(EXCERPT FROM HIS BOOK: “ACCIDENTAL CIVIL SERVANT”, PAGES 81-84)
An Encounter with Enron…
One of my memorable early experiences in BPE was a political baptism of fire – an encounter that put me smack in the middle of ethnicity, politics and policy conflicts, involving a company that became globally notorious for its internal misgovernance and deception – the Houston-based Enron Corporation.
Electricity shortage have become a way of life in Nigeria, and Enron saw an opportunity to cash in on that misfortune. They did something similar in India in the 1990s and it went really wrong but they learnt some lessons and came to Nigeria with a more refined approach.
What Enron proposed was to supply second-hand, barge-based generators (moveable and easy to relocate in case of payment defaults) using diesel initially, to be supplied by Wale Tinubu’s Ocean & Oil Ltd. (now Oando) until gas pipelines are extended from Egbin to the barges’ location, to provide initially 90MW and expandable to 540MW of electricity exclusively for Lagos State.
The Lagos State governor, Bola Tinubu, his finance commissioner Wale Edun, budget commissioner Yemi Cardoso, Gbenga Oyebode of Aluko & Oyebode, Wale Tinubu and Tunde Folawiyo, all of them friends or acquaintances of mine, were involved in the transaction at various levels and capacities. There were only three hurdles that needed to be crossed.
First was the legal reality of the time: that only federally-owned National Electricity Power Authority (NEPA) could buy, transmit and distribute power so the cooperation of the Federal Government (FGN) was needed. Second was that NEPA was notorious for not paying its bills (even to government-owned companies like the Nigerian Gas Company which supplies it with feedstock), so some payment security arrangements needed to be put in place in anticipation of NEPA’s default, and finally Enron would require a sovereign guarantee in the event that NEPA fails to pay and the security arrangement fails to crystallise or is exhausted by multiple defaults.
Enron and Bola Tinubu found a way by getting Chief Bola Ige, a fellow opposition AD party leader working in a PDP administration, to get Obasanjo to sign off on the transaction without any cabinet review or rigorous inter-agency discussions. Bola Ige also obtained the president’s consent to sign a sovereign guarantee on behalf of the Federal Government of Nigeria something only the Minister of Finance was legally authorized to do
There were no loud protest from NEPA management who could foresee the dangers of potential corporate insolvency because they all believe resistance was fruitless since Minister Bola Ige had the ears of President Obasanjo. Everything was signed, sealed and delivered and we all read about it in the newspapers. I was concerned that this could negatively impact the future privatization of NEPA and requested the VP to obtain copies of the agreements signed for our review. This was barely two weeks after I resumed, and then early in December 1999, we received the ‘power purchase agreement’ (PPA) of over 100 pages including annexes, annexures and other attachments.
We could not make any sense out of it. We approached Norton Rose of the UK, and two local law firms, A B Mahmoud & Co. based in Kano and George Ikoli & Okagbue of Lagos to undertake a review of the power purchase agreement. Norton Rose needed several weeks, and instinctively I knew we had to figure this out before it got too late, and several weeks night be too late.
The local law firms submitted the outcome of their reviews within a short period, but what we got were not very helpful in isolating the potential impact of the PPA on our power sector reform programme. The agreement was highly technical with enough equations and integrals to scare all but the most mathematically proficient of lawyers. At this point, I approached the World Bank country office for assistance.
Trevor Byer, the country director who fortuitously had been involved in power sector reforms elsewhere before his posting to Nigeria, was very helpful, proactive and immediately responsive. Within a couple of weeks, we received a summary of the agreement, its impact on privatization, what the equations and annexes meant in terms of tariffs, security arrangements, dollar payments and contingent liabilities.
I immediately briefed the Vice President who was alarmed at the findings, and he instructed me to draft a memo for onward transmission to President Obasanjo.
Within five weeks of taking over the headship of BPE, I drafted the first of many memos which would be forwarded to the President, drawing attention to surreptitious steps being taken by line ministries to frustrate sector reforms and privatization. The Lagos State-Enron case was particularly dangerous as it would have bankrupted NEPA almost overnight! The president immediately put the transaction on hold and commended the vice president for briefing him on the implications of the deal.
The VP set up a ministerial committee chaired by Minister of State Danjuma Goje, with BPE, the Federal Ministry of Finance, and Lagos State Government represented as members, to review the agreement. Enron immediately hired GoodWorks International, the global advisory firm co-founded by former US Ambassador to the UN, Andrew Young, to influence the outcome of the review, while Bola Ige and some sections of the South-West media got busy attacking me, the vice president and the BPE for depriving Lagos and Yoruba people of steady electricity’.
We declined to respond, focusing on fixing what we saw as a potential stumbling block to reforming and privatizing our electricity supply industry. I am glad we truncated the original deal, but even the better and revised arrangement which reduced tariffs from 8.5 cents per kilowatt – hour to just 1 cent a kilowatt – hour ended up placing huge financial burdens on NEPA years into the future – and the undertaking we extracted from Lagos State to share part of the burden was subsequently challenged in court, and remained in dispute until we left office.
My Enron experience was an education of sort. I learnt many new lessons that dispelled my naivety. Well-informed and trusted friends put pressure on me to look the other way because they were advisers or consultants to Enron, or were potential; beneficiaries in the transaction.
My explanations and passionate representations that the transaction was inimical to national interest, negatively impacts the long-term viability of NEPA and threatened the reforms of the electricity industry were neither important nor relevant to their position. I saw starkly how government officials were willing to prevent the interest of the country to impress foreigners, or obtain preferences for those they thought were their kinsmen. It was an early sobering experience and an appreciation of the reigning dictum of every one for himself, and no one for the country.
Mallam Nasir El-Rufai (Governor of Kaduna State and Former Director General, BPE)
Credit: Chika Nwankwo