For the third time since it berthed in Nigeria more than 30 years ago as NICOTES, Integrated Logistics Services Limited (Intels) is facing a major survival battle. The major difference this time is that its business dealings are so damning and the present management of Nigerian Ports Authority (NPA) seems to be allergic to inducement. Okey Ibeke undertook an extensive investigation of the aggressive business practices of the company and how it developed a stranglehold on oil and gas services.
Coming at a time that the heat was already on as permutations and jostling for the 2019 elections were already in full gear, it was inevitable that political motives would be inputted into the decision to cancel one of the contracts that made Intels a behemoth in maritime, oil and gas services.
The numerous contracts which effectively made the company a monopoly saw Intels grow exponentially to become second only to the NNPC in terms of revenue collection and dominance of service provision. Adding the now terminated contract signed with the Nigerian Ports Authority (NPA), in 2007, for the provision of pilotage services, Intels had exploited its extensive political connection to squeeze its way into becoming an aggressive tiger that dared and always won.
In January 1, 1999, NPA and Intels agreed to enter a joint venture. In the agreement, both parties undertook to provide facilities, services and logistics to the oil and gas industry in Nigeria by using and developing their contributions. Each of the parties' contributions to the joint venture was spelt out in the agreement. NPA was expected to contribute:
· Port facilities under existing long term lease given to Intels
· Port facilities already being utilized by Intels and
· Additional land within or outside the port premises which may be required for future business development.
All the port facilities and land will be allocated by NPA to Intels for the joint venture on the written request by Intels and at no cost whatsoever. NPA was also obliged to:
· Provide facilities and land required by the joint venture as a contribution for which 20 percent of declared profit shall be set aside to cover rent for the facilities.
· Implement the Ports Act of 1955 as well as other port rules and regulations to maximize the use of government facilities and services.
· Direct all the oil and gas related cargoes to be transiting through the facilities operated by the joint ventures in Warri, Onne and Calabar ports.
· Seek to maximize its revenue and shall therefore adopt pricing strategies including differential pricing to bring this about. The joint venture shall not be circumcised by any requirement other than profit maximization.
· Guarantee that port facilities, land and services needed, used or required for the present and future use by the joint venture partners are not given out to other parties which may not be in line with the objectives of the Joint venture.
PIX1: NPA Head Office
On the other hand, Intels was expected to contribute to the joint venture all agreements it has with oil producing companies, oil servicing companies as well as construction and transport companies. It will also contribute camp facility infrastructure developed so far. Other contributions and obligations of Intels include:
· Port facilities and infrastructures developed alongside equipment presently owned.
· Development and construction of warehouses and stacking area facilities based upon technical proposal which will be approved by NPA.
· Financing worldwide marketing of joint venture facilities and services
· Development, construction and maintenance of boreholes and pipelines for drill and fresh water supply at Onne, Warri and Calabar ports.
For all its investments through huge port facilities as well as the maximisation of the use of government facilities, NPA is entitled to just 20 percent of declared profit after tax while Intels gets 80 percent. The agreement also provides that “anything reinvested into the Joint venture out of its profit will be considered as investment thereof” and that “upon expiration or termination of the agreement, the investment value shall be shared between the parties on the same basis as provided for in the profit.
If the January 1999 agreement was outrageous, an updated version entered into by the two organisations on April 27, 2001, was seen by many operators in the port industry as a sell out.
On the portion that affects land allocation, it was agreed that with effect from April 27, 2001, the date for the commencement of the MoU, “the Authority reserves the right to allocate any parcel of land or premises lying within the ports to any service provider.
“However, the Authority shall with the written approval of the Managing Director give Intels the right of first option. Where Intels fails to notify NPA of its interest within one month, it is only then that NPA can consider another firm.”
PIX2: Intels Head Office
Under the MoU, Intels undertook to develop and maintain port facilities. This, as explained in the MoU, means that “Intels shall develop all areas and premises granted to it under the lease or which shall hereafter be allocated to it as oil service centres which shall be used amongst other things as oil and gas logistics support bases and are expected to enhance the value of the Authority's port facilities.
“Intels shall mobilize and attract oil producing and oil servicing companies to the ports and undertake to assist the Authority with the development and maintenance of all port premises and facilities by virtue of the lease or of any subsequent allocations made hereunder fall or shall subsequently fall within its authority or jurisdiction:
a. In the event that Intels constructs/develops a jetty/quay aprons same being a common user facility, the specifications and cost of which shall have been approved in writing by the Authority's Managing Director before the construction, Intels shall be reimbursed by the Authority for the cost of the development.
b. Intels shall develop the stacking areas and warehouses at no extra cost to the Authority.
c. However, the cost of the maintenance of jetty/quay aprons, stacking areas, warehouses, boreholes and other related facilities, shall be re-imbursed to Intels.
They agreed also that, “the defrayment of the cost incurred by Intels for the maintenance shall be in accordance with the Authority's guidelines on the operation of leases, areas of three years and above on the ratio of 50:50.
The MoU deliberately gave monopoly to Intels, conferring on it lordship over their competitors. With the status of being operator, regulator and caretaker, Intels rolled out charges for its numerous services, many denominated in US dollars and left the users of its services reeling and helpless.
The authority granted Intels the right to administer the Oil and Gas Free Zone and controversially ceded the licensing of prospective operators to the company. This created an unusual situation where the company became judge over the fate of its rivals and competitors. Such was the pervading use of that power that its only significant rival, Aero Maritime Group, the holding company for Brawal found it very difficult to secure license to operate at the free zone. Rather than grant it license it legitimately applied for, attempts were made to buy out Brawal by Intels
The MoU was signed on behalf of NPA by the then managing director, Mallam Bello Ibrahim Gwandu, while the General Manager of Intels, Danic Miskovic, signed on behalf of the company.
PIX3: Mallam Bello Ibrahim Gwandu, Fmr NPA MD
THE CONTENTIOUS PILOTAGE CONTRACT
Under the ten years pilotage contracts entered in 2007, all ships of 35 metres overall length or greater are mandated to pay a pilotage fee to accounts owned and operated by Intels unless they possess a valid Pilotage Exemption Certificate.
Intels collects the fees on NPA’s behalf and retains 28 per cent of the revenue as commission. The commission is deducted only after Intels would have discounted the cost of providing services to its clients. In doing that, there is no template for determining the operational cost in providing the services. NPA is merely handed 18% of the remaining 72% and rest goes towards amortization.
ATTORNEY GENERAL'S GREEN LIGHT TO HIT THE TIGER
For Hadiza Bala Usman, managing director of NPA, it was an agreement that flew in the face of national interest. Contrary to general perception that the cancelation of the contract was politically motivated, 15 months earlier, Ms Usman had initiated the process of revisiting and reviewing the contract which she saw as heavily skewed against public interest.
Having drawn the attention of the Intels management to the express requirements of the Treasury Single Account (TSA), Usman repeatedly invited its leadership to review the contentious aspects of the agreement. She was equally repeatedly rebuffed. Eventually, the NPA boss reverted to the Attorney General of the Federation and Minister of Justice, Abubakar Malami, seeking his advice on how to proceed.
PIX4: Attorney General of the Federation and Minister of Justice, Abubakar Malami
That singular move triggered the chain of events that doomed what was seen as Intels' arrogance and sure-footedness.
In the letter titled: “Request for Clarification of Conflict Between Executed Agreement and Federal Government Treasury Single Account Policy,” the attorney general responded: “I refer to your letter dated 31st May 2017, ref: MD/17/MF/Vol.XX/583 in respect of the above subject matter wherein you sought clarification on the legal issues implicated by the continuous implementation of the Managing Agent Contract Agreement dated 11th February 2010 executed between the Nigerian Ports Authority (NPA) and Intels Nigeria Limited for the provision of boats pilotage operations, in the light of the Federal Government of Nigeria’s Treasury Singe Account (TSA) policy.
“Upon my review of your letter under reference and the relevant agreements, I have been able to conclude inevitably that the terms of the agreement as agreed by parties and the dynamics of its implementation which permits Intels to receive revenue generated on behalf of NPA ab initio, clearly violates express provisions of Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal Republic of Nigeria, 1999 (as amended). It is thus curious that parties did not avert their minds to the above provisions of the constitution whilst negotiating the agreement.
“The inherent illegality of the agreement as formed has since been expounded by the TSA policy issued by the Head of Service of the Federation on behalf of the Federal Government of Nigeria directing all ministries, departments and agencies to collect payment of all revenues due to the federal government or any of her agencies through the TSA.
“The objective of the presidential directive (TSA policy) in exercise of the executive powers of the president under Section 5 of the 1999 Constitution (as amended) was in furtherance of the spirit and intent of Sections 80 and 162 of the constitution and to aid transparency in government revenue collection and management.
“NPA being an agency of the federal government is bound by the TSA policy and has not howsoever been exempt therefrom. Due to the constitutional nature of the TSA, where there is a conflict between the TSA and the terms of the agreement, the TSA shall prevail.
“Therefore all monies due to the NPA currently being collected by Intels and any other agents/third parties on behalf of NPA must henceforth be paid into the TSA or any of the sub-accounts linked thereto in the Central Bank of Nigeria (information of the account will be communicated in due course) in accordance with the TSA policy.
“For the avoidance of doubt, the agreement for the monitoring and supervision of pilotage districts in the Exclusive Economic Zone of Nigeria on terms inter alia that permits Intels to receive revenue generated in each pilotage district from service boat operations in consideration for 28% of total revenue as commission to Intels is void, being a contract ex facie illegal as formed for permitting Intels to receive federal government revenue contrary to the express provisions of Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal Republic of Nigeria (as amended), which mandates that such revenue must be paid into the Federation Account/Consolidated Revenue Fund.
“In the premise of the above, the conflict between the agreement and the TSA policy presents a force majeure event under the agreement, and NPA should forthwith commence the process of issuing the relevant notices to Intels exiting the agreement which indeed was void ab initio.”
Drawing the attention of Usman to the illegality of the agreement, Malami declared that the agreement violates Sections 80(1) and 162(1) and (10) of the constitution, and wondered that the parties – NPA and Intels – did not avert their minds to the relevant provisions when they were negotiating the agreement in 2010.
Section 80(1) of the constitution states: “All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.”
Section 162(1) states: “The Federation shall maintain a special account to be called ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
While sub-section 10 of the same section states: “For the purpose of subsection (1) of this section, ‘revenue’ means any income or return accruing to or derived by the Government of the Federation from any source and includes: (a) any receipt, however described, arising from the operation of any law; (b) any return, however described, arising from or in respect of any property held by the Government of the Federation; (c) any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory body."
When NPA gave vent to the Attorney General's directive, Intels' initial reaction was to adopt a combination of bluffing and threat. The company first gave NPA seven days to recant or it will withdraw its commitment as one of the key investors in the Badagry Deep Seaport development and go to court. It also used organised labour and the National Assembly to embark on scare mongering about the damage on the economy and loss of jobs the contract revocation would engender. It also accused NPA of frustrating its efforts at negotiating a resolution of the issue.
THE NPA’S STAND
- After terminating the agreement, the NPA says it won’t back down because Intels has been acting as though the laws of the country do not apply to it. “INTELS wanted to continue to do the job and deduct their money from source and then remit the balance to NPA, due to the fear of delay. I have assured them that the money would be paid within seven working days and where we exceed these days, we would be ready to pay for the delays. No company is above the law and it is only when all corporate entities obey the laws of the country that everyone benefits. There must be a level playing field for all players in the sector and this is the commitment of the NPA”, said the Managing Director of NPA, Hadiza Bala-Usman.
- She said the government would open a fresh bidding in a transparent manner for prospective contractors.
- She has assured staff of the company that once they possess the required skills, the new contractor would engage their services.
INTELS' EATING OF THE HUMBLE PIE
When all efforts at blackmail, manipulation and intimidation of NPA into submission failed, Intels, ultimately ate the humble pie. Its founder and majority shareholder, Mr. Gabriele Volpi, apologised to the federal government and NPA over the spat that led to the termination of the Pilotage Agency Agreement with his company.
PIX5: Intels founder and majority shareholder, Mr. Gabriele Volpi
Volpi pledged to ensure that Intels undertakes a reconciliation process with the NPA and transfers all the revenue collected from the boats monitoring and supervision services under the agreement in to the TSA with the Central Bank of Nigeria (CBN), in compliance with the policy of the federal government.
“We want to apologise to the federal government and NPA over this disagreement with Intels. I was not personally involved in the negotiations with NPA, but we apologise for what has happened. We intend to comply with the directive of government and transfer all the revenue to the TSA because we are a law-abiding company,” Volpi said.
Volpi added that his company was committed to co-operating with the federal government and the NPA in the development of the country’s maritime sector, including the construction of the Badagry deep seaport in Lagos State.
PIX6: Managing Director of NPA, Hadiza Bala-Usman
“We are committed to co-operating with the government and NPA in the development of Nigeria’s maritime sector and this includes the Badagry deep seaport.
“The Badagry deep seaport is a massive undertaking which will cost billions of dollars and will be the biggest in Africa and would turn Nigeria into a regional hub for ships bringing goods to the continent.
“It will also help to move a lot of shipping activities at the Apapa and Tin-can Island ports and help to decongest Apapa, so we are serious about our investments in Nigeria,” he said.
For a company that had had a field day riding roughshod over its less endowed competitors and imposing arbitrary charges on users of its services, the meek statement from Volpi was almost shocking. At what point did the change in fortunes decisive?
IN THE PAST
There had been numerous complaints and petitions to NPA, Transport Ministry, Presidency and National Assembly against Intels bordering on fraud and deliberate anti-competition and monopolistic practices that were aimed at squeezing out Intels' competitors.
An organization, CORNCERNED YOUTHS CONGRESS OF NIGERIA (CYCN), had in a 2001 open letter to then President Olusegun Obasanjo and published as an advertorial in several national dailies, leveled many allegations against Intels.
The organization had in a letter signed by James O. O. Tonglobim as president and Dokubur C. J. Tamuno as secretary, alleged that Intels was collecting revenue on behalf of the government in dollars, which it remitted to its London account, while it paid NPA in naira, the local currency.
They also alleged among other things that “it was an open secret that whenever a new Minister of Transport is appointed, Intels arranges oversea trips for him to buy him over. The Economic and Financial Crimes Commission (EFCC) can investigate this.” They had alleged that "some top officials of NPA are on the payroll of Intels. This is probably why everyone that ought to have complained (about the agreement) has kept quite as if nothing was wrong when in actual sense things are being destroyed”.
Two weeks after the publication of the petition, the federal government suspended the Intels contract and NPA was ordered to take over the operations of Intels while the company was also suspended from participating in the concessioning programme.
But barely six months later, in a statement signed by Dr. Aliyu Babangida, who was then Permanent Secretary in the Ministry of Transport and later governor of Niger State, the suspension was lifted.
The lifting of the suspension was sequel to the recommendations of a committee set up by the then Minister of Transport, Dr. Abiye Sekibo with Babangida as chairman and Chief Adebayo Sarumi, then managing director of NPA as member.
The statement read “sequel to the suspension of Intels operations at Onne port and all concessioning programme involving it on December 5th 2005, the Honourable Minister of Transport, Dr. Precious Abiye Sekibo has directed the lifting of the suspension”.
“The NPA is therefore to revert back to its statutory role and handover the operations as affected by the suspension back to Intels, while the Ministry of Transport and NPA in conjunction with other stakeholders shall implement the recommendations of the committee as approved” it concluded.
Typical of many other government's actions, the statement was silent on the findings of the panel. It never mentioned whether Intels was actually found guilty of the numerous allegations against it.
When the government constituted the committee, maritime watchers and some officials of the Transport Ministry and NPA strongly questioned the rationale behind the action especially as almost all the members of the investigative committee were not new to Intels activities.
A cross section of maritime stakeholders highly placed source at NPA, then told Business and Maritime West Africa that there is no information about Intels that was unknown to the government, especially the key members of the probe committee.
It will be recalled that Dr. Babangida, the then Permanent Secretary and chairman of the committee was the Director of Maritime Services in that same Ministry, when the contract between Intels and NPA was signed.
The same source also revealed that all the facts about the agreement and Intels' charges were all along in the file cabinet of Alhaji Baba Umar Farouk, the Director of Maritime Services in the Ministry at the time of the investigation who was a member of the committee, adding that there is no new facts to be investigated by the director.
Business and Maritime West Africa findings also showed that Chief Adebayo Sarumi, who also served in the panel cannot claim ignorance of Intels' operations, especially when he was appointed the chief executive of NPA and, by virtue of his position, was the first line supervisor of Intels. Same goes for Mr. Charles Adeola, the Secretary of the panel, who as the Director of Planning, Research and Statistics in the ministry cannot absolve himself of not knowing the details of Intels' infractions.
Unlike her predecessors, Usman refrained from exposing herself to inordinate contact with Intels.
Inside sources at the ministry revealed that as alleged by the Concerned Youths' Congress of Nigeria, Intels had managed to run the alleged very lopsided MOU it signed with NPA irrespective of numerous protests and petitions from many quarters.
This, they attributed to the fact that past and present top managers including past managing directors, executive directors, general managers, past Ministers of Transport, Directors in the Ministry, key NPA staff and board members, members of committees of National Assembly that exercise oversight functions on maritime, as well as some highly placed individuals both within and outside the ministry may have been inordinately patronised by Intels.
The information available to BMWA indicated that most of them enjoyed oversea courses and other trips abroad which were sponsored by Intel some and a lot of other patronages even at the time of the suspension.
In the period leading to the concessioning of ports, the arrangement between NPA and Intels had been roundly projected as the ideal example of landlord model in port management
Intels has been in Nigeria for many years with a long term leasehold of over 92,260 square meters of available space in cargo sheds and warehouses in the ports across the Niger Delta area of the country.
At Onne ports which is the hub of oil and gas operations for the West and Central Africa, Intels almost became the sole operator, reducing its landlord, NPA and other competitors to mere appendages.
The 2015 suspension of Intels' operations by the administration was not the first time it fell victim of its greed. Under the regime of General Ibrahim Babangida, the company was called NICOTES. When late General Sani Abacha came, he decided to withdraw all concessions and leaseholds given to NICOTES.
But like the phoenix, it reinvented itself and bounced back. To earn the mercy of Abacha, the company quickly realigned its ownership structure, accommodated Abacha's interest and changed its name to Intels. And on the coming of the Fourth Republic in May 1999, the company again quickly readjust its ownership structure, and business got better. The concessions and leaseholds seized during Abacha regime were all returned.
Intels provides integrated logistic facilities and services to the oil and gas industry, especially in Nigeria and Angola with expansion in Gabon, Congo and Equatorial Guinea. Among its areas of operations, however, none offers an unusual lucrative business climate like in Nigeria. The key to Intels' stranglehold on the ports system is a controversial agreement it entered into with the Nigerian Ports Authority that was seen to be heavily skewed in favour of the company.
Relying on its political connections with the military top brass during the regime of General Abdusalam Abubakar, Intels progressively acquired favourable lease agreements with the NPA.
At the Warri ports, it occupied three of the five cargo sheds and warehouses with available space in excess of 21,600m2. Six of the two sheds at the Warri Port were managed by Intels while six of the seven warehouses at the port were also managed by the company. The warehouses have a combined holding capacity of over 12,920m2.
At Onne Port which was Intels main operational base, the company had only Brawal to contend with. Two of the three sheds each with over 6000m2 were managed by Intels. Brawal holds the third. The new Calabar Port is not beyond Intels' tentacles where it had 7,000m2 space at Etuk Utan I.
What drew more flak for Intels was that it also floated DMS International Management Services, PRODECO and many other companies which they used in haulage business, stevedoring contracting, ship chandling, provision of accommodation, supply vessels, catering, freight forwarding and clearing, construction, bunkering and all manner of businesses in their areas of operation to further its dominance of services in the area.
The cancelation of the pilotage contract has opened a fresh chapter on disposal and sharing of assets when the company's services are no longer required.
The agreement is completely silent on transfer of investments whenever both the “Agreement” and “MoU” no longer exist between the two parties. They contained only provisions on development, operation and profit sharing. Besides, the agreement states that “during the duration of this agreement, an additional contribution of facilities and services shall be made by NPA to the Joint Venture.”
The agreement however shields Intels from fulfilling its financial obligations under previous lease agreements. The parties agreed that the validity of the existing lease agreement between NPA and Intels shall not be affected by this agreement, other than that Intels will not be charged any fees or charges on the lease from the commencement of the joint venture.
It is obvious that on the expiration of the joint venture, Intels will still corner everything. This is because, the MOU stated that upon expiration or termination of this agreement, the commercial value of the land will be mutually established and all non-re-imbursable investment made by Intels will be recognized and compensated accordingly. Re-imbursed investments shall be shared in line with the provision of this agreement at the rate of 20 per cent to NPA and 80 per cent to Intels.
Even high net worth organisations like shipping companies, oil firms, banks and allied port related firms who were using properties leased to Intels said the rents were high and that they were made to pay between three and four years rent in advance.
Following the suspension of Intels from participating in the recently concluded port concession, the fate of the company's successful gross bid of 251.41 million dollars for Onne Federal Lighter Terminal 'B', Onne Federal Ocean Terminal 'A', Warri Old Terminal 'A', Warri New Terminal 'B' and Calabar New Terminal “A”, became another subject of speculations.
PIX7: Onne Lighter Terminal
But like in the movies, where the main actor always survives against all odds, the concession of the terminals were granted to Intels as they bidded before the suspension. The company is operating the terminals now unhindered, with little or no regulation and even at higher tariff structure.
The pilotage contract is just one of the numerous businesses and services Intels is involved either directly by itself or on behalf of NPA. Certainly, even though it eventually is unable to regain, the contract, Intels will remain a dominant player in Nigeria's shipping industry.