US embassy cable - 02ABUJA1606

S E C R E T SECTION 01 OF 03 ABUJA 001606 
 
SIPDIS 
 
 
E.O. 12958: DECL: 05/29/2012 
TAGS: EIND, PGOV, EFIN, ECON, NI 
SUBJECT: NIGERIA: GON CORRUPTION REDUCED BUT FAR FROM 
ELIMINATED BY PRESIDENT OBASANJO'S DUE PROCESS INITIATIVE 
 
 
1. (U) Classified by Charge Timothy D. Andrews; Reasons 1.5 
(b) and (d). 
 
 
2. (S) Summary. Due Process Certification is the Obasanjo 
Administration's most effective anti-corruption measure to 
date.  The process requires what appears to be a cost-benefit 
analysis for all GON capital expenditures over N1 million 
and, according to the Presidential Special Advisors in charge 
of the process, it has saved the GON billions of Naira the 
past six months alone.  Executive branch officials, including 
the Minister of Solid Minerals, have commented that Due 
Process Certification has tightened belts, forcing Ministers 
to apply rational pricing and transparency to their 
contracting practices.  However effective this process may 
be, it only governs the contract award phase of the project. 
There is not a similar oversight mechanism for project 
implementation.   The President's Chief Economic Advisor 
Magnus Kpakol (strictly  protect) has admitted that 
significant corruption still occurs during the contract 
implementation phase.  End Summary. 
 
 
3. (U) In mid-2001, President Obasanjo established the Budget 
Price Monitoring and Investigation Unit (BMPI), mandated with 
reviewing on all national capital expenditures over N1 
million (USD 8600.00).  In October 2001, the GON formalized 
this procedure, termed Due Process Certification, in a 
Circular issued by the Accountant General of the Federation. 
Mrs. Oby Ezekwesili, Special Advisor to the President, 
oversees the BPMI Unit and was eager to convey its success at 
having saved the GON billions of Naira. 
 
 
4. (U) All federal capital projects over N1 million Naira 
must undergo three stages of certification: (1) Budget 
Preparation Certification, (2) Contract Award Process 
Certification, and (3) Work Completion Certification. 
According to Ezekwesili, all capital projects contained in 
the 2002 Budget had been subject to the first of the three 
stages.  Each Ministry must submit its project proposals for 
consideration by the President.  Every proposal must include 
a feasibility study on the availability of the site, building 
materials, labor and external services, such as water and 
power supply, as well as an articulation of demand for the 
project.  BMPI bases its decision to grant certification on 
whether the project will have a positive impact on 
employment, increase efficiency and productivity and improve 
service to the public.  Budget Preparation Certification is 
granted if the project is determined to: 
 
 
-- Be well aligned with GON strategic and sectoral priorities; 
 
 
-- Be adequately prepared technically and financially; 
 
 
-- Contain reasonable cost estimates consistent with 
international practice; 
 
 
-- Include detailed project designs with appropriately 
packaged components for procurement purposes; 
 
 
-- Include detailed and realistic financing, procurement and 
implementation plans; 
 
 
-- Identify adverse environmental and social effects where 
these exist; and 
 
 
-- Include an assessment of future operation and maintenance 
requirements. 
 
 
5. (U) Projects are granted Category 1, or full, 
certification if they meet all the above criteria.  Category 
2 certification is granted to projects not fully prepared but 
which could be completed within the next budget cycle. 
Category 3 projects are denied certification because they are 
significantly flawed or incomplete. Only Category 1 projects 
were included in the draft 2002 Budget the President 
submitted to the National Assembly. According to Ezekwesili, 
the Assembly inserted several non-certified projects prior to 
the budget's final approval. 
 
 
6. (U) Once the budget is approved by the legislature, the 
BMPI works closely with each Ministry's finance office on the 
second stage of certification, Contract Award Certification. 
Before a contract can be awarded, the following conditions 
must be met: 
 
 
-- Tender documents are prepared in line with GON guidelines; 
 
 
-- Tender process is conducted in line with GON guidelines; 
 
 
-- Pre-qualification criteria for contractors are 
appropriate, clearly stated and fully complied with; 
 
 
-- The lowest/best-evaluated bidder is recommended or if 
management approves a different bidder, reasons for that 
recommendation have been provided; 
-- Contract price is comparable with international 
experience; and 
 
 
-- The successful bidder continues to meet pre-qualification 
requirements. 
 
 
Only after the BMPI has issued the Contract Award 
Certification can the Ministry sign the contract and begin 
mobilizing the funds through the Accountant General and 
Central Bank. 
 
 
7. (U) Any project that requires more than one release of 
funds must receive a Work Completion Certification from BMPI 
before the relevant Ministry is able to access additional 
funds.  To receive that certification, the project must meet 
the following conditions: 
 
 
-- Earlier funds have been fully utilized; 
 
 
-- Site visit has been carried out to assess progress; 
 
 
-- Contract work is being carried out as agreed in contract; 
 
 
-- Percentage of work completed is commensurate with funds 
spent; and 
 
 
-- Anticipated project results are being achieved. 
 
 
8. (C) BMPI uses specialists from outside the career 
government service )- sometimes even expatriates -- to 
conduct these reviews.  Ezekwesili admitted, however, that 
finding technically proficient and honest specialists has 
been difficult.  She requested assistance from USAID in 
locating and funding outside specialists, particularly for 
infrastructure projects, such as roads, water and seaports. 
USAID has agreed to provide this assistance to BMPI. 
 
 
9. (U) She believes strongly that, through the BMPI, 
President Obasanjo has greatly reduced federal level 
corruption and that, through due process, oversight over 
contract procurement has been greatly enhanced.  "We have 
taken meat from the table of those who normally eat pork," 
she said.  Ezekwesili praised the work of the BMPI as 
compared to the Anti-Corruption Commission, which she said 
lacks teeth.  Inflated contracts, patronage and 
misappropriation of federal resources were common occurrences 
before, but no longer, she averred.  As an example, 
Ezekwesili cited a project proposed by the Ministry of Power 
and Steel that was going at a price well above the lowest 
bidder. Certification was not granted until the contract 
amount was reduced, saving the GON roughly N2 billion (USD 17 
million).  On buildings and road projects alone, she 
estimated that roughly N9.7 billion (USD 83 million) had been 
saved in the past six months alone. 
 
 
10. (U) Ezekwesili emphasized that President Obasanjo has 
given his full support to the certification process.  In 
early April, she said the President informed all Ministers 
during the weekly Executive Council meeting, that none of 
them should bother submitting a project for the Council's 
approval without a due process evaluation.  The Minister of 
Solid Minerals Adelaja (and former Minister of State for 
Defense), during a farewell dinner for the DATT on April 23, 
commented that the due process exercise was extremely 
positive, ensuring Executive branch contracts were rational 
in scope and cost.  When some expressed concern over 
potential delays due to the process, Adelaja countered that 
minor delays were a small price to pay to prevent corrupt 
contracting and to ensure rational projects. 
 
 
11.   (U) When asked about specific projects that are often 
criticized as wasteful, such as the Abuja stadium and 
National Identification Program, Ezekwesili explained these 
programs pre-dated the establishment of BMPI, and were driven 
by political concerns.  BMPI audited the Stadium construction 
and concluded, "this project has serious deviations from due 
process.  This is of particular concern bearing in mind the 
huge amount of expenditure anticipated, some N38 Billion, or 
$300 million equivalent.  However, given the delicate 
international aspects of the project and the need for Nigeria 
to demonstrate its ability to host the All African Games and 
provide a sufficient range of facilities and accommodation to 
do so, it would be politically impossible to recommend the 
project be reviewed or delayed in any way." 
 
 
12.  (C) Comment.  We join the IMF and World Bank in giving 
the GON good marks for institutionalizing due process 
regarding federal capital expenditures, and will continue to 
give the BMPI project support as it moves into the Ministry 
of Finance Budget Office.  This project has certainly limited 
the mischief in the award of government contracts.  However, 
just as water will find its way  through stone, so too will 
creative GON officials continue to find ways to manipulate 
the contracting process for personal gain.  Moreover, as long 
as the Anti-Corruption Commission "lacks teeth" (i.e., 
sufficient authority and funding) and the Code of Conduct 
Tribunal lacks independence, few will be punished for 
engaging in (or attempting to engage in) corrupt practices. 
Ezekwesili may have saved the GON USD 17 million in the case 
she cited, but no heads rolled at Power and Steel because of 
it.  In addition, allowing politics to override due process 
is a slippery slope. 
 
 
13. (S) In a private conversation, the President's Chief 
Economic Advisor, Magnus Kpakol, admitted that while BMPI has 
reduced malfeasance, plenty of opportunities for Ministers 
and other high-level GON officials to manipulate the system 
still exist.  While the BMPI may ensure that contracts are 
awarded at an appropriate price to an appropriate bidder, 
there is no mechanism in place (except if the project has 
several stages and must go through the Work Completion 
Certification) to ensure that the contract is fulfilled.  The 
way the BMPI is structured may actually encourage schemes 
that pay the full contract amount up front thus avoiding the 
site visit and work percentage requirements of the work 
completion certification (see para 6).  Additionally, clever 
operators can break a large project into several discrete 
contracts with each less than one million Naira in order to 
fall below BMPI's regulatory radar screen.  Several GON 
insiders give much credit to President Obasanjo's leadership 
against corruption and cite BMPI as an example.  Although a 
successful step forward, BMPI's due process certification has 
its gaps that are almost assuredly being exploited by corrupt 
officials.  To further the fight against misconduct in 
government contracting practices, an important step the GON 
should explore is improving its oversight of the actual 
performance of government contracts. End Comment. 
ANDREWS