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NIGERIA’S INVESTMENT CLIMATE: A 2022 PERSPECTIVE OF NOTABLE CORPORATE & TAX REFORMS PART I

THE NIGERIAN INVESTMENT CLIMATE The past two years have seen significant corporate and tax reforms as Nigeria seeks to revamp and reinvigorate its corporate environment, whilst reducing its overt reliance on the oil sector. The short-term uncertainties of the global market for oil in 2020/2021 largely brought about by the Covid-19 pandemic and long term...

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NIGERIA’S INVESTMENT CLIMATE: A 2022 PERSPECTIVE OF NOTABLE CORPORATE & TAX REFORMS PART I

THE NIGERIAN INVESTMENT CLIMATE

The past two years have seen significant corporate and tax reforms as Nigeria seeks to revamp and reinvigorate its corporate environment, whilst reducing its overt reliance on the oil sector.

The short-term uncertainties of the global market for oil in 2020/2021 largely brought about by the Covid-19 pandemic and long term uncertainties brought about by the underlying environmental pressures on oil production have adversely affected the Nigerian economy, surged the country’s debt profile and devalued the Naira.

According to published reports, Nigeria attracted a total FDI of $2.6 billion in 2020. This is $0.7 billion lesser than total FDI of $3.3 billion in 2019. 2021 saw more challenges although Nigeria retained its position as 3rd most attractive investment destination in Africa (behind South Africa and Mauritius). Nigeria’s performance across the six pillars namely: market depth, access to foreign exchange; market transparency, tax and regulatory environment, capacity of local investors, macroeconomic opportunities and the enforceability of the standard master agreement. 

While the 2021 budget provides social investment programs to address the poverty and unemployment challenges, the Government has also taken some steps to improve the ease of doing business by reviewing some laws to align with Global best practices.

Measures taken to improve the investment environment and other initiatives have contributed to Nigeria’s ranking as 105 on the “Ease of Starting a Business Ranking” compared to countries like Ghana, Kenya and South Africa that rank 116th, 129th and 139th place respectively.

In 2020, the new Companies and Allied Matters Act CAMA was passed with the objective of greatly easing regulatory requirements for companies, reducing the time and cost implications of company registration, eliminating administrative bottlenecks and increasing corporate form options.

The Finance Acts of 2019 and 2020 were also enacted to improve the Nigerian tax regime and administrative framework. The Acts refined a wide spectrum of tax legislation, attuning them towards better responding to current issues, increasing investor confidence in the tax reform and reflecting economic realities. In particular, the Finance Act, 2020 was signed into law as an instrumental tool to improve the ease of doing business in Nigeria, widen the tax base, introduce response measures to the Covid-19 pandemic and bolster Nigeria’s fiscal profile.

KEY OBJECTIVES OF CORPORATE REFORMS: CORPORATE GOVERNANCE AND TRANSPARENCY

On 7th August 2020 the Companies and Allied Matters Act 2020 (“CAMA 2020”) was signed into law.The CAMA 2020 repealed the Companies and Allied Matters Act (Chapter C20) Laws of the Federation of Nigeria 2004 (“Repealed CAMA”), which originally come into force in 1990.

One of the overarching objectives of CAMA 2020 is to foster a much-needed robust corporate environment and transparency within public and private companies.

After the CAMA 2020 was signed into law, the Corporate Affairs Commission (“CAC”) subsequently issued the Companies Regulations 2021 (the “Regulations”) to provide the framework for the full implementation of the CAMA 2020. The Regulations came into effect on 1st January 2021 and the registration of limited partnerships and limited liability partnerships, commenced in April 2021.

THE BOARD OF DIRECTORS

The restrictions that were enshrined in the Nigerian Code of Corporate Governance 2018 (the “NCCG”), which preclude the chairman of a public company from acting as the chief executive officer (the “CEO”) of the same company have been incorporated into the CAMA 2020.

Public companies must now have a minimum of three independent directors, and it is obligatory for any shareholder that has the power to nominate the majority of the members of the Board, to nominate at least three independent directors for the company.

The appointment qualifications for an independent director stipulate that the nominee or his relatives must not, in the two years preceding the nominee’s appointment to the board, have: (a) owned (directly or indirectly) more than 30% of the shares of the company; (b) been employed by the company; (c) acted as an auditor of the company; (d) paid or received from the company, sums exceeding NGN 20 million, or held up to 30% of the shares (or acted as a partner, director or officer) of an entity that received or made such a payment to the company.

It is to be noted that there is some conflict, which remains unresolved in this 30% shareholding threshold requirement as against the requirement of the NCCG which stipulates that an independent director should not hold more than 0.01% of the paid-up share capital of the company.

Any nominee to the position of director of public companies must disclose their existing positions on the boards of other public companies, before taking up the new appointment. There is also now a cap on any person being director of public companies and the cap is 5 public companies. The CAMA provides for a two-year period for any person who is a director of more than 5 public companies, to comply. 

REGISTER OF DIRECTORS’ RESIDENTIAL ADDRESS

All companies must keep a new register called a “Register of Directors’ Residential Addresses”, which must contain the usual residential address of the company’s directors. This register differs from the Register of Directors which, typically, will specify a “service address” for the directors that, in some cases, could be the company’s registered office.

The CAMA 2020 classifies information relating to the residential address of a director as being “protected information.” There are restrictions on how the company and the CAC can deal with such protected information.

REMOVAL OF A DIRECTOR NOW A BASIS FOR GENERAL DISQUALIFICATION FROM DIRECTORSHIP

The CAMA 2020 retains the procedure for removal of directors outlined under the Repealed CAMA. A key change, however, is that directors who are suspended or removed from office by a company will also be disqualified from being directors of other companies.

SHARE CAPITAL

The concept of authorised share capital has been abrogated and replaced by a requirement that companies must have at least the minimum issued share capital of NGN100,000.00 for private companies and NGN2,000,000.00 for public companies. 25% of this issued share capital must be paid up. 

Existing companies must fully issue their authorised share capital to comply with this and the CAC Regulations (Regulation 13) provide that companies that have unissued shares in their share capital must have issued those shares by 30th June 2021. Companies that comply with this directive will not be required to pay any CAC filing fees on the shares when they file their return of allotments at the CAC.

Therefore the CAC will recognise the fees previously paid by the companies on their unissued shares. Where, however, a company does not issue all its unissued shares by the specified date, the company and every officer of the company shall be liable to a daily penalty prescribed by the Commission. The Regulations state that the daily penalty payable by public companies is N1,000 while the daily penalty for private companies is N500 and for small companies is N250.

Private companies have exercised various options in order to give effect to this directive including bonus issues or a rights issue to existing shareholders; cancellation of unissued shares by reduction of share capital. For public companies where the approval of the Securities and Exchange Commission and other regulators might be required, the CAC has provided a more flexible timeline.

Under the old CAMA, the power to allot shares resided with the company and could be delegated to the directors, subject to any conditions imposed either in the articles or from time to time by the company in general meeting.

Under the CAMA 2020 and regulations, the power to allot only applies to private companies and has a similar result. The board of directors of public companies are more restricted as they can also issue and allot new shares, provided the board is expressly authorised by the articles to do so or has been so authorised by the shareholders in a general meeting.

MANDATORY PRE-EMPTIVE RIGHTS

All companies (public or private) are now required to first offer newly issued shares to their existing shareholders, in proportion to their existing holdings.

The implication of this for public companies is that any issue of new shares, whether by way of a public offer or a private placement, must be preceded by a Rights Offer/Issue to existing shareholders. Apart from the cost and time associated with carrying out a Rights Offer/Issue, one possible consequence is that if the shareholders of a company decide to take up the shares that are offered to them during such a Rights Offer/Issue, the company might not be able to issue the number of shares it needs for the transaction it originally intended to execute.

DISCLOSURE AND TRANSPARENCY – SUBSTANTIAL SHAREHOLDERS AND PERSONS WITH SIGNIFICANT CONTROL

The threshold for determining the substantial shareholders of a public company has been reduced from 10% to 5%. In addition, another new register called the “Register of Persons with Significant Control” has to be maintained by all companies. A person has significant control of a company where that person directly or indirectly holds at least 5% of the shares, interest or voting rights in the company; directly or indirectly holds the right to appoint or remove a majority of the directors in the company; or otherwise has the right to exercise or actually exercises significant influence or control over a company. Disclosures are required to be made by both substantial shareholders and persons with significant control.

UNCLAIMED DIVIDENDS

Under the Repealed CAMA, the law recognised dividends as special debts due to and recoverable by shareholders within 12 years and actionable only when declared. The CAMA 2020 retained this position but went further to say in s. 432 that after 12 years, the unclaimed dividends could be included in the company’s distributable profits which could be distributed to the shareholders of the company. Other changes made by the CAMA 2020 are that companies are now required to publish their list of unclaimed dividends in two national newspapers. The list must be attached to the notice of the next annual general meeting circulated to the members of that company. The company may invest the unclaimed dividend for its own benefit three months after the publication and the issuance of the notice of the annual general meeting to shareholders. Shareholders are not entitled to receive any interest on unclaimed dividends. 

The Finance Act, 2020 came into law on the last day of the year 2020. It established the Unclaimed Funds Trust Fund (“Fund”) and amended s.432 of the CAMA 2020. Specifically, section 432 of the CAMA 2020 has been amended to include two new sub-sections which have the effect of distinguishing the manner in which unclaimed dividends of a public company that is listed on the NSE should be treated. After a period of six years from the date of declaring any dividends, the unclaimed dividends of a public company that is listed on the Nigerian Stock Exchange (“NSE”) shall be immediately transferred to the Fund. Unclaimed dividends that are transferred to the Fund shall be a special debt owed by the Federal Government of Nigeria to the relevant shareholders and may be claimed by such shareholders at any time.

COMPANY SECRETARY

Public companies are still required to have a company secretary, even though this requirement has been dispensed with for private companies.

COMPANY SEAL

The use of company seals is now optional for all companies. The CAMA 2020 provides for how a company may execute certain documents in the absence of a seal.

REMUNERATION OF MANAGERS

The compensation of the managers of a company must now be disclosed to members of the company as part of the ordinary business to be transacted at the annual general meeting. The term “Manager” is defined in the Regulations to include any person, by whatever name called, occupying a position in senior management and who is vested with significant autonomy, discretion, and authority in the administration and management of the affairs of a company (whether in whole or in part).

MEETINGS

VIRTUAL GENERAL MEETINGS

The provision in CAMA 2020 that permits private companies to hold their general meetings electronically, does not extend to public companies. This means that, absent any special dispensation from the regulators (such as those granted in 2020 as a result of COVID), public companies must continue to hold their general meetings physically.

VIRTUAL BOARD MEETINGS

Section 289(1) of the CAMA 2020 replicates s. 263(1) of the Repealed CAMA, and neither of these provisions make it clear that board meetings can be held virtually. Prior to the CAMA 2020, companies took the precaution of ensuring that their articles authorised the board to meet virtually, otherwise board meetings had to be held physically. Section 289(1) has been clarified by Regulation 16 titled ‘Electronic Meetings of Directors’. Regulation 16 provides that Directors may, in the exercise of their power to regulate their meeting as they think fit, hold their meetings electronically and by any means that would allow all directors to participate, speak and vote at the meeting.

Regulation 16, therefore, provides more flexibility to boards for holding their meetings, even where the articles of the company do not provide for this.

S. 240(1) of the CAMA 2020, which requires virtual general meetings of private companies to be held in Nigeria. 

JURISDICTION OF THE NATIONAL INDUSTRIAL COURT OF NIGERIA ON TORTS

1.0 Introduction Labour related issues are weighty issues as they have economic implications on the country. It is therefore necessary that the government, through legislative framework, protect labour interests and provide an effective avenue for the resolution of disputes that arise therefrom. The establishment of the National Industrial Court of Nigeria (NICN) as a superior...

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JURISDICTION OF THE NATIONAL INDUSTRIAL COURT OF NIGERIA ON TORTS

1.0 Introduction

Labour related issues are weighty issues as they have economic implications on the country. It is therefore necessary that the government, through legislative framework, protect labour interests and provide an effective avenue for the resolution of disputes that arise therefrom. The establishment of the National Industrial Court of Nigeria (NICN) as a superior court of record vested with jurisdiction to determine labour related disputes was a step in the right direction for the economy. However, in recent years, issues as to its jurisdiction have been raised particularly as it concerns the jurisdiction to hear and adjudicate over tortious claims that arise in the workplace. It is this issue that this article will seek to address.

2.0 Jurisdiction of the National Industrial Court

Section 7 of the NIC Act confers exclusive jurisdiction on the NICN in civil causes and matters relating to labour, trade unions, environment and conditions of work; determination of issues relating to industrial action, question as to the interpretation of any collective agreement, the Constitution of any trade union amongst others. The National Assembly is also empowered to confer such additional jurisdiction on the court in respect of incidental or supplementary matters. Section 254C of the 1999 Constitution (as amended) expands the jurisdiction of the court in several respects. For instance, it has powers to adjudicate over matters connected with international best practices in labour as well as application or interpretation of international labour standards. Both provisions also extend the jurisdiction of the court to adjudicate over matters that are incidental to the matters over which the Court has jurisdiction. The question that begs for answer is what matters will constitute ancillary issues or to put it in other words, do the provisions of the Constitution and the NICN Act envisage a strict and narrow interpretation of the ancillary powers of the court so that it cannot adjudicate over certain matters irrespective of the fact that they are closely related to matters over which the court has jurisdiction? Can the NICN, for instance, adjudicate over a matter in tort as incidental to its jurisdiction over labour related matters, when the tort occurred between an employer and employee? It is these issues to which we will seek to find answers. In determining the extent of the ancillary powers of the NIC, we will consider few cases where the Court of Appeal has made pronouncement on the issue.

In Ecobank Nigeria Limited –v- Mrs. Winifred Effiok Osu[1] the Appellant placed a restriction on the Respondent’s account after paying her post resignation entitlements into the account. All the cheques issued by the Respondent on the account were dishonoured, whereafter the Respondent brought an action at the NIC claiming amongst other things damages for defamation. The NICN assumed jurisdiction in respect of the claim for defamation on the grounds that it was incidental to the claim bordering on labour and employment. On appeal, the Court of Appeal stated that the NIC did not have jurisdiction to entertain the claim on defamation as that was a standalone cause of action in law and it could not be lumped with an employment-related claim. We are hard-pressed to disagree with the finding of the Court of Appeal on this matter for reasons which we shall consider anon.

Jurisdiction is a creation of statute and it is the statute that creates a court that can limit its jurisdiction[2]. It is our submission, with all due respect, that if the Court of Appeal had adverted its mind not only to section 254C of the 1999 constitution but also sections 7 and 14 of the NIC Act, it would have reached a different conclusion in Ecobank’s case (supra). The court seemed to suggest in its judgment that the jurisdiction of the NIC can be sufficiently determined by sole reference to the Constitution and nothing else. By a refusal or failure to consider the provisions of the NIC Act in determining the scope and extent of the NIC’s jurisdiction, the Court of Appeal seemed to suggest that the conferment of any jurisdiction by an Act of the National Assembly on any court created by the Constitution is vacated if such jurisdiction is not equally conferred on the court by the Constitution that created it. This would seem to be turning the law on its head as Acts of the National Assembly and the Constitution are not mutually exclusive but are able to exist side by side and the Act of the National Assembly may make provisions for details not captured by the Constitution. The powers granted by the Act of the National Assembly, whether the Act was enacted before or after the promulgation of the Constitution, is never in contention as the powers are complementary to the provisions of the Constitution and the question of invalidity will only arise where there is inconsistency[3]. Since the court’s jurisdiction can be extended by statute, it is only right for the court in determining the issue of jurisdiction to look to both the Constitution and the statute that make provision for the court[4]. It is on this point that we submit that the Court of Appeal erred in not considering the provisions of the NIC Act.

A look at the provisions of sections 7 and 14 of the NIC Act, as well as section 254C (1)(a) and (k) of the 1999 constitution which the Court of Appeal relied on in reaching its decision will reveal that claims of tort can well be brought in an employer-employee dispute. We will reproduce the said provisions for ease of reference.

Section 7(1)- The court shall have and exercise exclusive jurisdiction in civil causes and matters-

  • relating to-
  1. labour, including trade unions and industrial relations; and
  2. environment and conditions of work, health, safety and welfare of

labour, and matters incidental thereto.

Section 14- The court shall, in the exercise of the jurisdiction vested by or under this Act in every cause or matter, have power to grant, either absolutely or on such terms and conditions as the court thinks just, all such remedies whatsoever as any of the parties may appear to be entitled to in respect of any legal or equitable claim properly brought forward by the court so that, as far as possible, all matters in dispute between the parties may be completely and finally determined and all multiplicity of legal proceedings concerning any of those matters avoided[5].

Section 254C(1)- Notwithstanding the provisions of section 251, 257, 272 and anything contained in this constitution and in addition to any such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the National Industrial Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters-

  • relating to or connected with any labour, employment, trade unions, industrial relations and matters arising from workplace, the conditions of service, including health, safety, welfare of labour, employee, worker and matters incidental thereto or connected therewith;

(k) relating to or connected with disputes arising from payment or non-payment of salaries, wages, pensions, gratuities, allowances, benefits and any other entitlement of any employee, worker, political or public office holder, judicial officer or any civil or public servant in any part of the federation and matters incidental thereto.

One cannot help but notice the copious use of the words with which the ancillary jurisdiction of the NIC is captured under section 254C. If as it is stated that the lawmaker does not use any word in vain[6], one is left to wonder the scope of the words with which the ancillary jurisdiction of the court is expressed. The will of the framers of the constitution is sufficiently revealed in the repetitive use of the words ‘incidental to’ ‘connected therewith’ and other similar words used to express the ancillary jurisdiction of the NIC and it is safe to conclude that although a matter may ordinarily be an independent cause of action but because the facts that gave rise to it are employer-employee based, then it becomes incidental to the matter bothering on employer-employee relationship. It was for the Court of Appeal in Ecobank’s case to give effect to the will of the framers of the constitution as expressed under section 254C[7]. For a matter to be connected with an action brought before the court, it must be so intertwined that it naturally flows from the matter brought before the court. A key question to ask in determining if the matters are intertwined is this: If the employer-employer relationship was not in existence, would the tort have occurred? If the answer would be in the negative, then it is submitted that the tortious claim is so intrinsically connected to the employment related dispute that it is easy to see how the tort becomes incidental to the employment dispute and why it will be the intention of the framers of the constitution to have them decided together. Also, the dispute in Ecobank’s case (supra) arose from the payment of employee gratuity and benefits which is evidently captured under the provision of section 254C(1)(k).

By a more fortified reasoning, section 14 of the NIC Act empowers the court to grant “all remedies whatsoever” the parties are entitled to in respect of any legal or equitable claim. To argue that reliefs for tortious claims cannot be granted when an employment related matter is being determined by the NIC is to ignore the clear provisions of the law as claims in tort are either legal or equitable, depending on the particular tortious claim. The intention of the legislature which the court is expected to give effect to is further clearly revealed in that section i.e. the avoidance of the multiplicity of actions as long as what is in dispute is a labour issue. One wonders why this will be difficult to see upon a consideration of that section, thus the reiteration of our position that the Court of Appeal would have reached a different decision if it had as much as considered the provision of section 14 of the NIC Act. The Court of Appeal in reaching the decision in Ecobank’s case relied on its previous decision in Dr Emmanuel Akpan v. University of Calabar[8] where the court per Otisi JCA stated as follows:

“A claim cannot be considered as ancillary to the main claim when it is completely removed from the subject matter of the main claim… a careful examination of the provisions section 254C of the 1999 constitution, as amended will not reveal that its powers extend to entertaining a claim in tort, at all. A claim in tort cannot be considered as being ancillary to a claim for wrongful dismissal when brought before a court which has its jurisdiction limited by statute… a claim for defamation stands on its own. The learned trial judge therefore rightly declined jurisdiction over the appellant’s claim for defamation.”

Similarly, in Bisong v University of Calabar[9], decided by the same panel of Justices and on the same day, the court used the same words in stating that the NIC cannot exercise jurisdiction in tortious liability, notwithstanding that it flowed from an employer-employee relationship. In the twin matters, the court did not consider the provisions of section 7 and 14 of the NICN Act. In 2018, however, two years after the decision in Akpan’s case and Bisong’s case, the Court of Appeal in Medical and Health Workers Union of Nigeria v. Dr. Alfred Ehigiegba agreed with the position we took above i.e. that the National Industrial Court has ancillary jurisdiction to deal with any subject-matter that is intertwined with its primary jurisdiction conferred under the Act and the 1999 Constitution irrespective of the fact that such subject-matter would ordinarily constitute a different cause of action[10]. However, the case of Ecobank v. Effiok Osu (supra) which was decided in 2020 and being later in time will constitute the extant position of the law.

3 .0 Conclusion

We cannot help but throw our weight behind the Court of Appeal’s decision in MHWUN’s case above as the truest reflection of the intention of the framers of the Constitution in the consistent use of the words that make for the ancillary jurisdiction of the NIC. It is also correct that in consideration of the jurisdiction of any court, resort must be had to the Act of the National Assembly establishing the court as well as the Constitution; which was what the Court of Appeal failed to do in the line of cases that denied the jurisdiction of the NIC to hear claims for tort as part of its ancillary jurisdiction. The position of the law where there are two conflicting decisions of the same court is that the latter in time prevails as the law[11], thus, we may be stuck with the decision in Ecobank v Osu (supra), until the Court of Appeal is able to reverse itself. It is also necessary that the Court of Appeal harmonises its decision on this point so as to avoid a situation where various divisions of the court will keep handing out conflicting judgments on the same point seeing that by virtue of section 243(4) of the 1999 Constitution, the decisions of the Court of Appeal on appeals from the NIC are final[12]. Alternatively, it is hoped that the case of MHWUN will proceed on appeal to the Supreme court, since it was a case that originated in the High court not the NIC and the Supreme court will have the opportunity to set the law straight.

 

[1] CA/L/963/2016 (unreported) in which judgment was delivered on 24 February 2020.

[2] Garba v. Mohammed (2016) LPELR-40612(SC)

[3] Amadi & Anor v. INEC & Ors. (2012) LPELR-7831 (SC)

[4] Garba v. Mohammed (supra).

[5] Emphasis mine

[6] Aroh v Odedo & ors (2011) LPELR-9202

[7] Marwa & ors v Nyako & ors SC. 141/2011, where the court stated that the duty of the court is to give` effect to the will of the legislature. See also Tukur v Government of Gongola State (1989) 4 NWLR (Pt. 117) 517

[8] (2016) LPELR-41242 (CA)

[9] (2016) LPELR-41246 (CA)

[10] (2018) LPELR- 44972 (CA)

[11] CBN v Zakari (2018) LPELR-44751(CA); Osakwe v. Federal College of Education (2010) 3 SCNJ page 529 at 546

[12] See also Skye Bank plc v Victor Iwu [2017] 6 SC (part 1)

NATURE OF DISPUTES THAT MAY BE REFERRED TO ARBITRATION.

  Introduction: Arbitration is a process by which disputes or difference between two or more parties as to their mutual legal rights and liabilities is referred to and determined judicially with binding effect by the application of the law by one or more persons (the arbitral tribunal) instead of by a court.[1] An arbitration agreement...

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NATURE OF DISPUTES THAT MAY BE REFERRED TO ARBITRATION.

 

  1. Introduction:

Arbitration is a process by which disputes or difference between two or more parties as to their mutual legal rights and liabilities is referred to and determined judicially with binding effect by the application of the law by one or more persons (the arbitral tribunal) instead of by a court.[1]

An arbitration agreement is therefore where two or more persons covenant that a dispute or a potential dispute between them shall be resolved and decided in a legally binding way by one or more impartial persons in a judicial manner, upon evidence put before him or them. The agreement is called an arbitration agreement or a submission to an arbitral proceeding when after a dispute has arisen, it is put before such person or persons for decision. The procedure is called arbitration and the decision when made is called an award.[2]

It is apposite to note that arbitration may either be voluntary or compulsory. In other words, it may be by parties’ agreement or by statutes. A voluntary arbitration is by mutual consent of the parties whilst a compulsory arbitration is that which is demanded by the provision of the statute.

2.    Meaning and test of ‘dispute’ for purposes of arbitration:

The word dispute means contention, discord, conflict, friction and antagonism. It also implies a conflict or controversy. If there was concord and harmony, then the parties have no valid legal basis to seek a reference to arbitration. Our apex Court has defined dispute to mean “act of arguing against, controversy, debate, contention as to right, claims and the like or on a matter of opinion.”[3]

A matter shall be referred to arbitration when it becomes clear or is to be interpreted to mean that a difference or dispute exists between the contending parties. Therefore, where a party admits liability of an existing debt but simply defaults to pay, or when a cause of action has been extinguished owing to the death of a party embedded in the Latin maxim, actio personalis noritur cum persona, then there is no dispute to arbitrate upon or relevant party to arbitrate with. The conflict which the parties to an arbitration agreement agree to refer to must consists of a justiciable issue triable civilly. A fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction.[4]

The next step is to determine whether the dispute or difference necessarily arises from or it is connected with the clause contained in the agreement i.e. it falls squarely within the scope of the parties’ agreement. If a party to an agreement has compromised his position by conceding to numerous alternative remedies to the other party, other than resort to arbitration, and by showing an intention to compromise, to an act of the party which he is complaining about, he has, in consequence, robbed himself of competence or premise of referring the subject matter of complaint to arbitration.[5]

3.    Arbitrable Disputes:

It is a general perception that any agreement that contains an arbitration clause shows a clear and unmistaken indication that the contract requires the parties to resolve their disputes through an arbitration process. Unarguably, arbitration is generally encouraged in Nigeria in particular and the international community in general because arbitration clauses reduce the court dockets to resolve disputes. Therefore, in keeping with the sanctity of agreements, the law is enthusiastic to ensure the validity of arbitration clauses notwithstanding any apparent inadequacy or lack in the normal formal language with legal contracts.

Hence, once parties covenant in their agreement to resolve their dispute through arbitration and an issue is perceived or is to be interpreted to mean a difference or dispute exists, such dispute shall be referred to arbitration. The difference or dispute must, however, arise from the clauses contained in the agreement i.e. fall within the scope of the parties’ agreement. Therefore, it is not every dispute or difference that can be referred to arbitration. The Disputes must be capable of being disposed of judicially, in a civil form. These disputes include all matters in controversy about any real or personal property, disputes as to whether a contract has been breached by either party thereto, or whether one or both parties have been discharged from performance thereof.[6]

Sections 48 (b) (i) & (ii) and 52 (2) (ii) of the Arbitration and Conciliation Act, CAP A18, Laws of Federal Republic of Nigeria[7] provide that even when an award has been procured and it becomes clear that an agreement on which the arbitral award was premised on arose from an invalid contract or the subject matter of the dispute is not capable of settlement or is contrary to public policy, such an award is bound to be set aside. This, therefore, reinforces the position that the dispute must be capable of settlement before it qualifies as an arbitrable dispute. This is also the same position in international arbitration under Chapter VII, Article 34 (2) b) and Chapter VIII, Article 36 1) a) i) & 1 b) of UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments as adopted in 2006.[8]

4.    Matters that cannot be referred to Arbitration:

It is trite that the disputes, which are the subject of an arbitration agreement, must not cover matters, which by the law of the State are not allowed to be settled privately or by arbitration usually because this will be contrary to public policy.[9]

It is manifestly clear that the following categories of matters cannot be the subject of an arbitration agreement as enunciated by the Nigerian Supreme Court and therefore cannot be referred to arbitration: –

  1. an indictment for an offence of a public nature;
  2. disputes arising out of an illegal contract;
  3. disputes arising under agreements that are void as being by way of gaming or wagering;
  4. disputes leading to a change of status, such as a divorce petition;
  5. any agreement purporting to give an arbitrator the right to give judgment in Therefore, a criminal matter, like the allegation of fraud does not admit of settlement by arbitration. This is because these issues are a matter of public concern. It is contrary to public policy to compromise such disputes.[10]

Similarly, the Nigerian Court of Appeal has held in two decisions[11] in Esso Petroleum and Production Nigeria Ltd & Anor. (SNEPCO) vs. NNPC unreported Appeal No. CA/A/507/2012; delivered on 22 July 2016 and Shell (Nig.) Exploration and Production Ltd & 3 others vs. Federal Inland Revenue Service unreported Appeal No. CA/A/208/2012; delivered on 31 August 2016 that tax disputes arising from a Production Sharing Contract (PSC) are not arbitrable because the subject matter of the dispute is within the exclusive jurisdiction of the Federal High Court. The rationale for the above decisions seems to appear that it may be contrary to public policy to compromise the revenues due and payable to the government. These decisions are currently subject of appeals to the final Court in Nigeria. Until then, they remain the authority that tax disputes are not arbitrable.

5.    Conclusion:

It is pertinent to note that by the provisions of Section 2 of the Arbitration and Conciliation Act 1988 (ACA). (Cap A18 Laws of the Federation of Nigeria 2004)[12] an

arbitration agreement shall be irrevocable except by agreement of the parties, or by leave of Court, or a Judge. Consequently, the mere fact that parties agree to proceed to arbitration once there is a dispute does not ipso facto make the agreement to arbitrate irrevocable because not all disputes are arbitrable. The disputes must be triable civilly. It should not be illegal or tainted with a crime or fraud.

However, it is worthy of mention that the right to go for arbitration is a personal right. It is not a constitutional right. Therefore, it can be waived by either of the parties to the agreement expressly or by contract, more particularly where the two contending parties submit their disputes to Court for determination.[13]

 

[1] Miss Nigeria –v- Oyedale (1960) NCLR 191

[2] C. N. Onuselogu Enterprises Ltd. -v- Afribank (Nigeria) Plc. (2005) 12 NWLR (Pt. 940) 577

[3] Plateau State & Anor. v. AG Federation & Anor.(2006) LPELR-2921(SC)

[4] Chief Felix K. Ogunwale v. Syrian Arab Republic (2002) 9 NWLR (Pt. 771) 127

[5] United World Ltd Inc. –v- MTS Ltd (1998) 10 NWLR (Pt.568) 106.

[6] BCC Tropical Nigeria Ltd. v. The Government of Yobe State of Nigeria & Anor. (2011) LPELR-9230 (CA).

[7] Sections 48 (b) (i) & (ii) and 52 (2) (ii) of the Arbitration and Conciliation Act, CAP A18, Laws of Federal Republic of Nigeria

[8] Chapter VII, Article 34 (2) b) and Chapter VIII, Article 36 1) a) i) & 1 b) of UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments as adopted in 2006

[9] B. J. Export & Chemical Company Ltd v. Kaduna Refining & Petro-Chemical Company Ltd (2002) LPELR- 12175(CA).

[10] Kano State Urban Development Board V. Fanz Construction Ltd. (1990) 4 NWLR (PT.142) 1 at 32-33.

[11] Esso Petroleum and Production Nigeria Ltd & Anor. (SNEPCO) vs. NNPC unreported Appeal No. CA/A/507/2012; delivered on 22 July 2016 and Shell (Nig.) Exploration and Production Ltd & 3 others vs. Federal Inland Revenue Service unreported Appeal No. CA/A/208/2012

[12] Section 2 of the Arbitration and Conciliation Act 1988 (ACA). (Cap A18 Laws of the Federation of Nigeria 2004)

[13] Kurubo v. Zach-Motison (Nig.) Limited (1992) 5 NWLR (Pt. 239) 102.

Extolling the Virtues of Adam Smith

F.O. Akinrele & Co. is retained for 2012-2013 as Country Legal Consultant to Adam Smith International with a mandate to deliver specialist legal support to ASI’s objectives of expanding access to infrastructure providers, Nigerian government ministries and regulatory authorities in all the key infrastructure sectors including telecoms, power & energy, water supply and sanitation and...

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Extolling the Virtues of Adam Smith

F.O. Akinrele & Co. is retained for 2012-2013 as Country Legal Consultant to Adam Smith International with a mandate to deliver specialist legal support to ASI’s objectives of expanding access to infrastructure providers, Nigerian government ministries and regulatory authorities in all the key infrastructure sectors including telecoms, power & energy, water supply and sanitation and transport (ports, road, rail and aviation).

Adam Smith’s philosophies of access to world markets through free trade between nations are exemplified by the ethos of Adam Smith International (ASI), founded in response to the growing international interest in practical advice on economic and government reform, now a leading independent governance and economic consultancy.
ASI’s Nigerian subsidiary, the Nigerian Infrastructure Advisory Facility (NIAF), has won the British Expertise Development Project of the Year Award in recognition of its outstanding success based on its NIAF programme, in providing increased access to improved, reliable and affordable infrastructure services in Nigeria.
F.O. Akinrele & Co’s on-going legal mandate in supporting the NIAF programme includes determining the scope for future private sector investment and how structural and regulatory reforms can be introduced to ensure that such investment results in pro-development outcomes. The specific areas in respect of which we provide legal support are as follows:

Infrastructure and utility sector policy

  • Strategies for attracting sustainable private sector investment
  • Selecting the most appropriate private sector participation (PSP) methodology
  • Utility and infrastructure sector restructuring and market reform
  • Creation and strengthening of regulatory frameworks and institutions

Nigeria, like much of sub-Saharan Africa is badly hindered by inadequate, outmoded or even non-existent infrastructure. Weak infrastructure diminishes the productivity of individuals and the capital they employ; it therefore eradicates the natural competitive advantages inherent within a country’s assets. It creates barriers to development by restricting opportunities and raising costs thus impeding the sustainable development of the economy and stifling innovation.

According to the World Bank Investment Climate survey, 2006, poor infrastructure is regarded as either a “major or severe obstacle to the operation and growth” of around 70% of business in sub-Saharan Africa. “Good infrastructure on the other hand is the foundation upon which sustainable economic development and the fight against poverty can take place. Making infrastructure development work for the poorest in society remains a critical challenge” – Adam Smith International.

Power Sector Privatisation Milestones

On Tuesday, September 25 2012, Nigeria named the successful bidders for five state power generation plants signifying a major step in the privatisation of the Nigerian energy sector since the 2010 announcement by President Goodluck Jonathan to break up the state power company and sell it off as 10 distribution companies and six generation companies....

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Power Sector Privatisation Milestones

On Tuesday, September 25 2012, Nigeria named the successful bidders for five state power generation plants signifying a major step in the privatisation of the Nigerian energy sector since the 2010 announcement by President Goodluck Jonathan to break up the state power company and sell it off as 10 distribution companies and six generation companies.

In a sector where Power outages hold back economic growth, the Nigerian Federal Government has made power reforms a priority part of plans to privatise the country’s electricity sector to boost growth. Despite holding the world’s seventh largest gas reserves, Nigeria, Africa’s second largest economy, only produces around 4,000 megawatts (MW) of electricity for its 160 million people, less than a tenth of the amount South Africa provides for a population a third of the size. Despite an estimated $40 billion of capital injected into reforming the power sector over the last two decades, capacity has only improved marginally. If Nigeria can fix its electricity problems it could launch Africa’s second largest economy into double-digit growth and help pull millions out of abject poverty.

Privatisation of Power Generation

The 5 successful bidders were:

  1. A consortium including a Nigerian Public Company Transcorp for the Ughelli Power Company, offering $300 million;
  2. Forte Oil for Geregu Power plant offering $132 million;
  3. A consortium made up of Nigerian, Chinese and British companies for the Sapele Power firm offering $201 million;
  4. Mainstream Energy, a group including the Russian firm RusHydro in collaboration with several Nigerian companies won a contract to manage the Kainji Power company;
  5. North-South Power, a mostly Nigerian consortium, won a similar contract on Shiroro Power.
    NB. Mainstream and North-South had no competitors for their bids.
  6. The sale of the remaining generation firm, which will run the Afam power plant, is being re-tendered after the Power Minister Barth Nnaji resigned last month when it was revealed he had a stake in one of the consortiums bidding for the asset.

Privatisation of Power Distribution
On Oct. 16 2012, a number of frontline bidders were announced as top contenders for the electricity distribution companies. Minister of State for Power, Darius Ishaku, said at a ceremony in Abuja announcing the top contenders, “This is a milestone in the power privatisation process”. But clear winners of the bids had yet to emerge, as the rules for the bidding employed by the Bureau of Public Enterprises prescribed that the bidders would still be subjected to further tests.

Equally, one of the bidding rules states that no company can be allowed to win more than two bids.
In addition, no company will be allowed to win both the Ikeja and Eko Electricity Distribution Companies, which collectively generate about 45 per cent of the total revenue of the Power Holding Company of Nigeria.
Based on the rules, the National Council on Privatisation, led by Vice-President Namadi Sambo, will still subject the top contenders to scrutiny before announcing the eventual winners.

The Chairman, Technical Committee, NCP, Mr. Atedo Peterside, said successful bidders were contractually bound to deliver on the Average Technical, Commercial and Collection (ATC&C) loss reduction levels they had submitted.
Peterside said, “the bidder offering the highest ATC&C loss reduction is in a leading position subject to the ground rules”. Further that “the regulator will not adjust tariffs upwards to accommodate the inability of a Distribution company operator to deliver on the ATC&C levels that they commit to; rather tariffs will be adjusted downward annually to reflect the agreed ATC&C loss levels irrespective of the operator’s ability to meet its contractual obligation.”

The Federal Government is looking to realise N197.25bn (approx. $1.25bn) at the end of the sale of the 10 companies, whose bids were opened on Tuesday. Instead of allowing the bidders to compete based on their financial strengths, they were evaluated based on ATC&C loss reduction proposals. The eventual winners will have to pay 60 per cent of the asset worth of the companies as determined earlier by the Nigerian Electricity Regulatory Commission (NERC).

A breakdown shows that N25.79bn (approx. $164m) will be realised from the sale of Abuja Electricity Distribution Company; N20.23bn (approx. $129m) from the Benin Electricity Distribution Company; N21.19bn (approx. $135m) from Eko Electricity Distribution Company; and N19.81bn (approx. $ 126m) from the Enugu Electricity Distribution Company. Others are N26.51bn (approx. $169m) from the Ibadan Electricity Distribution Company; N20.64bn (approx. $ 131m) from the Ikeja Electricity Distribution Company; N12.86bn (approx. $ 82m) from the Jos Electricity Distribution Company; N21.44bn (approx. $ 136m) from the Kano Electricity Distribution Company; N19.51bn ($ 124m) from the Port Harcourt Electricity Distribution Company; and N9.31bn ($ 59m) from the Yola Electricity Distribution Company.

1. ABUJA ELECTRICITY DISTRIBUTION COMPANY
At the opening of the bids on Tuesday 16th Oct. 2012, Interstate Electronics Limited being promoted Mr. Emeka Ofor emerged the top bidder for the Abuja Electricity Distribution Company by offering to reduce the ATC&C loss by 21.62 per cent.
The second bidder, Kann Consortium Utility Limited, offered to reduce the ATC&C loss by 18.43 per cent.

2. BENIN ELECTRICITY DISTRIBUTION COMPANY
For the Benin Electricity Distribution Company, Vigeo Power Consortium emerged the top contender with an offer to reduce the ATC&C loss by 21.78 per cent. The company is being promoted by Mr. Gbolade Osibodu.
The other contender for the Benin Electricity Distribution Company is Southern Electricity Distribution Company, which offered to reduce the ATC&C loss by 17.72 per cent.

3. EKO ELECTRICITY DISTRIBUTION COMPANY
For the Eko Electricity Distribution Company Limited, Integrated Energy Distribution and Marketing Limited emerged the top bidder by offering a loss reduction of 21.43 per cent.
Other bidders for Eko include New Electricity Distribution Company Consortium, 20.43 per cent; West Power & Gas, 18.55 per cent; Honeywell Energy Resources International Limited, 16.33 per cent; SEPCO-Pacific Energy Consortium, 15.7 per cent; and Oando Consortium, 14.29 per cent.

4. ENUGU ELECTRICITY DISTRIBUTION COMPANY
Interstate Electrics Limited emerged the top contender for the Enugu Electricity Distribution Company with an offer of 20.83 per cent ATC&C loss reduction, while Eastern Electric Nigeria Limited offered a reduction rate of 15.99 per cent.

5. IBADAN ELECTRICITY DISTRIBUTION COMPANY
Integrated Energy Distribution & Marketing Limited emerged as top contender for the Ibadan Electricity Distribution Company with an offer of 17.46 per cent loss reduction. Other contenders are New Electricity Distribution Company Consortium, 17.14 per cent; and Western Consortium 14.37 per cent.

6. IKEJA ELECTRICITY DISTRIBUTION COMPANY
Integrated Energy Distribution & Marketing Limited emerged top contender for the Ikeja Electricity Distribution Company with an offer of 21.51 per cent ATC&C loss reduction. Others bidders were New Electricity Distribution Company Consortium, 20.43 per cent; Vigeo Holdings, Gumco, African Corporation AFC & CESC Consortium, 19.27 per cent; Honeywell Energy Resources International Limited, 16.25 per cent; and Oando Consortium, 14.25 per cent.

7. JOS ELECTRICITY DISTRIBUTION COMPANY
Aura Energy Limited was the sole bidder for the Jos Electricity Distribution Company and was offered 16.22 per cent ATC&C loss reduction.

8. KANO ELECTRICITY COMPANY
Sahelian Power SPV Limited offered 21.21 per cent ATC&C loss reduction.

9. PORT HARCOURT ELECTRICITY DISTRIBUTION COMPANY
4Power Consortium offered 19.55 per cent ATC&C loss reduction.

10. YOLA ELECTRICITY DISTRIBUTION COMPANY
Integrated Energy Distribution & Marketing Limited offered 18.58 per cent ATC&C loss reduction.

Fuel Subsidy Initiatives II

The gasoline subsidy embodied the worst characteristics of the country’s economic governance. In 2011, the subsidy on gasoline cost the government over $9 billion, more than the entire federal government capital budget and about double the subsidy’s cost in 2010. The costs were exacerbated by rising interest charges and insurance premiums occasioned by payment delays....

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Fuel Subsidy Initiatives II

The gasoline subsidy embodied the worst characteristics of the country’s economic governance. In 2011, the subsidy on gasoline cost the government over $9 billion, more than the entire federal government capital budget and about double the subsidy’s cost in 2010. The costs were exacerbated by rising interest charges and insurance premiums occasioned by payment delays.

By the end of 2011, Nigeria owed importers over $4 billion, the government decided to end the subsidy.
The Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has said the N888bn (approx. $ 5.6bn) allocated for subsidy payments in the 2012 budget should be enough to pay petroleum product importers. She told journalists in Tokyo, Japan, recently that the fund had not been exhausted and should be enough to pay the subsidy bills for this year.

The Federal Government has since tightened the payment system and is currently prosecuting some oil marketers for subsidy fraud. The government is also making efforts to revamp the nation’s comatose refineries with about $1.6bn set aside for their turnaround maintenance. The Federal Government has 445,000-barrel per day crude oil refining capacity but has been relying on petroleum product imports for domestic consumption and has, however, invited the original builders of the refineries in Port Harcourt, Warri and Kaduna to help revamp them.
Also, the Federal Government has earmarked N971bn (approx. $ 6.1bn) for petroleum subsidy in the 2013 budget estimates presented to the National Assembly by the President.

The government’s efforts, according to analysts, suggest that it may not completely remove fuel subsidy until it gets the local refineries working optimally. It is reported that meanwhile, the Federal Government is targeting raising the amount in the Excess Crude Account to $10bn between January and February, 2013. Further that the Finance ministry is anticipating that the fund would increase to $10bn, even if deductions had to be made from the account to pay for petroleum subsidy in 2012.

The country currently saves oil revenue above the benchmark budgeted price of $72 per barrel in the ECA.

The 36 state governors agreed in June to boost savings in the account to $10bn. Its balance in September 2012 was $8.4bn (N1.32tn), The nation’s foreign-exchange reserves have increased by 28 per cent this year to $42bn. The Nigerian benchmark Bonny Light crude has risen by 27 per cent from a June low to $114.52 a barrel. Analysts report that the country’s chance of a rating upgrade is being hindered by a lack of clarity over how its Sovereign Wealth Fund will grow amid tensions between the Federal Government and state governments over revenue allocation, according to Standard & Poor’s.

Petroleum Industry Bill II

Since our report earlier this year on the Petroleum Industry Bill (PIB), the PIB has been sent by the Presidency to the house of Assembly. It is presently under debate with the lower house of the Nigerian National Assembly. Yet there are key commentators who claim that the PIB is weak on the crucial component...

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Petroleum Industry Bill II

Since our report earlier this year on the Petroleum Industry Bill (PIB), the PIB has been sent by the Presidency to the house of Assembly. It is presently under debate with the lower house of the Nigerian National Assembly. Yet there are key commentators who claim that the PIB is weak on the crucial component of National Oil Company reform.

The Revenue Watch Institute in its assessment has stated that the draft Petroleum Industry Bill (PIB) currently before Nigeria’s parliament is unlikely to significantly boost the performance of the NNPC. The report, based on research comparing relevant parts of the 2012 Executive PIB with the rules and practices of 12 national oil companies worldwide, found that provisions for restructuring the Nigerian National Petroleum Corporation (NNPC) fell short of best practices, failed to address the corporation’s biggest existing challenges and could create new problems. “NNPC dominates the Nigerian oil sector as an asset manager, regulator, and commercial player. Nigeria cannot fully address the big issues its oil industry faces today unless it improves how NNPC works.” – Patrick Heller, senior legal advisor at RWI.

The bill’s sponsors have argued that passing the PIB would turn the sector around, in part because the bill would transform NNPC into a world-class “commercialized” national oil company. This would involve making it profit-minded, financially self-sustaining, politically independent and accountable to the public.

The notable areas of concern are:

  1. The PIB restructures NNPC into three new companies without saying clearly what each would do, or what assets they would control.
  2. The PIB does not define how NNPC will participate in oil exploration and production going forward.
  3. The PIB sets out a limited privatization process for two of the three new companies, but with unclear rules, undefined shareholder rights and arbitrary timelines.
  4. The PIB omits basic fiscal terms and rules for when the new companies can retain earnings, thereby failing to place NNPC on a path to sustainable financial independence.
  5. The PIB, by not setting up technically competent, independent boards or legislative oversight, allows high-level political interference in NNPC to continue.
  6. The PIB undermines transparency by allowing two out of the three new companies not to publish their contracts or audits.

Improving the PIB provisions represents one useful step towards a successful transformation of NNPC. Such provisions would, however, form only one part of the larger plans needed to advance the issues identified as crucial in the report. These include a careful delimitation of commercial and non-commercial roles, the development of a workable model for revenue retention and clear rules for publication of independent audits and reporting to the legislature

Sovereign Wealth Fund

The decision of the Federal Government of Nigeria to establish a National Sovereign Wealth Fund (NSWF) has been greeted with divergent commentaries from various quarters especially from State governments as well as financial and social commentators. Already a bill for the establishment of the Nigerian National Sovereign Wealth Fund has been sent to the Legislative...

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Sovereign Wealth Fund

The decision of the Federal Government of Nigeria to establish a National Sovereign Wealth Fund (NSWF) has been greeted with divergent commentaries from various quarters especially from State governments as well as financial and social commentators.

Already a bill for the establishment of the Nigerian National Sovereign Wealth Fund has been sent to the Legislative arm of government as an executive sponsored bill while a seed capital of one billion US Dollars ($1 billion) has been proposed and set aside for the commencement of the Fund.

SOVEREIGN WEALTH FUND
A Sovereign Wealth Fund (SWF) is an investment fund owned by a sovereign state/nation with the mandate to invest in financial assets such as stocks, bonds, precious metals, property and other financial instruments. However, the objectives might include providing liquidity stabilization funds as well as the funding of vital economic infrastructure projects within the sovereign state. The structure and scope of investments in a sovereign wealth fund generally depend on the circumstances of each nation as well as the enabling law however Sovereign wealth funds usually have long-term investment focus. The need for the SWF is that countries through the SWF diversify their revenue streams by devoting a portion of its reserves to an SWF that invests in the types of assets which act as shields against systemic risk, and in the case of Nigeria, against oil related risk.
SOURCE OF FUNDING AND LEGAL ISSUES ARISING (The Nigerian Story)

In view of the seed capital of one billion US Dollars ($1 billion) from the ‘Excess Crude Account, Governors of the 36 States of the Federation commenced an action against the Federal Government before the Supreme Court (Nigeria’s Apex court) over plans to transfer $1 billion from the “Excess Crude Account” to a new a new account to be known as the “Sovereign Wealth Fund.
A seven-man panel of the court, headed by the Chief Justice of Nigeria, CJN, Justice Dahiru Musdapher, has now assumed jurisdiction of the legal dispute following a breakdown of an out-of-court mediation between the parties. Earlier on, the Federal Government had approached the court (at the commencement of the suit) praying that the parties be allowed to explore amicable resolution of the case through negotiation.

The plaintiffs in their consolidated suit, had sought preservative orders of the court restraining the Federal Government from making any withdrawals howsoever from the account styled the “Excess Crude Account” (or any account replacing same by any name howsoever) pending the hearing and determination of a substantive suit.
They further urged the court to order that all sums standing to the credit of the said “Excess Crude Account”, (or any account replacing same by any name howsoever) be paid into court or be otherwise secured as the court may deem fit pending the hearing and determination of the substantive suit.
It appears that the substance of the disagreement is not with the setting up of the fund, but with the funding from the ‘excess crude account’ which invariably will deplete their monthly allocations from the Federation accounts.

At the last sitting of the court, the case could not progress as the court was indisposed. it remains to be seen what the outcome will ultimately be.

NNPC Proposes New Deadline for Gas Flaring in Nigeria

NNPC Proposes New Deadline for Gas Flaring in Nigeria The Nigerian National Petroleum Corporation (NNPC) has proposed December 31, 2011 as the new deadline for ending gas flaring associated with oil exploration in the country. Sequel to the proposed new deadline, the House of Representatives Committee on Oil and Gas is now considering December 2011...

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NNPC Proposes New Deadline for Gas Flaring in Nigeria

NNPC Proposes New Deadline for Gas Flaring in Nigeria

The Nigerian National Petroleum Corporation (NNPC) has proposed December 31, 2011 as the new deadline for ending gas flaring associated with oil exploration in the country.

Sequel to the proposed new deadline, the House of Representatives Committee on Oil and Gas is now considering December 2011 as the new date to enable the corporation, which is managing the Joint Venture (JV) fields on behalf of the Federal Government, to address factors militating against the attainment of zero flare by oil and gas operators in the country.

Prior to the new deadline proposed by the NNPC, the IOCs in the country had expressed their doubts over the possibility of achieving zero flare out by the end of last year, notwithstanding the threat by the Department of Petroleum Resources (DPR) to sanction defaulters.
The initial flare-out target was set at December 31, 2008. However, although the target could not be achieved, evidence suggests that the flare out rate was reduced by about 45 per cent.
It would seem that the main obstacle to achieving a virtual elimination of gas flaring in the country is the paucity of the infrastructure needed to transmit associated gas from the oil fields to the market centres – instead of flaring it. It will take at least two years to complete a successful gas utilisation programme capable of channelling the flared gas to power stations, inter alia.

Other factors which would militate against the proposed new deadline include political instability in the region, and lack of funds for investment in the industry. With regards to the former, it is impossible to contemplate the feasibility of the new deadline while the Niger Delta region is under siege by criminal gangs and “militants” whose stock-in-trade is violence and kidnapping of oil and gas workers.

With respect to the issue of finance, the notorious delay on the part of the NNPC to fund its part of several JVs is worrisome. The NNPC is a major stakeholder in each of the gas utilisation projects needed to achieve the flare-out deadline.

For further enquiries, please contact:
Adedolapo Akinrele, SAN
Email: dolapo_akinrele@foakinrele.com
Mobile: +234 802 290 5245
Phone: +234 1 2693998