment or irrevocable letter of credit.
To the best of my knowledge, the government policy was to pay contractors only 25% mobilisation fee. However, it is not the duty of the President to oversee such payment. You are well aware of those whose duty it is to pay. If a contractor, who has been paid mobilisation fee is not actively on site, it will be wise to find out what the problem of such contractor may be – violence in the Niger Delta, extortion of money by the so-called militant groups, unfriendly community, waiting for raining season to go, awaiting equipment from abroad or any other reason. If there is a contractor that has taken mobilisation fee or any fee for that matter and not performing, there is always the guarantee from his bank or insurance that can be called. For letters of credit, a contractor does not draw money until there is evidence of performance normally in form of shipping documents which are negotiated between the bank of the client and the bank of the supplier.
You may wish to know that any allegation that companies are not registered or that non-existing companies were paid are not matters for the President but for appropriate officers in the relevant ministries. If this ever happened, there would have been a big syndicate racket that should be broken and all concerned prosecuted because monies are paid by cheques or letters of credit. Companies will not have bank accounts opened for them without evidence of registration and other documents authenticated. If the Committee has such a case, please ensure prosecution without delay. Let me just say that international and multi-national companies like the suppliers of turbines do not necessarily need to be registered in Nigeria to carry out operations, directly asking for waiver if necessary or through their local representatives. I am, however, informed that the issue of unregistered companies has since been clarified and the Committee has received evidence of registration of all the 34 companies.
While looking for solution to our energy problem, I visited South Africa where they depend heavily on thermal plant based on coal, generating in total 40,000MW and planning to spend $21 billion in the next five years. We could not embark on coal generated thermal until we can produce coal locally and no private sector will be involved in coal or other solid mineral production unless there is assurance
or expectation of reasonable return on such investment backed by necessary law, regulation and survey. The solid mineral bill lasted two years in the National Assembly. And no investor could be persuaded to come to invest in solid mineral when there was no law in place. The law came in the last quarter of our Administration. Very serious attention can now be paid to thermal generation from coal. Meanwhile, we have taken to hydro to supplement thermal with Mambila and Zungeru and smaller potentials from where we can generate almost 4000MW.
There has been some allegation of waiver of due process. Let us all understand what is meant by due process. It is the rule or regulation put in place for systematic and orderly business of government. Normal due process for award of contract is advertisement or, in case of selective tendering, ensuring sufficient number to avoid collusion. Then the tender should be publicly opened, followed by analysis of the tender and award made on the recommendation by those who analyse. Our Administration set up a due process unit to ensure that another check is in place especially with local contractor to see whether prices could be further reduced and to issue a certificate to ensure that there is budget provision for the project, the contract or the supply. All NIPP projects went through due process to check on competence, prices, or cost and were issued with due process certificate but exempted from due process payment certificate since they were not projects on normal annual budget but on special provision from excess crude and the fund being available there was no need to cause any further delay in payment for such an urgent project where any delay will be costly in human discomfort and inadequate power supply to industries. The first set of invoices by contractors were delayed in due process office for almost two months – an unnecessary delay which was holding up progress.
Let me plead with the Committee again that where you have proven cases of fraud or corruption, please give details of the amount involved, the bank involved, the persons involved. Where it is corruption, the receiver and the giver. Not only should you make public such proven misconduct, hand the offender with necessary documents to EFCC and/or ICPC.
In all cases, in government, during our Administration, we pursued the best interest of Nigeria and we went to great lengths to ensure that the interest of Nigeria, Nigerians and the government is protected. As the head of that administration, I spared no public officer who committed any breach of public order, integrity and propriety, particularly fraud and corruption. No matter how high an official was, he was sanctioned for misbehaviour. In this respect, I lead by example. But if your Committee has anything to the contrary, bring it out here and now, to explain if explanation is necessary.
Now, after it is all said and done, the bottom line is that Nigerians need power and they need it now. Any delay is double jeopardy – there is loss to our economic and industrial growth and, every month that the contractors are wittingly or unwittingly prevented by whatever reason or excuse from embarking on their jobs, Nigeria will pay more. The hold-up and the delay that have attended the projects in the pipeline since May 2007 will, by my estimation, cause the nation not less than 25% more by the time the works are completed. There is the danger that some of the equipment, particularly the turbines that are now at the port and elsewhere in the country may suffer deterioration if not kept in a special storage facility. And they may have to be replaced or refurbished at a very high cost before they can be installed.
The point must be made and vigorously too that 20 20 20 will be a mirage without adequate power supply and adequate transportation. The private sector will have to be involved in helping to provide these either as contractors, suppliers or public-private partnership. We cannot criminalise them, antagonise them, disgrace them and expect to get the best support and cooperation out of them. Most of the contractors and suppliers are companies and organisations with tremendous reputation and most of their management and staff are men of honour and dignity. They deserve understanding and respect. Most of them, as far as I know, have carried out the task consciously and committedly. In all cases, there are officials or Committees who are supposed to monitor them.
What I am saying is that the legislature, whether in their legislative duties, their oversight functions or in their investigative duties, must realise they share responsibility for progress of the nation especially the economy. Let the Legislature help the Executive in its onerous task of moving the economy forward and in realising 20 20 20.
Theatrical or circus shows will provide fun and maybe hurt some people but the reality will remain. Let us do everything possible to urgently implement the projects in the pipeline to minimise the current agonies of the Nigerian public. One year is already lost, we cannot afford to lose another year without dire consequences in the coming years. Let us all be progressively positive and cumulatively constructive to move Nigeria forward. Let us move away from ‘Pull Him Down (Phd)’ syndrome.
In summary, when our Administration came in in 1999, we met seven power stations – Kainji, Jebba, Shiroro, Egbin, Afam, Sapele and Delta – all together in different stages of disrepair and obsolescence, generating about 1500MW.
By 2007, we have added six new stations as follows with the seventh almost completed at Alaoji:
Okpai in Delta – 480MW by Agip
Afam II – 276MW
Omotosho – 330MW
Palalanto – 330MW
Geregu – 414MW
Ikot Abasi-Ibom Power – 145MW – to which Federal Government is a partner.
Alaoji – 545MW
To these must be added about 2000MW produced by Rivers State.
We must also take cognizance of the heavy rehabilitation works in all the existing power stations: increasing their available capacity significantly.
There are six NIPP projects in the pipeline and the expansion of Omotosho, Papalanto, Geregu and Alaoji to about 1000MW each by combined cycle and 2500MW from Mambilla.
In other words, in eight years of our Administration, we have provided six new power generating units of almost 2000MW.
There was no transmission work embarked upon between 1982 and 2000. But by May 2007, we have taken transmission to Bayelsa State for the first time, double the transmission from Shiroro to Abuja to ensure stability of supply. We have also awarded all the transmission contracts to close the transmission loop and ensure that vandalism of transmission or any fault in the transmission line will no longer keep any part of the country in the dark if there is adequate power generation. This is to ensure stability of power supply nationwide. At the same time, we have embarked on pre-paid meter system to reduce non-payment of electricity bills and eliminate unauthorised connection. We moved from revenue generation of about N2billion per month in year 2000 to about N7 billion per month in 2007. Repairs on the pipeline that was vandalised in February 2006 and which began immediately were completed only in March 2008.
Finally, let me come to the quantum of money spent on power from 1999 to 2007. Various figures have been banded around ranging from US$4 billion to US$16 billion. They may all be right or they may all be wrong depending on what anybody takes as expenditure most of which is constant no matter what amount of power is generated, transmitted or distributed, your figure can be as high as you want to make it. That figure will include personal emolument of staff, pensions, gratuities, transportation, maintenance, rural electrification, etc.
If you take staff emolument, etc, out and limit expenditure to only running or operating costs and capital expenditure for generation, transmission and distribution, you will get a new set of figures. If you add power-related training and expenditure in other ministries and departments such as education, NNPC and industry you will get yet another set of figures. If you limit yourself to capital expenditure and running costs you will get a set of figures that can truly be said to be really expenditure on power.
I have been told that the figure in this regard from 1999 to 2007 is in the region of $6.5 billion including outstanding letters of credit. But whatever figure you choose to take, to say that there is little or nothing to show for it is the greatest understatement of the year which will tend to portray inadequate knowledge or ignorance.
From what I have said above, there are results to show for the expenditure. What is required is serious, adequate and committed follow-up and sustenance from where we stopped. If the total expenditure has not translated to power availability at our homes and for our industries, it is because the little additional expenditure that is necessary for completion or for sustenance has not been made. For example, if you spend $200 million on a power station and the switch gear costing less than half a million dollar is not installed, you will not get the benefit of the $200 million already invested. For the uninitiated, nothing has happened.
Let me, at this juncture, crave the Committee’s indulgence to express appreciation, once again, to those my colleagues, collaborators and assistants who joined hands with me in serving Nigeria loyally, committedly, honestly and sacrificially. You have done your best for your country, you have made your mark and I am sure the fruits of your labour will continue to be seen and surely appreciated. I am proud of the achievement we have made together. One thing that anybody may charge against almost all of us under our Administration who were involved in solving the power problem from 1999 to 2007 is passion and zealousness. I will, however, accept such a charge without any apologies as I see passion and zealousness for the good of Nigeria as a virtue worthy of emulation.
I thank friends, relations, well-wishers and concerned citizens who have got in touch with me by letters, telephone calls, e-mails and text messages to express their feelings and concerns. The lot of reformers must be understood is not without its pain and stress. We have no regret for all that we have done for our country and humanity. We thank God for the opportunity to serve Him by devotedly serving our country and we thank Him for His grace. We also thank Nigerians and friends outside Nigeria who appreciate what we have done. I am so confirmed and encouraged by the good we have done for this country politically, economically and socially that I have no regret whatsoever. We have taken Nigeria to where it should be within the limited time we had.
Honourable Chairman and Honourable Members, thank you. I am ready to deal with any allegations or approvals which my presentation to you so far has not clarified or adequately explained. But let me just add that no approval or programme or policy was granted or embarked upon for personal enrichment or aggrandisement. If, however, any official or public officer has made a genuine mistake, he or she should be sanctioned and corrected at the same time. I understand that threats for all sorts of spurious reasons are being issued for other investigations, no honest officials or political officers who served in my Administration should feel threatened by such threats if their hands are clean and clear.
Chief Olusegun Obasanjo, GCFR
May 12, 2008