Presidential Committee Report Indicts Defence Ministry In Mismanagement Of N35bn Loan

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A Presidential Committee report on the Audit of Defence Equipment Procurement in the Armed Forces from 2007 to 2015, has indicted the Ministry of Defence of mismanaging a N35 billion loan. The loan was reportedly obtained for the purchase of Contingent-Owned Equipment, but was wasted on substandard equipment, which did not meet the United Nations’ requirements. The PUNCH reports that the committee’s Fourth Interim Report, which it obtained, revealed several abnormalities in the running of the ministry and the use of the loan. According to it, the fourth report, released on October 23, 2016, through the Office of the National Security Adviser, for submission to President Muhammadu Buhari, detailed how the defence ministry and the Debt Management Office, DMO, did not follow due process in the release and use of the said loan. It said that the lapses in the disbursement and administration of the loan should make the federal government call for a review of the “entire DMO loan portfolio, and remedy the lapses.” Buhari had in 2015 approved that the committee should investigate the former service chiefs, military officers and ministry officials, who were allegedly involved in the irregularities uncovered in the contract awards and procurement process. The committee had disclosed that it was investigating 18 retired and serving military personnel, 12 serving and retired public officials and 24 chief executive officers of companies involved in the procurement. Two former Chiefs of Army Staff; Lt Gen Onyeabo Ihejirika (retd.) and Lt Gen. Kenneth Minimah (retd.), former Minister of State for Foreign Affairs, Dr Nurudeen Mohammed, and three former Permanent Secretaries in the ministry; Bukar Aji, Haruna Sanusi and E.O. Oyemomi, were among those investigated by the committee. The committee in July 2016 released its Third Interim Report on the Audit of the Equipment Procurement. It revealed that a total of N185 billion and $685 million were spent on procurement and operations between 2007 and 2015. The Third Report stated that N71 billion and $685 million were spent on procurements for the Nigerian Army between 2007 and 2015 by the ministries of defence, finance, foreign affairs and environment. The Nigerian National Petroleum Corporation, NNPC, the Central Bank of Nigeria, CBN, and the Office of the National Security Adviser, were also mentioned in the Third Report. The report said some state governments, including Adamawa, Kano and Yobe, as well as the ministries of finance and power also funded the army operations with N114 billion during the eight years. The report partly reads, “In March 2008, the President approved the request of the Ministry of Defence for the procurement Contingent-Owned Equipment with a domestic loan of N35bn by selective tendering through Original Equipment Manufacturers or their representatives and reputable defence vendors. It was estimated that the nation would generate over N4bn annually from the COE and recoup the investment within nine years. Consequently, the Debt Management Office raised and transferred the loan into the MOD Unity Bank Operations Account in June 2008, instead of a dedicated capital project account. “In spite of the sense of urgency created by the MOD, the funds remained inexplicably unutilised for the intended purpose for over nine months thus stalling the anticipated reimbursement and repayment of the loan for more than two years. MOD awarded the first set of eight contracts with a total value of N9.2bn in October 2018. However, while some of the equipment procured was not required based on the Memorandum of Understanding Nigeria signed with the UN, others were acquired at highly inflated costs, far above the Generic Fair Market Value recommended by the UN. “Additionally, equipment that did not attract any reimbursement from the UN were procured in excess of the total requirements of the battalions in the UN Missions. For instance, procurement of the K-38 High-Speed Assault Patrol Boats awarded to Doiyatec Communications Limited at N3.12bn was wasteful as boats were not needed in the landlocked region of Sudan. Moreover, Level II Hospital was procured through Kishalom Nigeria Limited at N475m whereas the UN recommended only N10.5m for such equipment.” The committee added that the MOD also retained the N35bn loan at the bank for 21 months, before disbursing a balance of N28.4billionn into six commercial banks. It said, “Similarly, the MOD procured a large quantity of communications equipment from RCN Nigeria Limited and Richfield Technologies at the total cost of N5.2bn even though the equipment did not attract reimbursement from the UN. These trends manifested in all subsequent contracts awarded by the MOD from the N35bn loan, suggesting that the entire loan package was deliberately packaged to rip off the nation. “Furthermore, the MOD contravened emphatic Presidential directive that the loan should be used only for procurement of COE that would generate reimbursement from the UN for repayment of the loan. The committee also established that in June 2010, MOD transferred the sum of N2.175bn from the 35bn to the Defence Intelligence Agency as a loan for construction of building for the Defence Section at the Nigerian Embassy in Brazil. However, the DIA could not account for the utilisation of the money released as it was confirmed that only N400m  from the 2010 budgetary appropriation was remitted to Brazil for the stated purpose. “Over N1bn of the N35bn loan was also used to settle bills of 10 revalidated contracts awarded in 2006. Unfortunately, some of the contractors still failed to perform or return the sum of N262m paid to it as 20 per cent mobilisation fees for contracts worth over N1.31bn. In the committee’s view, it was fraudulent and a disservice for the MOD to commit the funds into expenditures other than those approved by the President.” However, Patience Oniha, Director General of the DMO, while responding to the indictment, said there was a Memorandum of Understanding between her office and the Ministry of Defence. She said there are records to prove that the ministry had been able to repay a significant part of the loan, and that the balance had been restructured. Oniha said, “There was a loan to that effect. However, there was a MoU. There were terms. For confidential sake, I will not disclose the figures involved. “The Ministry of Defence has been servicing the loan. The loan has not been fully repaid but there has been restructuring. They have made a significant repayment but for confidential purpose, I will not disclose the amount involved. For the President to grant a standalone approval means that there was some sense of urgency around it.”
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