Foreign reserves risks further depletion over UK Court judgement

Nigeria may lose about 20 per cent of its foreign reserves following last Friday judgement of a London court awarding $9 billion assets forfeiture against the country in favour of Process and Industrial Development Limited (P&ID) for breach of contract.

Nigeria’s external reserves dropped by $482.18 million from N45.14 billion as of July 8 to $44.65 billion as of August 8. The reserves which had maintained a steady rise in recent months has started suffering decline, and this latest judgement, if implemented, may compound the nation’s woes.

While the firm has declared the immediate execution of the court order, the FG disclosed it was making vigorous efforts to defend its interest in this matter and would not relent in exploring every viable options in doing so.

Reacting to the judgement, Solicitor-General of the Federation and Permanent Secretary, Federal Ministry of Justice, Dayo Apata, said the federal government would pursue an appeal against the judgment of the English Court dated 16 August 2019 and at the same time seek for a Stay of Execution of the said judgement.

The dispute arose over a 20 year Gas Supply and Processing Agreement (GSPA) entered in 2010 between FGN and P & ID inrespect of an accelerated gas development project in Nigeria’s OMLs 67 and 123.

According to the federal government, P&ID never began the construction of the project facility although it alleges it incurred about $40 million in preliminary expenses.

P & ID’s claimed in the arbitration proceedings was mainly for loss of profit for the entire twenty-year term of the GSPA, initially claiming the sum of $1.9 billion and later increasing its claim to $5.9 billion.

In granting the huge arbitration award against Nigeria the tribunal decided the following: thatthe project would operate at 93 uptime during the twenty-year of the GSPA despite the well-known risks of operating such a project in the Niger-Delta.

That the average price of Natural Gas Liquids (the mainrevenue earner for P&ID assuming the GSPA had been implemented), should be based on an average oil price in excess of $100 per barrel over the twenty-year life of the project.

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