Government and Ghost Contractors: Running Or Ruining The Economy?

In recent times, it was well-known, even before the 2003 elections, that some department, ministries and agencies were full of ghost employees who did no real work for the ministry, drew multiple salaries, or existed only on paper. In the immediate aftermath of the invasion, rooting out such ghost employees was not a high priority. But it never became one, either. The special inspector for the ministry of Finance would later cite payments to these ghost employees as a significant waste of resources.

At the time it only raised some eyebrows and mild curiosity…. The lack of seriousness to recast the strategy and policy of development on the basis of ‘two economies’ eventually led to the demand for Six Points. The rest is history.

Huge no-bid civil-construction and reconstruction contracts given out by the Federal and State Government not even talking about the corrupt-ridden Niger Delta Development Commission, NDDC after dilapidated Nigerian urban infrastructures and amenities guarantee that many of the same companies looting taxpayers here in Nigeria will validate their credential from the collapsed bridges and buildings disaster too.

People, whose jobs and homes were lost to road accident owing to “hole-indrill” at motorable road centre, are finding it difficult to get in on the action. First, President Umaru Yar’Adua signed a waiver of the prevailing wage requirements that normally apply to federal contractors. The administration also junked affirmative action requirements for contractors. Minority contractors complain they are being shut out, like many foreign-owned firms excluded from working their own country’s construction. FERMA has made the contracting process even more opaque by outsourcing procurement and contracting processes to companies like fictitious companies. This government simply ignores the National Assembly’s later report concluding that some ghost companies did not establish or implement sufficient managerial, financial, and contractual controls to ensure funds were used in a transparent manner. The system of importing dollars to pay salaries and execute construction projects in cash — which made sense in the first few months after the assessment — was never replaced with a system that would have provided better oversight. A non-cash economy was never established. The Federal ministry Of Transport found that the authority disbursed over N80.8 billion … without assurance the monies were properly used or accounted for. And the staff of the House Committee on Oversight or the Government Reform uncovered some illuminating anecdotes.

In addition to these audit reports, officials in Abuja have provided first-hand accounts of lax physical controls. One Accountant-General of the Federation’s official described an environment awash in monetized bills. One contractor received a N20 million payments in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack. They also found that N77, 41,300 in cash had been stolen from one division’s vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in the ministry offices. One official was given N6.75 million in cash, and was ordered to spend it in one week before the new government took control of Nigeria funds.

Just before Obasanjo handed over sovereign power to the Yar’Adua government, it flew billions of dollars outside the country — including one shipment of $8oo million that was the largest in the history of the money laundry. Where did this money go? Many of Nigerians picked by that administration to lead ministries after the handover proved corrupt. In one case, an official appears to have stolen more than half a million dollars earmarked for fighting the insurgency.

This isn’t entirely the CBN’s fault — the Aso Rock and the EFCC also share blame. But the CBN could have sent more people errand, raised more objections in Abuja to the way the EFCC was being run, helped this nation move away from a cash-based system of payments and made sure Nigerians money was not being misused. It is this larger point — about accountability and oversight — that Ribadu was making when he asked “who in their right mind would send 360 tons of cash to the western world?”

Of course Nigeria is not Dubai. And a modest effort is afoot to prevent the kind of contracting abuses witnessed in Nigeria. House and Senate appropriations committees have sent dozens of inspectors to monitor the such contractors, and a bipartisan group of senators led by ad-hoc committee chairmen., wants to let the inspector general whose office uncovered the fraud and waste here in Nigeria to oversee the failed contracts. The move has introduced a bill that would establish stiff criminal penalties for misuse of relief and reconstruction funds.

These are good ideas, but if the National Assembly really wants to prevent the waste, fraud and other abuses seen in this country, it needs to exclude companies with a track record of contracting abuses from participating in any contracts.

On the same day that politicians were helping those “mushroomic” ghost companies, 19 members of the Congressional ruling party Caucus called on the president to suspend such undisclosed company from any new federal contracts based on its history of fraud, bribery and abuses here and elsewhere. The caucus’ proposal likely will be dismissed as partisan sniping. But it makes sense: the federal government suspended the FAAN tower contractors from any new federal contracts when its crimes were revealed by the Aviation Intervention fund’s investigation (even before any of its executives was indicted or convicted). We ought to protect taxpayers by applying the same exclusion sanction to Austrian company.

Federal acquisition regulations require the use of “responsible contractors.” Surely there are few companies with such company’s astonishing track record of bribery, fraud and other abuses. Recall the truckloads of overpriced petrol imported from nearby Sao Tome/Principe Refinery, the N1,000 laundry bags, N4,500 cases of soda, the deliberate torching of N850 million trucks in need of repair, multiple cases of bribery in Nigeria, the use of a Cayman Islands and the Bermuda subsidiary to do business inside Nigeria’s “NNPC” (in violation of this nation’s policy), and so forth. Numerous investigations into failed contracting practices and abuses are still under way at the Judiciary, the EFCC and the ICPC.

The Army Corps of Engineers cannot be trusted to enforce the responsible contractor standard. It recently demoted Nuhu Ribadu, the high-ranking whistle-blower who told the National Assembly that contracts awarded to “mushroom” companies of government interest represent “the most blatant and improper contract abuse I have witnessed during the course of my professional career.” Ribadu says he was “removed because I steadfastly resisted and attempted to alter what can be described as casual and clubby contracting practices.”

Most of those ghost companies are tied to the State governors and the presidency and may be one reason they received lump sum contracts. They know how the game works. They helped these controversial companies get similar inflated work every year, and consult for companies bidding on contracts, along with former political office holders. Those whose relatives hold offices are in the eye of the current contracting windfall. Today, they are consulting for coffer-prone companies which serve as conduit for sucking public fund dry, for another no-bid FEMA contractor.

Back in the national assembly, the law-makers, hosted a “welcome party” for contractors. Most of these meeting were co-sponsored by the intending shadow-companies.

The administration should have learned from the botched abandon projects and suspended contract jobs that real success requires the involvement of those with the most at stake in planning decisions. But the administration apparently can’t figure out why, when it’s got so many friends working as lobbyists and contractors, it should bother talking to anyone else.

Another federal government office responsible for enforcing responsible contracting standards has been undermined by Yar’Adua’s penchant for placing political cronies with questionable competence in high-level bureaucratic positions. Those whose Office of Due Process, Procurement Policy at the Ministry Of Finance oversees an estimated N300 billion worth of annual government contracts, was recently arrested for lying to investigators and obstructing an investigation into the ruling figures lobbyist .

With incompetent or corrupt cronies in charge of enforcing responsible contracting rules, it’s not surprising that useless and unnecessary and government extra-bred offshoot companies got a $16 million contract after the controversial Independent Power Project. But if the national Assembly is serious about preventing the same flood of fraud, waste and other abuses that we witnessed in recent times from being repeated, it must exclude corporate recidivists like ghost companies from any future contracts.

Written by
L.Chinedu Arizona-Ogwu
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