Nigeria pays out almost $500m to Indian steel company to settle breach of contract dispute

NIGERIA'S federal government has just paid out a whopping sum of $496m to settle a long-standing contractual dispute with an Indian investor group in the steel sector that could have ended up costing the country $5.26bn.

With alarming regularity, Nigeria gets dragged to court by companies for breach of contract with legally binding agreements are inexplicably unilaterally terminated. This tends to happen when there is a change of government and incoming administrations refuse to respect agreements signed by their predecessors.

According to the attorney general of the federation Abubakar Malami, this latest payment was made after the two sides went to mediation. He added that the mediation proceedings were under the Alternative Dispute Resolution framework of the International Chamber of Commerce led by Phillip Howell-Richardson.

Dr Umar Gwandu, the spokesman for the attorney-general's office said the settlement agreement came into effect on 19 August 2022. He revealed that the source of the dispute were five contracts entered into by the 1999 to 2007 administration of President Olusegun Obasanjo which gave complete dominance over the Nigerian steel space to one company, the Global Steel Group.

According to Dr Gwandu, in 2008, the administration of President Umaru Yar’Adua proceeded to terminate the contracts contrary to legal advice offered by the Federal Ministry of Justice, which cited the termination cost in the form of damages. He said that had the government not terminated the Ajaokuta Share Purchase Agreement on April 1, 2008, and waited for just 55 days to terminate, it would have terminated it lawfully and would have collected more than $26m from Global Steel as a settlement.

Dr Gwandu added: “Nigeria succeeded in reducing the claim in mediation brought by the international firm of King and Spalding, legal representatives of the Global group, by 91%. A claim for over $10bn was threatened in arbitration before the International Chamber of Commerce, International Court of Arbitration, Paris, in respect of five major contracts of 2004 to 2007, covering steel, iron ore, and rail.”

Mr Malami added that the Buhari government took decisive steps to resist the claim, rather than pass it on to successive governments. He pointed out that with this development, the government has now rescued the steel industry from interminable and complex disputes as well as saving the taxpayer from humongous damages.