$176bn modernisation project stalled as promoters battle FG, Customs in court

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The Customs Modernisation project, touted to deliver revenue to the tune of $176 billion to federal coffers over a period of 20 years, is currently threatened as lead promoter of the project, Bionica Technologies, has sued the Federal Government and the Nigeria Customs Service before a Federal High Court sitting in Abuja.

Also sued are the Attorney-General of the Federation and Minister of Justice, Minister of Finance, Budget and National Planning, the Infrastructure Concession & Regulatory Commission, ICRC, and a firm, Trade Modernization Project Ltd.

Equally sued are technology giant, Huawei Technologies (Nigeria), Bergmans Security Consultants and the Africa Finance Corporation, AFC.

At issue is the emergence of Trade Modernization Project Limited as the new lead promoter, after government had recognised Bionica Technologies.

In a memo dated September 17, 2019, signed by late Chief of Staff to the President, Malam Abba Kyari, the Federal Government had advised the Ministers of Finance and Justice that the President had “approved the engagement of Bionica Technologies West Africa (lead sponsor), Bergmans Security Consultant & Supplies Ltd (co-sponsor), Africa Finance Corporation (lead financier) and Huawei (Lead Technical Service Provider) to establish a  project special purpose vehicle (SPV) to enter a 20-year concession arrangement with NCS and ICRC for the Customs Modernization Project 9Establsihment of digital.paperless Customs Administration).”

Findings by Vanguard revealed that two core issues led to break down of relationship between Bionica, which was consistently described as “lead sponsor” of the project and Bergmans Securities Consultants and Supply Limited, described as “co-sponsor” in some of the official documents relating to the project, including FEC approval.

”First is a dispute over shareholding structure of the SPV. Second is alteration of the draft concession agreement that formed the basis of FEC approval allegedly by officers of Bergmans, a company which findings have shown, joined the project much after Bionica, Huawei Technologies and African Finance Corporation had collaborated to drive the project proposal in the direction of FEC approval.

Bionica, which bidded for the project in a keenly contested pool of 94 other bidders, funded the survey of Nigeria’s extensive borders and invited both Huawei and AFC as partners, going as far as signing joint development agreements with each of the partners.

Earlier this year, on May 17, 2022, the Nigeria Customs Service, NCS, announced the signing of the e-Customs Public-Private-Partnership contract with Trade Modernisation Project Limited, TMPL, now touted to be sponsored by Bergmans Security Consultants and Supplies Limited, with technical and financial partnerships from Huawei Technologies and African Finance Corporation respectively.

The incorporation of the SPV, known as TMPL, implied the ouster of the original SPV included in the FEC-approved concession agreement, E-Customs (HC) Project Limited, incorporated for the project by Bionica, Bergmans, Huawei and AFC. It has been replaced with TMPL, after what is known as the Huawei Consortium had secured all the statutory approvals, including that of the Federal Executive Council.

TMPL was only registered on April 7, 2022, less than eight weeks before it replaced E-Custom (HC) Project Limited as the SPV for the e-Customs project, leaving keen watchers of the process wondering how a company that did not participate in the statutory processes leading up to incorporation of the earlier SPV, including FEC approval, provided for by Section 2 of the Infrastructure Concession Regulatory Commission Act, becoming lead promoter in such a short space of time.

There are fears that granting concession of the project to TMPL will ignite huge questions of violation of due process of the law governing infrastructure concession in Nigeria.

Bionica’s officials alleged that TMPL’s lead sponsor, Bergmans, also did not participate in the project development and bidding phase but was somehow brought into the project in 2018 by NCS Comptroller-General, Hameed Ali.

The Beginning

In compliance with procurement laws, NCS advertised bids for its modernization project, and 94 firms submitted proposals, from which 16 were shortlisted. According to documents sighted, Bionica’s formal bid took place in October 2016 and at the request of the NCS, made presentations of the E-customs project design to the management and ICT team of the NCS between January and February 2017 .

Between May and June 2017, Bionica, collaborating with the NCS funded and embarked on a six-week- long assessment of customs facilities across the country to enable preparation for the modernisation of the customs processes, documents showed.

Satisfied with Bionica’s proposals, on November 11, 2017, the NCS conveyed its official approval for the e-customs project to Bionica only. This was the precursor to approaching regulatory authorities such as the Infrastructure Concession Regulatory Commission (ICRC) and Nigeria Information Technology Development Agency (NITDA) for the necessary oversight responsibilities and later approvals which Bionica sought and obtained. Although this phase, only Bionica, Huawei Technologies and AFC were listed as partners towards the actualisation of E-Custom project.

Introduction of Bergmanns

In March 2018, the NCS in a letter written to President Muhammadu Buhari christened the project as the “Presidential Initiatives On Custom Modernization: “E-CUSTOMS Project” (Establishment Of A Digital/Paperless Customs Administration)”. It was in this letter that the name of a company named Bergmans first appeared in any document relating to the E-custom project our investigators have so far sighted.

In the said letter signed by the Comptroller General of the NCS, Bionica was named “lead sponsor” while Bergmans was named “co-sponsor” of the project.

In the suit filed by Bionica in the Federal High Court, Abuja, Bionica averred that Customs’ Comptroller General, Hammed Ali, brought in Bergmans as co-sponsor and promotor of the project “despite playing no role whatsoever in the build-up to the NCS’ management’s approval of the project.” “it was unilateral and done to take care of private interests,” a Bionica official alleged, asking not to be identified by name because the matter is already in court.

In June 2018, following Hammed Ali’s letter, the president through his Chief of Staff, late Abba Kyari, directed the ICRC to conduct due diligence on the e-customs project and undertake negotiations toward a draft concession agreement and a full business case for the project for FEC’s approval, a statutory requirement.

Documents seen reveal that PwC acted as financial adviser, Olaniwun Ajayi LP, Perchstone & Greys and Bola Ajibola & Co acted as legal consultants while TYP Consulting acted as technical consultants.

At Bionica’s expense, ICRC’s officials conducted due diligence exercise on Huawei in China and two marine technical partners, Paramount Group and Larsen and Toubro in South Africa and India, respectively.

In another letter dated August 9, 2019, Ali wrote the Presidency, stating that the technical and commercial proposal had been submitted to the ICRC “who have conducted due diligence and certified same suitable. “‘In the same letter, he gave Bionica and Bergman the nomenclature of “co-sponsors” while Huawei was described as “lead technology provider”, and AFC as “lead financier”.

Eventually, the president on September 17, 2019, granted anticipatory approval of the project and engagement of the four (Bionica, Bergman, AFC, and Huawei) to “establish a project special purpose vehicle to enter into 20-year concession arrangement with the NCS and ICRC for the Customs Modernization and Project (Establishment of digital/paperless customs administration).”

The president then directed the Attorney-General of the Federation and Minister of Justice and the finance minister to finalise a concession agreement between the ICRC, NCS, and the SPV.

Subsequently, a draft concession agreement negotiated and agreed upon by the appointed transaction advisers and the parties, was forwarded to the Attorney-General of the Federation, Abubakar Malami through the finance minister, Zainab Usman, for vetting and approval, letters dated October 3, 20 , and 30, 2019 showed.

On December 5, 2019, Justice Minister, Abubakar Malami, approved the draft concession agreement while incorporating his inputs. Two critical statutory approvals then followed: NITDA’s clearance on May 11, 2020; and a Full Business Case Compliance Certificate from ICRC, dated July 16, 2020.

Then, the FEC ratified the anticipatory approval of the president for the project on September 17 , 2020, on the recommendation of the finance minister, who said the project had scaled the required regulatory hurdles and that the concession agreement, based on negotiated terms and conditions, had been duly vetted” by her ministry and Mr. Malami’s justice ministry.

Specifically, FEC approved the engagement “E-Customs (HC) Project Limited, as the concessionaire for the project.

This is a major point at issue in the FEC-approved concessionaire and Bionica’s suit challenging the eventual engagement of Bergmans’ sponsored TMPL to execute the e-customs project.

In a letter to the President, Ali claimed Bionica had indicated its unwillingness to proceed with the project, while other partners remained committed.

He, therefore, asked that a new SPV be formed to proceed with the project, giving rise to the incorporation of Trade Modernization Project Limited in April 2022.

However, Bionica officials are bemused by the claim that they withdrew from the project.

“We only want the right thing to be done, in accordance with due process and law.” an official said.

“The terms and conditions of the draft agreement were subjected to negotiations severally between the stakeholders, including the Attorney-General, the Finance Minister, the consortium partners, and the transaction advisors, before the FEC approval and this fact was mentioned in the Finance Minister’s memo to the president.

“What the FEC approval directed was that the Attorney-General should examine the concession agreement to ensure the draft concession agreement vis-a-vis his observations/comments if they have been incorporated before producing the final clean copies for execution by the parties.

“But surprisingly, another draft concession agreement, with serious material alterations, emerged and we were being asked to execute despite having no basis in joint negotiations. This was what we refused to sign as we insisted on the FEC-approved draft concession agreement,” Bionica officials said.

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