China reneges on $2.5b fund for Nigeria's rail project         http://odili.net/news/source/2009/mar/13/7.html
From Terhemba Daka, Abuja

THE Minister of Transport, Ibrahim Biu, has disclosed that the Chinese government has reneged on its pledge to provide a counterpart funding of $2.5 billion to the Federal Government for the execution of the multi-billion dollar rail project initiated by the Olusegun Obasanjo administration.



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The minister made the disclosure yesterday during the ongoing public hearing on the planned Lagos-Kano and the Ajaokuta-Itakpe-Warri rail lines, organised by the House Committee on Land Transport.

[b]The Chinese government, under the new terms, will now only grant a $500 million concessionary loan while the Federal Government is to obtain the balance of $2 billion from Chinese banks at prevailing interest rates.[/b]A consultant, TEEM Nigeria Limited, was engaged by the Federal Government to supervise the multi-billion dollar rail modernisation project and Itakpe-Ajaokuta-Warri rail projects respectively.

Biu, who expressed concern over the agreement, disclosed that the Federal Government was under obligation to pay between $1.1 billion and $1.4 billion for the cancellation of the project.

Under the arrangement, the minister explained that $1.2 billion was dedicated as a soft loan to Nigeria for the execution of the first phase of the double-tracked Lagos-Kano rail project covering 1,315 kilometres, which was awarded to CCECC.

The minister faulted the decision of former President Olusegun Obasanjo to fund the project through the excess crude oil account, explaining that President Umaru Yar'Adua had reversed the decision as it was unconstitutional.

Biu expressed concern over the age-long policy of the Federal Government to engage the services of foreign consultants and contractors for the execution and supervision of all government-owned projects to the detriment of Nigerian firms.

He explained that N134 billion had so far been spent by the Federal Government on the construction of standard gauge rail lines from Itakpe-Ajaokuta to Warri, adding that the contractor, Julius Berger, was demanding the payment of N6.45 billion while TEEM Nigeria Limited was demanding N1.135 billion.

From the N134 billion paid, Julius Berger has received N122.7 billion while TEEM Nigeria Limited received an additional sum of N12.3 billion as consultancy fees.

According to him, the N6.45 billion has been provided for in the 2009 budget, but he noted that no provision was made for the payment of N1.135 billion to TEEM Nigeria Limited.

TEEM Managing Director, Holzious Monvic, gave the position while responding to questions raised by the members of the committee on whether the project followed due process or not.

Monvic explained that the project was awarded to CCECC based on the Chinese government's commitment to provide the $2.5 billion concessionary loan to Nigeria, adding that the process was not bidded for or advertised.

He noted that the project could have been more favourable to Nigeria if it was tendered for by various international organisations, adding that all efforts to prevail on government to ensure best practice in the award of the contract were turned down.