Nigeria reviews deals with Chinese, Korean firms

Felix Onuah – Reuters

Copyright Reuters
Fri 31 Oct 2008
ABUJA, Oct 31 (Reuters) – Nigeria has suspended a railway deal with China and threatened to revoke two oil licences awarded to South Korea in the latest move by President Umaru Yar’Adua to review contracts signed by the last administration.
The authorities suspended the rail contract with one of China’s biggest engineering firms because the cost was inflated and there were no funds for the project, meant to modernise Nigeria’s century-old rail system, Yar’Adua’s spokesman said.
Former President Olusegun Obasanjo awarded the contract worth $8.3 billion in 2006 to China Civil Engineering Company (CCEC) and promised the firm an oil block in return as an incentive.
“The federal government had suspended the execution of the Chinese railway contract because this administration had discovered that the contract was over inflated,” presidential spokesman Olusegun Adeniyi said.
“Everything about the contract was wrong. There was no fund allocated for the project other than a promise by the immediate past administration to give the Chinese company an oil block,” he said.
He said the government had asked CCEC to submit a new proposal detailing its funding plans.
Foreign industry executives say widespread reviews of existing contracts by Yar’Adua’s 17-month old administration have heightened investor uncertainty. The government says it wants to ensure that all deals are in Nigeria’s best interests.
Adeniyi said Nigeria would revoke two offshore oil blocks, Oil Prospecting Licences 321 and 323, awarded to the Korean National Oil Company if the firm failed to pay a signature bonus of $231 million waived by the last administration.
“This waiver is not acceptable (to) this administration because the constitution does not allow a waiver,” he said.
“The oil minister is dialoguing with the Korean oil firm to pay the signature bonus due … (if) they still refuse to pay, the company stands to lose the licences.”
Obasanjo had made developing infrastructure central to the award of new oil acreages in Africa’s top oil producer, but the policy was widely criticised as lacking transparency and not following due process.
Obasanjo offered preferential rights to mainly Asian firms during oil block auctions in 2005 and 2006 in exchange for promises to invest in infrastructure. The policy drew huge bids from several companies, many of which never produced the cash. (For full Reuters Africa coverage and to have your say on the top issues, visit: ) (Writing by Tume Ahemba; Editing by Nick Tattersall and Sami Aboudi)
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