US embassy cable - 04ABUJA1164

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001164 
 
SIPDIS 
 
E.O. 12958: DECL: 06/30/2014 
TAGS: ECON, EINV, PINR, TBIO, SOCI, NI 
SUBJECT: CHANGE IN MANAGEMENT AT ABUJA'S NATIONAL HOSPITAL: 
         BACK TO (FUNNY) BUSINESS AS USUAL? 
 
REF: LAGOS 1291 
 
Classified By: A/DCM CLAUDIA ANYASO.  REASONS 1.5 (B & D). 
 
1. (C) CONFIDENTIAL -- ENTIRE TEXT. 
 
2.  Summary:  The GON's decision to terminate International 
Hospital Group's (IHG) management contract at the National 
Hospital appears to stem not from irregularities on the part 
of the British management group, but rather on its 
intolerance for irregularities that enriched powerful people, 
some of them apparently close to the President.   The saga of 
National Hospital suggests that the GON's stated policies of 
streamlining, transparency and anti-corruption do not 
necessarily apply at the highest levels of government.  End 
comment. 
 
3.  Econoff met with a key member of the former management of 
International Hospital Group team (protect source) for a 
post-mortem of IHG's management contract at the National 
Hospital in Abuja.  His story was very much at odds with the 
portrayal to date by the Nigerian press and by GON officials. 
 
4.  According to the IHG official, the contract IHG signed 
with the Board of Directors of the National Hospital was, in 
parallel, a management contract aimed at helping the hospital 
to improve its operations in addition to a consulting 
contract to lay the groundwork for improved operations in the 
future.  IHG had received a business plan from the Board at 
the beginning of the contractual period but soon found it 
useless.  No accounts had been kept at the hospital since 
1999, and most internal data on patient visits was suspect. 
Unable to determine how many patients had been treated and 
how much money the hospital had collected or spent, IHG had 
no ready benchmarks to assess the hospital's performance. 
Its first task, therefore, was to put the accounts in order 
and set up a functioning IT system.  After six months, IHG 
produced audited accounts of the hospital's operations since 
inception. 
 
5.  The National Hospital's Board of Directors consisted of 
prominent people from health care, the various geopolitical 
zones of Nigeria, representatives of key cabinet ministers, 
etc.  According to the official, relations with the Board 
remained excellent throughout IHG's tenure.  IHG's contract 
was with the Board and contained appropriate mechanisms for 
Board review of IHG's performance and procedures for 
terminating the contract for cause with prior notice. 
However, since the hospital is also a parastatal, the GON, 
represented by the Secretary to the Government of the 
Federation (SGF), had an exogenous but important role in 
monitoring the National Hospital's operations. 
 
6.  IHG's contract, which was for UKP 2.8 million per annum 
(approximately USD 5.12 million, not the USD 6.55 million 
cited in press reports), gave IHG authority over personnel 
matters such as the hiring and firing of staff, including 
medical doctors.  On its own, the GON committed itself to 
placing anyone who was laid off from the hospital into new 
positions in government entities.  In the contract, the GON 
also committed itself to providing working capital for the 
hospital, which in fact never materialized. 
 
7.  The IHG source believes the company ran afoul of some 
"important people" by terminating several senior staff 
members and tightening up the contract tender process.  When 
IHG took over, the National Hospital had, for instance, a 
very expensive maintenance contract with Julius Berger, the 
German construction giant that had originally built the 
hospital (and most of Abuja, for that matter).  Not only were 
the fees much higher than customary, but anomalies such as 
monthly maintenance fees on pieces of furniture the hospital 
owned were included.  IHG put the maintenance contract out to 
bid, and Berger was reportedly furious that it did not win 
the contract.  The reason it lost was simple:  Julius Berger 
did not even bother to bid on the contract, apparently 
assuming their "relationship" would win them the contract. 
 
8.  In the end, IHG's tenure at National Hospital was 
terminated by the SGF on one week's notice over the head and 
over the objections of the Board of Directors.  The 
publicly-stated reason was that IHG was in breach of contract 
because the hospital had not become self-sustaining after its 
first year of operations under IHG.  No mention was made of 
the fact that the GON was also in breach for not providing 
the promised and much-needed working capital.  According to 
the source, the report made by the SGF contained a number of 
outright falsehoods, many half-truths and several arguments 
full of sophistry intended to discredit IHG. 
 
9.  The IHG official noted that the interim management team 
is headed by a medical doctor with close ties to the 
president who had previously expressed interest in running 
the hospital himself and who complained that National 
Hospital was the only major hospital in Nigeria not headed by 
a medical doctor.  The IHG official further speculated that 
the Nigerian government may intend to privatize the hospital, 
because the privatization agency Bureau of Public Enterprises 
(BPE) is represented on the interim management team. 
 
10.  The official also speculated that the reasons for IHG's 
rapid ejection was that its oversight of outside contracts 
had cut off some people's sources of illicit income. 
Evidence cited for this was the rapid reinstatement of at 
least three employees who had been terminated for cause, 
including some who are still under investigation by the 
Independent Corrupt Practices Commission (ICPC). In addition, 
Julius Berger was rapidly brought back as management 
contractor. 
11.  Other actions of the interim management committee 
indicated that they were paying more attention to 
personalities and ethnic sensibilities than to operational 
effectiveness.  One member of the hospital management, hired 
by IHG just prior to the termination of its contract, was 
quickly fired not on performance grounds but for being from 
the wrong region and tribe.  Another example is the IT 
director of the interim management team, who has no computer 
on his desk, declines offers to supply him with one, and 
insists that any document presented to him be printed out on 
paper. 
 
12.  Although the IHG official claimed no first-hand 
knowledge of high-level political interference, the team 
received numerous indications from sympathetic staff members 
that IHG's tenure at the National Hospital was a casualty of 
rivalry between President Obasanjo and Vice President Atiku. 
 The official said he now gives credence to this theory due 
to the manner in which the termination was carried out: it 
occurred over Easter weekend, when most of the Board was 
unavailable and the Vice President was out of town.  The 
official suspects that while the Vice President, whose 
influence is on the wane, was otherwise engaged, officials 
close to the Presidency who had designs on National Hospital 
or vested interests in its formerly corrupt practices gained 
the President's support for the takeover.  This group acted 
so quickly that no one was in place to take over from IHG: 
after the one-week notice period expired, IHG stayed on for 
an additional two days, calling SGF regularly to find out 
when someone would come to the hospital and assume charge. 
 
13.  Comment:  Econoff has met most of the members of the IHG 
team socially at various times, and all appear to be 
level-headed, competent professionals.  IHG's experience with 
National Hospital suggests that the hospital is still running 
as a parastatal, with political goals more important than 
economic goals.  Reinstatement of discredited employees and 
questionable service contracts runs counter to the GON's 
rhetoric on transparency and fighting corruption, as does the 
sudden termination of the contract without formal Board 
proceedings.  If the suspicions of the IHG official are 
correct, it would appear the GON's commitment to economic 
reform might not extend to the highest levels of government. 
End comment. 
CAMPBELL