Controversy Trails CMD Concessioning

The Federal Government under the Obasanjo administration in 2005 inaugurated the Infrastructural Concession Regulatory Commission Act (ICRC) in a bid to give legal teeth to the government strategic moves towards confronting the problem of infrastructural decay in the country under Public Private Partnership (PPP).

Under the plan, ICRC will ensure participation of the private sector in financing the construction, development, operation and maintenance of public infrastructure, development project or network for a stated period. Common concession contracts include Build, Operate and Transfer (BOT), Build, Own and Operate (BOO), Build, Transfer and Operate (BTO), lease contracts, among others.

The concession process allows private investors and operators to inject much needed capital into upgrading and maintaining infrastructure.

With the support of the World Bank and other financial institutions, many African governments are adopting the concession option for the development of their basic infrastructure.

The “infrastructure” envisaged under the ICRC Act 2005 covers virtually every sector of the economy: power plants, highways, seaports, airports, canals, dams, water supply, telecoms, railways, land reclamation, inter sate transport systems, industrial estates or township development, housing, tourism development, waste management, ICT and database infrastructure, education, health, drainage, dredging, trade fair complexes among others.

Given the state of most public assets, there was no doubt that concessioning will hold great promise for the economy.

It was against this background that the Federal Government through the National Planning Commission placed advertisement for expression of interest for the management of the Centre for Management Development, Lagos (CMD) facility on a build, operate and transfer (BOT) basis.

About 10 companies expressed interest in the bidding process, out of which six were short-listed and eventually; Allied Thrust & Systems (Nig.) Ltd. (ATSL) emerged as the preferred bidder.

Consequently, the National Planning Commission (the lessor) on March 1, 2007, entered into an 18-year lease agreement with Allied Thrust & Systems (Nig.) Ltd. (the lessee).

Under the terms of the agreement, 5.02 hectares of land of CMD was demised to the lessee, who was also expected to renovate the existing 30-room facility (serving as the Guest House), construct a 102-room guest house with 4-star facility, build and operate a 1000 seat conference facility and pay a graduated annual rent of N270 million to the lessor in three tranches over the lease period.

Subsequent to the agreement ATSL effectively took over the management of the property in May 2007. But the cordial relationship between the management of CMD and ATSL began to grow cold when in September 23, 2008, Mr. Emeka Nwasike, managing director of ATSL wrote the management of CMD, then under the director-generalship of Dr. Joseph Maiyaki, seeking approval to commence work on the conference hall.

In a reply to the letter, Mr. B.D. Chinoko, a senior official of CMD wrote, “I am directed to refer to the on-going construction work in the Guest Facility area and to inform you of the decision of Management to request you to discontinue the work since it does not have its approval.”

It added that, “Please be reminded that by the Terms of Agreement, the only construction work approved are the Hotel and the Conference Centre.”

The present bone of contention is a recent letter of CMD to ATSL in which its new director-general, Dr. Kabir Usman, noted that on assumption of office in January, 2010 he had council’s approval to terminate the lease agreement on the grounds of irreconcilable differences and more particularly, because it was observed that the activities of ATSL were at variance and in conflict with the noble goals and objectives of the lease agreement.

According to Usman the spirit of the lease agreement which was to complement and create a conducive atmosphere for learning had been breached and all attempts to reconcile these differences were unsuccessful, despite the personal intervention of the Honourable Minister of National Planning in April, 2009.

The director-general noted that the core object of the lease agreement was to create a conducive environment for learning, for which the activities of ATSL had virtually eroded, contrary to the provisions of the clause “i” of the lessee’s covenants in the lease agreement.

The said clause stipulates that “Not to permit to be done within the demised premises any act or thing inconsistent with the terms of this agreement or that will constitute a nuisance to the neighbouring premises.”

Usman observed that notwithstanding, having given the contents of your letter dated 16 December, 2010, a considered thought, “I wish to assure you that the centre is working conscientiously to ensure the amicable resolution of this longstanding face-off in such a manner that the same will constitute a win-win to both parties.”

He expressed the hope that this would no doubt required that both parties make some sacrifice in the spirit of give and take, adding that they are prepared to consider the offer made in the ATSL letter.

Subsequently, the director-general noted that ATSL request to construct a 60-room low budget hostel accommodation capable of taking a 6x 41/2 bed, reading table, chair, television and air-conditioner, with toilet facilities ensuite has been accepted.

The director-general stated further that the approval granted to ATSL in principle also presupposes that no further development in the said 5.02 hectares of land would be allowed, until ATSL and CMD agree on a suitable site for the construction of the low cost budget hostel accommodation in a such a way as not to constitute nuisance value to the serene atmosphere suitable for learning and for which the centre is reputably known for.

Usman observed that this approval also meant that the lease agreement in force would be subject to review, the modalities of which would be worked out for the mutual benefit of both parties.  

He said it was important to note that the parties are required to urgently formalize the present agreement to enable the ATSL commence the process of obtaining the necessary approvals to enable it commence the building project urgently, remarking that the magnanimity of the present administration of the CMD in accepting the offer of ATSL will be reciprocated by its commitment to finalise the agreement and move the project forward.

However, in his response, Nwasike observed that it is strange and rather perplexing that after 14 months as the DG of CMD they are still talking about the rudimentary tenets of this BOT/lease agreement.

He rehashed their obligations to CMD as enunciated in the BOT/lease agreement that they are to renovate the existing 30-room facility, construct a 102-bed guest house with four star facilities and to build and operate a 1000-seat conference centre.

The managing director of ATSL said apart from these, their other obligations are to pay the rent, operate the facility and transfer same to the National Planning Commission at the end of the lease period, adding that all these are clear and provided for by the agreement and that CMD obligations are to help them (ATSL) provide approvals and allow them to peaceably hold the demised premises without interference from it or any other persons.

He said of the three obligations, they have fulfilled item one, item three is delayed because the management of CMD has refused to allow them to construct the conference centre despite the fact that the working drawing approval had been given by the Federal Ministry of Housing and Urban Development more than a year ago, adding that they cannot discuss item two because item three is hanging.

Nwasike said BOTs are people oriented, to allow private investors take part in the development of the economy, develop government institutions at the investor’s cost and generate funds for government to provide amenities to the citizenry.

He remarked that any attempt to scuttle such laudable projects more so where the investor is keen and performing, is anti-people and anti-government, adding that they believe the National Planning Commission or CMD will genuinely not want to be labeled in that category of people who have come to despise the nation and its people and wish to bring it to ruin.

The managing director of ATSL drew the attention of the Minister of National Planning to the on-going face-off between his company and the management of CMD, noting the company took effective occupation of the premises one and half months after the lease agreement was signed and had complied with the clauses in the lease agreement, spending over N280 million.

He contended that despite this huge expenditure and to their utter discomfiture, the management of CMD has not shown the willingness to abide by the unambiguous provisions of clause 6A of the lease agreement, noting that the management of CMD/ National Planning Commission obligate themselves to give ATSL quiet enjoyment of the premises for 18 years devoid of any manner of interruption from the lessor or its agents.

Nwasike listed some examples of interruption to include the fact that the management of CMD cut off ATSL from the public power supply, insisting that ATSL provide its own transformer. This development made ATSL to depend entirely on its generator for about four months before it completed the purchase and installation of a 500 KVA transformer.

Also, the management of CMD insisted that ATSL wall off the 5.02 hectares of land that was demised to it and more also CMD used the Nigerian Police to threaten ATSL staffs who was going about their lawful duties on the premises.

There is no doubt that the government meant well with the concessioning policy. We have begun to see its positive impact in the airports and the ports. Those responsible for executing the policy should rise beyond selfish interest and look at the bigger picture, which is to enhance the performance of public infrastructure.

Over the years, we have realized that government alone cannot finance the economy. There is need for public and private sectors collaboration. This is what informed the privatization policy of the Federal Government and of late the concessioning policy.

We call on the National Planning Commission, management of CMD and ATSL to make effort to resolve the contending issues in the lease agreement in the overall interest of the policy.