Customs modernisation contract: The Bobby trap

The Federal Government may have fallen into a booby trap over the award of Customs modernisation project, with a risk of paying $2.5b as litigation fees. examines a report by the House of Representatives Joint Committee on Finance, Customs and Excise and Public Petitions.

The Federal Government is facing the risk of paying $2.5b as litigation fees if it goes ahead to implement the $3.1m Customs Modernisation contract .

The Federal Government may have ignored a piece of advice by “the Solicitor General of the Federation to the Minister of Finance urging it to consider the strength and weakness as well as litigation fees of $2.5billion and lengthy time frame of embarking on this case and how that may affect the ultimate goal of government for revenue generation

“On the other hand, the Presidency through the office of the Chief of Staff to the President issued a letter dated 17th September, 2019 engaging the consortium titled Presidential Initiative on Customs Modernisation  to carry out the same project awarded to Messrs Adani Mega Systems Limited/ Webb Fontaine seven months after they were engaged by CBN- CISS

“It is the opinion of the Committee that the Presidency was not duly informed of the existing contract agreement and litigations filed by Messrs Adani Mega Systems Limited/ Webb Fontaine.”

The report revealed that Federal Government acted in breach of an earlier contract award terms with Messrs Adani Mega Systems Limited/ Webb Fontaine consortium that must have responded to a June 20, 2016 advert.

Also revealed in the report is the ongoing litigation instituted by the consortium earlier given the job in a suit challenging the cancellation. The suit which was filed in December 2018 at the Federal High Court Abuja with suit No FHC/ABJ/CS/850/2017 will likely stall the recent award of the contract to another consortium.

The House of Representatives Joint Committee report which was jointly signed by James Abiodun Faleke, Chairman Finance; Jerry Aguigbo, Chairman Public Petitions; Yuguda Hassan Kila, Chairman Customs; Lawali Ibrahim, Clerk to Committee on Finance and Aliyu Maccido, Clerk to Committee on Customs revealed that the controversial cancellation and re-award of the contract took place during the time of the late Chief of staff to President Muhammadu Buhari, Mallam Abba-Kyari

The Federal Executive Council (FEC) recently announced the approval of $3.1 billion for the ‘complete’ automation of the Nigerian Custom Service (NCS).

“The main objective of this project is to completely automate every aspect of the customs business and to institutionalise the use of smart and emerging technologies that will enhanced the statutory function of the Nigerian Customs Service in the areas of revenue generation as well as trade facilitation and enhancement of security,” Minister of Finance and Budget Planning Zainab Ahmed told journalists shortly after FEC meeting in Abuja.

Ms Ahmed said the project, to be delivered by Messrs E. Customs HC Project Limited, would be financed by sponsors “who will in return look over the investment in the concessionary period of 20 years” while it has the potentials to generate up to $176 billion for the country.

“So this investment of $3.1 billion is broken down into capital investment of $1.2 million which will be done in three phases over 36 months by these investors and $1.1 million is our projection of the operational cost over the 20-year period of the implementation of this project.

Maritime lawyer Emeka Akabogu faulted the award as lacking in legal backing and transparency.

He said: “When the Federal Executive Council of the country has given its seal to a project such as this, I would assume that it has been given a 360-degree consideration, particularly relating to viability and value for money.

“There is no doubt that the country needs end-to-end customs modernisation, but it must be guided by the very reason for which it is needed, which is transparency and trade facilitation.

“Transparency will determine if the scope of the project justifies the investment. I certainly feel that the stated cost is not just high, it is mind-boggling. Automation will certainly involve new technology and innovation, but it is not rocket science. The project being contemplated will probably incorporate complete automation of data submission and verification processes for cargo clearance in a formalities single window.

“For increased assurance, it may be carried on block chain technology and even involve deployment of smart contracts. I absolutely subscribe to it as it will resolve the current issues which bedevil import clearance efficiency, including extortion by customs and under-declaration by importers. But it will not cost $3.1bn and does not need a 20-year concession.”

He noted that the more important element, which no reference was made to, is ensuring that the legal framework to drive the initiative is in place.

“Even though Nigeria is signatory to the Trade Facilitation Agreement, it is not implementing most of its highlight provisions which could greatly alleviate the challenges in the immediate term and which don’t need expenditure of ridiculous sums to achieve.

“One of the reasons is that the TFA provisions have not been given legal recognition in the CEMA. A draft of a new CEMA incorporating provision to facilitate compliance with the TFA was developed some years ago, but was not conclusively taken through to enactment.

“Any investment in customs modernisation without starting from the legal framework and policy quick-wins will be cosmetic and self-defeating. I advise we start from that point and from there define the technology requirements to facilitate compliance which will be the basis for a procurement such as has been done. We have put the cart before the horse,” he added.

On October 10, last year, House Committee on Public Petitions Chairman Jerry Alagbaoso moved a motion that the deal be investigated. He had submitted that there are some foreign companies who are very eager to sponsor, finance and provide technical services to what they call the modernisation of Customs, albeit, without recourse to the National Assembly.

“My motion is on the need to investigate the curious concession proposed arrangement between the consortium Bionica Technologies West Africa Limited, who are the sponsors; Bergan Security Consultants and Suppliers, who are co-sponsors, African Finance Corporation, who are lead financiers and Nigeria Customs Service and Infrastructure Concession Regulatory Commission (ICRC) for the customs modernisation project.”

The African Finance Corporation (AFC), which is to be the financier of the project, according to Alagbaoso, will result in a 20-year concession and frittering away of funds in the CISS account domiciled with the Central Bank of Nigeria ( CBN).

Alagbaoso added that in the 1990s there were efforts to modernise the customs by the United Nations Conference on Trade and Development (UNCTAD), which pioneered the process of Automated Systems for Customs Data (ASYCUDA), leading to the installation of ASYCUDA++ and training of customs officers for three years. Besides, he said the House was aware of various customs modernisation projects in the past.

“The House is also aware that the Federal Government agreed to engage former pre-shipment companies for valuation and classification of goods, hence some service providers namely Webbfontaine, Cotecna, SGS and Globalscan were engaged for that purpose.

“This contract was to last for seven years, from 2005 to 2012 when the service providers handed over to Nigeria Customs Service. By 2011, one could say the positive effects of this included a competent and committed workforce for Nigeria Customs Service, personnel understanding of the new process and benefits to stakeholders.

“It resulted in the collection of proper revenue due, elimination of corruption and other benefits. The House notes that with these put in place, there exists a one-stop-shop which allows all trade transactions to be conducted through a single system domiciled with the customs

“For example, all other government agencies like NAFDAC, SON and the rest have dissolved into a single platform with the Nigeria Customs Service.

“In 2011 there was an illegal concession between the Federal Ministry of Finance and a company with inadequate capital base called Single Window System and Technologies, signed in secrecy during the government transition period and this responsible house of representatives had a public hearing and stopped it to save Nigeria billions of Naira Vide the votes of Wednesday, 13 July 2011.

“In 2017 another move for customs modernisation was made by the Technical Committee on the Comprehensive Import Supervision Scheme, purported to be acting on behalf of the Federal Government called Adani Systems Nigeria Limited to modernise, maintain, develop the scanning of goods in the country in line with the pre-shipment inspection act for a period of 25 years.

“Again the attention of Controller General of Nigeria Customs Service was drawn to this and the concession was stopped.

“Curious that in September 2019, another concession, which will last for 20 years is being suggested to Nigeria Customs Service, Infrastructure Concession Regulatory Commission, Federal Ministry of Finance, Federal Ministry of Budget and Planning, Federal Ministry of Justice and this agreement is for pro-rata sharing of one per cent Comprehensive Import Supervision Scheme and a $300m investment.

“Worried that billions of Naira will be frittered away from the account of the one per cent Comprehensive Import Supervision Scheme with the Central Bank of Nigeria, regarding the cost of this latest customs modernisation by different parties involved.

“Further worried that there is no difference in substance,  scope and the structure between the failed concession attempts of 2011, 2017 and this 2019.

“There is already a national single window platform in the Nigeria Customs Service and officers of the service is performing beyond expectations, collecting duties in billions of the naira on a daily basis.

“The Federal Government is being misled by advice on this one per cent Comprehensive Import Supervision Scheme, which has accumulated in billions of naira in the Central Bank of Nigeria.

“A motion for CBN to account for this money was moved in the 8th Assembly, the House, therefore, resolved to mandate the committee on finance, customs, public petitions, committee on agreements to expose the foreign and local collaborators involved in this project either as sponsors, co-sponsors, financiers and others.

“Mandate the CBN to account for the funds between 2012 and now and urge all parties involved to maintain status quo until the outcome of the public hearing and report back in three weeks

“Three or four foreign companies are bringing their selfishness into our national agenda.  The fact that it failed in 2011, 2017 there is no way it cannot fail in 2019,” Alagbaoso said.