BLOOMBERG’S SIX FALSEHOODS: the FGN settlement payment of $496m
We are writing to correct the recent misleading reports in Bloomberg and other media outlets orchestrated by our business creditors concerning the reported FGN settlement payment of US$496 million to Global. We are disappointed that the media outlets, such as Bloomberg, did not deem it necessary to contact us or the UK-based mediator appointed by the International Chamber of Commerce (ICC) ADR Unit, Paris, Mr Phillip Howell-Richardson, before running a misleading story. The real story should be how we were taken advantage of by the Nigerian government after we operated from 2004 – 2008 until we were dispossessed and strung along through a settlement process from 2013 – 2022, only to get the equivalent of our sunk costs with interest in 2023. Bloomberg has allowed itself to be used by our creditors to cast a blot on the victim in this long saga.
Bloomberg asserts through William Clowes – its mining and metals reporter – six false assertions. We show below that they are false. (For the Bloomberg reports, see Nov 17, 2023: https://www.bloomberg.com/news/audio/2023-11-17/william-clowes-on-nigerian-steel-settlement-podcast;
- That Ajaokuta Company never produced steel. While it is true that Ajaokuta never produced steel before we took over, all that changed following our concession in 2004. Following our concession in 2004, billets were rolled out as rebars and sold across Nigeria for construction purposes. Had Bloomberg bothered to check the financial accounts of Ajaokuta Steel Company Ltd, it would have seen figures under “Sales”. What would a steel company be selling that is not steel? Following our ouster in 2008, Ajaokuta stopped all steel production.
- That Ajaokuta was given to us to manage and buy in 2004. This is false. We were given a concession to manage Ajaokuta in 2004, and in May 2007 its majority shares was sold to us to expand production. If we were so bad, why would the government that sold us Delta Steel (which was successfully operating) in 2005, and which gave us the iron ore concession of NIOMCO in 2005, opt to sell 60% of Ajaokuta shares to us in May 2007?
- That after the Ajaokuta concession was entered in 2004 the Nigerian government terminated the contract three years later. This is false. In May 2007, the Nigerian government deepened things further by entering a share sale agreement pursuant to which we acquired 60% of the shares of Ajaokuta Steel Company Ltd. Months later, simply due to a change of administration, all our rights were terminated in five long-term contracts.
- That “seemingly out of the blue” the government announced the $496m payment. This is false. We filed arbitration in 2008 and went through settlement attempts under the ICC ADR framework while the arbitration was kept in abeyance. We were so keen to resume operating that we even agreed to drop all our damages claims and even title to the Ajaokuta shares so long as the rail and port components were put in place to make NIOMCO-Delta commercially viable. This Framework Settlement Agreement (FSA) was signed in May 2013 but was not implemented for 7 years. We put pressure on the government to fulfil the FSA from 2013 until 2020 when we decided to go back to arbitration. Fearful that Nigeria was heading for a mega arbitration award (clearly with the P&ID case on their mind), it was the Nigerian government that reached out to us to settle by buying us out completely. At this stage we would not have countenanced a return to settlement unless we achieved a clean break. This is how the idea of a buy-out emerged.
The buyout mediation was conducted transparently under the ICC ADR framework led by one of the UK’s foremost mediators, Mr Phillip Howell-Richardson. It lasted from January 2020 – August 2022 with the Nigerian government appointing PwC to advise it on our $5.2 billion claim. PwC, building on submissions of the Nigerian legal team, recommended a buyout at $901m. However, at the last minute when the Nigerian legal team became aware of the bankruptcy of Mr Pramod Mital, the government sought to take advantage of this by denuding us of all our loss of profit and consequential losses in Delta Steel. This is how we were suddenly confronted with a “take it or leave it” deal of $496m with no explanation. We were expecting a minimum figure of $901m (the PWC recommendation), not the $496m figure that profited from our financial predicament. We only accepted the buyout – devoid of our lost profit on five contracts and losses to Delta – because of our dire financial state – a fact that the FGN obviously capitalised on.
- Bloomberg falsely asserts that we were “systematically cannibalising” assets from Ajaokuta and this was the reason for termination of the share purchase in 2008. First, it is incredulous that the government will convert the Ajaokuta concession into a share sale in May 2007 only to terminate it in April 2008, as well as also terminating a railway concession, and iron ore concession. Secondly, the cannibalising allegation that Bloomberg “parrots” was a false mischaracterisation of the commercial network arrangement that involved the cooperation of Delta and Ajaokuta in billet to rebars steel production. Since Ajaokuta’s blast furnace had never worked, we maintained a network arrangement with our company (Delta Steel) to produce the billets that were rolled out as rebars by Ajaokuta. This commercial arrangement that involved both companies sharing equipment for production was later falsely branded as “asset cannibalisation” by a new administration that was searching for a reason to backup their wholesale termination of all our interests. Thirdly, it is noteworthy that the FGN had appointed PwC pursuant to the 2013 FSA to forensically investigate the claims, yet none of the claims were substantiated. Lastly, the Arbitral Tribunal has never made a finding of asset cannibalisation. It is strange that notwithstanding this, Bloomberg’s William Clowes felt able to put these false and damaging claims forward.
- Bloomberg assumes that money spent running a plant from 2004 to 2008 ceases to exist as sunk costs where the investor obtains short term finance from local banks for some of its naira expenditure (due to business exigencies such as an overvalued exchange rate on capital inflows). So that where the investor is denied compensation for all its loss of profit and consequential losses on its multiple contracts that were terminated at a stroke in 2008, a settlement payment of value that is equivalent to its sunk costs – a value that the FGN ascertained and inserted in its contract with us in 2007 – is to be viewed with suspicion. This is either financial illiteracy or mischievous.