On August 1, 2016, after decades of deadlock, the Buhari administration took a major step towards kick-starting and revitalizing the steel sector as it signed a renegotiated concession agreement with Global Steel Holdings Ltd (GSHL) for the Nigerian Iron Ore Mining Company (NIOMCO), Itakpe. By the new agreement, the Ajaokuta Steel Complex reverted to the federal government, effectively freeing the entity from all contractual encumbrances that had left it uncompleted and non-functional for decades, while GSHL retains NIOMCO. The new agreement, which followed four years of mediation by the international negotiator, Phillip Howell-Richardson, was signed at a ceremony in the Villa, presided by Vice President, Yemi Osinbajo. The Minister of Solid Minerals Development, Kayode Fayemi, signed on behalf of the government, while GSHL Chairman, Prammod Mittal signed on behalf of the company.
Speaking at the event, Osinbajo hailed the mediation process that led to the resolution of the problem that had made it impossible for the two national assets to be functional for years. “It is one of the cases of failures. It is a tragedy of immense proportion that we have both Ajaokuta Steel Complex and NIOMCO and couldn’t get anything out of them for years,” the Vice-president noted. On his part, Fayemi, who led the Nigerian side in the negotiations, said with the new agreement on NIOMCO, the next step is to commence the process of taking over Ajaokuta and ensuring that it is given out to a serious operator with proven technical and financial capacity.
Fayemi said: “It is our expectation that we would accomplish two things- bring NIOMCO to full function and starts the process of retaking Ajaokuta and then give it to a new operator. With this, we will move from being just a mineral nation to a mining nation. Once the first phase of the agreement is accomplished, it is the intention of the FGN to quickly move into accomplishing the objectives of concessioning the Ajaokuta Steel Plant to the most competent operator who meets the requirements of credible track record, technical capacity and financial competence.
“Overall, we are confident that this landmark settlement is a pointer to what to expect in the Government’s determination to fix the Nigerian mining sector. This is one of the key milestones in the Road Map for the growth and development of the Nigerian mining sector and I want to thank our team from the Federal Ministries of Justice and Solid Minerals for their hard work and also thank GSHL for sticking to the provisions of the laws in seeking resolutions to the problem” Fayemi described the settlement as a landmark development that would help the diversification plans of the President Muhammadu Buhari administration.
But beyond all the euphoria and high expectations about industrial growth and economic diversification, few would have imagined at the time; that Nigerians had once again been shortchanged. For after all is said and done, the Ajaokuta steel saga is a tragedy of immense proportion that the nation has endured for decades. The fact that President Buhari decided to sweep the past of the Ajaokuta steel saga under the carpet is a dreadful mistake. That past is connected to one of the most wicked acts ever perpetrated against this nation by Kebbi Governor, Abubakar Atiku Bagudu – the debt-buy-back fraud.
The trove of evidence provided to the Buhari administration by the US Department of Justice, copies of which were obtained exclusively by Huhuonline.com, disclose previously unknown dealings between Bagudu and offshore companies that used funds provided by the Nigerian government, to buy and then resell Nigeria’s debt from the failed Ajaokuta steel company. Nigeria lost over $350 million to Bagudu and his cohorts in the scam. This is the story.
The Nigerian Steel Development Authority was created in 1971 to serve as a catalyst for the development of the country’s steel and iron ore deposits. In 1979, it entered into an agreement with Tiaj Prom Export (TPE), a Russian company, to construct a steel plant in Nigeria for five billion Deutsch Marks (DM); and the entity known as the Ajaokuta Steel Company was born. According to the DOJ trove of evidence, the Nigerian government agreed to give TPE debt instruments guaranteeing payment of two billion DM to finance part of the construction. Amid allegations of bribery, kickbacks and over-inflation of the contract, then military head of state, Gen. Mohammed Buhari, who had overthrown the civilian government of President Shehu Shagari in 1983, suspended payment on the debt after TPE refused to renegotiate the contract. TPE, in turn, stopped work on the steel plant, and Nigeria defaulted on the outstanding debt. TPE sued Nigeria for breach of contract and sough international mediation.
In 1996, after 13 years, TPE decided to cut its losses, and sell the Ajaokuta debt in the open market, for a fraction of its original worth. Bagudu learned from his bankers at ANZ (London), about TPE’s plan to sell the DM 1.6 billion debt for just DM 350 million. He then contacted Muhammed Abacha, who sold the deal to his father. Gen. Abacha then directed Finance Minister Chief Anthony Ani to sign an agreement with Bagudu, providing assurances that the government of Nigeria would buy back the debt from Bagudu if one of Bagudu’s companies, (in this case Mecosta) purchased the debt from TPE. Bagudu then orchestrated a series of transactions through which Mecosta received money in escrow from Nigeria, used that money to purchase the DM 350 million debt through a Liberian brokerage company, identified in US court filings as Parnar Shipping Corporation (Parnar), and then resold the debt back to Nigeria for almost three times the cost at DM 972 million.
According to the leaked files, US investigators said on September 30, 1996, Bagudu arranged for TPE to sell DM 1.6 billion of its Nigerian debt instruments to Parnar for DM 350 million. That same day, Parnar resold the same debt to Bagudu’s company, Mecosta, for DM 486 million. Mecosta immediately marked up the price again and sold it back to Nigeria for DM 972 million, which the Nigerian government paid in two installments of DM 486 million. The records show that the CBN, at the instructions of Chief Anthony Ani transferred DM 486 million to an escrow account held in the name of Parnar and Mecosta at ANZ (London), DM 481 million of which was then used by Mecosta to pay Parnar for the debt.
The confidential records also show that on April 15, 1997, Ani ordered CBN to wire the balance DM 486 million in two tranches of $141,253,333 (DM 243 million) each, into and out of a correspondent account at Citibank (New York) to Goldman Sachs in Zurich, Switzerland, for credit to the Mecosta account, but the funds were diverted and instead deposited into accounts held in the names of Eagle Alliance and Morgan Procurement. The second transfer in the same amount came a week later on April 22, 1997.
The noose begins to tighten
The shady transactions raised a red flag leading officials at Goldman Sachs to informed Bagudu and Mohammed Abacha that the bank was ending their relationship over concerns about the source of the money in the accounts held by Eagle Alliance and Morgan Procurement. As a result, Bagudu transferred $202.3 million in cash and securities from the Eagle Alliance accounts at Goldman Sachs in Zurich to a Mecosta account at Banque Baring Brothers, in Geneva, and moved another $90 million in cash and securities from the Morgan Procurement accounts to a Mecosta account at Credit Agricole Indosuez in London. However, after officials at Banque Baring Brothers discovered that Bagudu had falsely claimed the money deposited came from the oil and gas industry, the bank terminated its relationship with Mecosta over false representations made by Bagudu.
Bagudu then approached DBIL bank in the Bailiwick of Jersey and presented fake documents showing the Mecosta funds as the proceeds of oil, construction, and energy trading, when in fact the funds were the proceeds of theft and corruption. DBIL officials approved the request to open an account in the name of Mecosta. But when the account was opened on April 3, 1998, bank documents show Bagudu changed the name on the account from Mecosta to another one of his offshore companies; Doraville Properties Corporation, and then transferred $137.1 million in proceeds of the debt buy-back scam from the Mecosta account at Banque Baring Brothers into the new Doraville account.
Overall, the Nigerian people lost 622 million DM ($354,024,071) from the deal after the government paid 972 million DM for the TPE debt, whose selling price on the open market was 350 million DM; nearly two-thirds less than Nigeria ultimately paid for the debt. Only in Nigeria can such a monstrous theft of public funds occur and the perpetrators are free, and hold authority positions from where to continue the pillage. Buhari’s war against corruption will stand or fall on how he handles Bagudu.
After General Abacha’s sudden and unexpected death, Muhammed Abacha used the Doraville account as part of his plea bargain, transferring $115 million in the account to the government of Nigeria, leaving only $1,000 balance. This $1,000 was later comingled with funds from the purchase and sale of Nigerian Par Bonds which was the other fraud Bagudu perpetrated against the Nigerian people. That story is next.
