Highlights of Third Interim Report of Committee on Audit of Defence Equipment Procurement in the Nigerian Armed Forces from 2007 – 2015

INTRODUCTION

In continuation of its assignment, the Committee on Audit of Defence Equipment Procurement (CADEP) in the Nigerian Armed Forces, analysed procurement contracts awarded by or for the Nigerian Army between 2007 and 2015. The Committee so far noted that within the period under review, the sum of N71, 775,313,451.30 and $685,349,692.49 were spent on Nigerian Army procurement by the Ministries of Defence, Finance, Foreign Affairs and Environment. Others were NNPC, CBN and the Office of the National Security Adviser (ONSA). Additionally, some state governments, notably Adamawa, Kano and Yobe as well as Federal Ministries of Finance and Power, funded Nigerian Army operations with the sum of N114, 067,739,113.00. The contributions made by other states such as Borno, Plateau among others were not available as at the time of writing this report. Therefore, the total amount spent for procurement and operations within the period under review were N185, 843,052,564.30 and $685,349,692.49.

MINISTRY OF DEFENCE AND NIGERIAN ARMY PROCUREMENT

The Committee found that between 2007 and 2008, the Nigerian Army procured some equipment, arms and ammunition that were funded by the NNPC. The contracts were well documented, followed due process and satisfactorily executed. However, the Committee observed that some of the subsequent procurement undertaken by the MOD and Nigerian Army substantially breached provisions of the Public Procurement Act (PPA) 2007.

The Committee reviewed some of the Nigerian Army contracts awarded by MOD for the period under review. The contracts included the procurement of assorted ammunition, 20 units of K-38 Twin Hull Boats and 6 units of 4 x 4 Ambulances fitted with radios awarded to DYI Global Services Ltd and Doiyatec Comms Nig Ltd in which Mr Amit Sade has controlling shares.

The contracts for the procurement of assorted ammunition and 20 units of K-38 Twin Hull Boats were awarded on 6 October 2008 at the cost of N2, 730,000,000.00 and N3, 120,000,000.00 to DYI Global Services Ltd and Doiyatec Comms Ltd for UN Peace-Keeping and Niger Delta Operations respectively. However, the Committee noted that BPP had earlier raised observations on the competence of the contractors to MOD but its observations and advice were ignored. DYI Global Services Ltd had been paid N2,593,500,000.00 representing 95% with the delivery of ammunition worth N1,744,183,705.31 only (representing 63%). Doiyatec Comms Ltd was paid N2, 496,500,000.00 representing 80% with the delivery of only 8 out of the 20 boats worth N1, 248,000,000.00 representing 40%. The Nigerian Army Technical Assessment Report revealed that these 8 boats did not meet the operational requirements and the Nigerian Army spent the sum of N106, 795,014.00 to make them suitable and operational. The third contract was for the procurement of 6 units of 4 x 4 Ambulances fitted with military radios awarded to DYI Global Services Ltd on 31 August 2010 at the cost of N90, 000,000.00. The company collected 15% mobilization fee of N13, 500,000.00 on 31 December 2010 but yet to deliver a single ambulance.

While the 2 companies collected N5,103,500,000.00 representing 86% of the total value of the 3 contracts amounting to N5,940,000,000.00, they only performed to the tune of N2,992,183,705.31. Furthermore, the Committee found that the terms of payment in the contract agreement for the procurement of the K-38 boats was fraudulently structured in favour of the contractor by making the inspection of manufacturer’s facilities a condition for the payment of 40% (N1, 248,000,000.00) of the contract sum. It was also discovered that MOD staff raised documents approving payments when it was obvious that the contractors had not performed, thereby suggesting connivance between MOD officials and the contractors. The then MOD officials, Dr Haruna Sanusi, Bukar Goni Aji, EO Oyemomi, BO John, Buba M Gamawa, Abdulrazak Salau, Mrs Josephine N Opara, Tajudeen G Fetuga, Abdullahi Maikano and CEO Doiyatec Comms Ltd, Mr Amit Sade need to be further investigated to establish their complicity or otherwise. The Committee is of the opinion that DYI Global Services Ltd and Doiyatec Comms Ltd should be made to jointly refund the sum of N2, 260,925,479.15, Withholding Tax (WHT) and any accruing interest on the amount collected for items not delivered. The 2 companies should also be blacklisted.

Nigerian Army awarded contracts totaling N700,000,000.00 and $63,349.470.00 to Suncraft International Ltd and Singapore Kinetics Technologies Ltd between 9 January 2007 and 6 May 2009 for the retrofitting of MK1 Fast Patrol Crafts and procurement of 50 Scorpion Fast Patrol Crafts respectively. The Committee established that the Nigerian Army deducted N35, 000,000.00 as 5% WHT on the Suncraft International Ltd contract. However, there was no evidence to show that the deducted amount was remitted to FIRS. Col AA Abubagaji and Lt Col EL- Hussaini Boyi (rtd) who effected the payment should be made to account for deducted WHT.

The MOD, between 29 April 2005 and 19 October 2010, awarded 2 contracts to Progress Limited for the supply of 42 units of BTR-3U APCs and spare parts to the Nigerian Army. Neither the MOD nor the NA could provide the contract agreements to ascertain the cost of the APCs. However, a Nigerian Army Audit Report stated that the contractor exploited the non-inclusion of specific spares list in the contract agreement and failed to deliver the requisite spare parts that were to accompany the 42 units of the APCs. Fundamental issues raised on the status of the APCs by the plant representative at the Kiev Engineering Plant in Ukraine were ignored. Delivery commenced in 2007 and quantities 26 of the delivered APCs were immediately deployed to UNAMID for Peace Keeping Operations but scandalously, broke down on induction.

The unfortunate situation necessitated the award of another contract to the same company on 19 October 2010 by the MOD for the procurement of major spare parts for the repairs of the APCs at the cost of $162,089.84 only. However, only a few quantities of the items needed for the maintenance of the APCs were delivered. For instance, only 4 out of the 84 contracted units of tyres were delivered and found to have expired. The Committee observed that the APCs did not meet the operational requirement for the Nigerian Army. Furthermore, the breakdown of the APCs on deployment to UNAMID caused Nigeria international embarrassment and deprived her appropriate re-imbursement from the United Nations. The then Permanent Secretary and DFA MOD, Dr Haruna Usman Sanusi and Mr Jonah Ogunniyi Otunla as well as CEO Progress Ltd should be held accountable for these infractions.

The MOD awarded Bamverde Nig Ltd a contract for the procurement of 3 units of Charlie Horse Level-1 Field Hospital on 12 January 2011 at the cost of N1, 241,129,497.62 at a unit cost of N413, 709,832.54. Although the contract was awarded by MOD, payments were effected by the Nigerian Army. The company was paid a total of N827, 419,656.08 for the 2 Charlie Horse Level-1 Hospitals that were delivered and deployed to the NE. However, there was no evidence of payment of WHT amounting to N41, 370,982.80 by the vendor. The Committee noted that the balance of N413, 709,832.54 for the procurement of the third hospital was in the accounts of Nigerian Army. The CEO Bamverde Ltd, Col Olu Bamgbose (Rtd) should be held accountable for none payment of the WHT.

MOD awarded 2 contracts to TS-Y International Ltd for the procurement of spare parts for Artillery guns between November 2008 and December 2009 at the total cost of N549,059,400.00 only. The contracts were vendor driven, executed and fully paid without recourse to the Nigerian Army. The Committee found that the delivered spare parts have remained in Nigerian Army stores for the past 6 years unutilized. This is a clear case of waste of public funds. Furthermore, there was no proof of payment of 5% WHT amounting to N27, 452,970.00 to FIRS. The then Permanent Secretaries and DFA MOD, Dr Haruna Usman Sanusi, Alhaji Bukar Aji Goni and Mr Abdullahi Maikano as well as CEO TS-Y International are to be held responsible for their roles in this procurement.

Four contracts were awarded to Barnes and Tubbies for the procurement of assorted arms and ammunition between 8 November 2007 and 4 July 2014 at the total cost of N1, 563,657,100.00 and $14,493,651.20. The Committee noted that the Nigerian Army included payments of VAT and WHT in the $14,493,651.00 contract agreement. It was further observed that the inclusion of VAT in the contract agreement was irregular. Furthermore, there was a Presidential approval granting waiver for payment of import duty, pre-shipment inspection and associated taxes only for the N1, 081,625,600.00 contract. Nonetheless, the Committee observed that the vendor failed to pay N71, 008,855.00 and $724,682.60 for all the contracts claiming that the waiver granted for the import duty also exempted it from payment of WHT. The Committee found the vendor’s reason untenable as there is no law exempting any entity from payment of WHT.

MOD awarded a contract to Dalfam (Nig) Ltd for the procurement of assorted weapons for the Nigerian Army on 9 December 2010 at the cost of N240, 082,162.00. However, Dalfam Ltd sub-contracted this procurement to Hadassa Investment Security (Nig) Ltd after receiving payment of 15% mobilization fee, amounting to N36, 012,324.30. Nigerian Army rejected the weapons on delivery as they were found to be refurbished. This generated some controversies but it was eventually resolved and the contractor promised to replace the refurbished weapons with new ones. Sadly, the weapons have not been delivered till date. The Committee observed that both contractors were not competent to deal in the procurement of arms and ammunition. Consequently, CEO Dalfam Nig Ltd, Alhaji Maisudan Bello Mohammed should refund the 15% (N36, 012,340.30) mobilization fee and any accrued interest.

The contract awarded to Barnes and Tubbies on the 4 July 2014 at the cost of N143, 480,000.00 made provision for 80% mobilisation amounting to N114, 784,000.00, which was paid before the signing of the agreement. The contractor failed to execute the contract and it was consequently terminated. Despite the termination, the contractor failed to refund the N114, 784,000.00 earlier collected. It took the intervention of the Committee for the contractor to refund the money to the Federal Government Funds Recovery Account at the CBN on the 12 April 2016. The Committee therefore recommends that Barnes and Tubbies should refund the $724,682.60 unlawfully included in the contract sum as VAT as well as all the WHT due. Maj Gen AI Muraina (rtd), Mr Tajudeen Gbenga Fetuga and CEO Barnes and Tubbies are to be held responsible for the observed lapses.

The MOD awarded 2 contracts amounting to N420, 726,799.20 to Baram International Nigeria Limited between 29 March 2011 and 17 June 2014 for the procurement of 53 Armoured Vehicles Spare Parts at the cost of N169,916,849.77 and that of Ballistic Vest, Night Vision Binoculars and 3 Unmanned Aerial Vehicles at the cost of N250,809,949.50. The Committee observed that the contracts were awarded without recourse to the Nigerian Army, to a vendor who lacked the necessary technical competence. Sadly, the contract worth N169, 916,849.77 with 90 days completion time was yet to be completed 5 years after. The Committee is of the opinion that the then Permanent Secretary MOD, Mr EO Oyemomi and CEO Baram International Nig Ltd Alhaji Gujja Attom, be held accountable.

Nigerian Army awarded 9 contracts to China North Industries between 20 August 2013 and 2 January 2014 for the procurement of various arms and ammunition at the total cost of $9,358,637.00 only. Out of the 9 contracts 7 were funded. Prior to the contract awards, the then COAS, Lt Gen OA Ihejirika (rtd) led a delegation of officers (who were not specialists on arms and ammunition) to China, where he personally selected the arms and ammunition, without due diligence. The Committee found through a member of the delegation that the COAS used ‘common sense, intuition and instincts’ in making those decisions. There were no ammunition receipt inspection and arms technical reports to determine the operational suitability, serviceability and shelf life of the items. Furthermore, it was observed that all fund transfers were made through Westgate Global Trust Ltd instead of CBN to the then Defence Attache (DA) Beijing, China, who then credited China North Industries. The Committee noted that transfer of funds overseas through official channels was not a challenge for government agencies at the material time. The process of award, procurement and payments were very unprofessional and unethical. Consequently, Lt Gen OA Ihejirika (rtd) and Maj Gen AI Muraina (rtd) should be held accountable accordingly.

Nigerian Army awarded 2 contracts to Hadassa Investment Security (Nig) Ltd on 3 August 2010 and 19 September 2011 for procurement of Twin Free Fall and Airborne Training Parachutes for Independent Day Celebration and Airborne Training respectively at combined cost of N290, 300,000.00. The Committee noted that only 44% of the items for the Airborne Training Parachute contracts worth N61, 859,910.13 were delivered while 56% of the items worth N78, 440,090.15 were outstanding. Although there was proof of payment to the vendor, there was no evidence that the accrued WHT on the full payments amounting to N14, 650,000.00 had been paid. The Committee is of the opinion that Hadassa Investment Security (Nig) Ltd should refund the sum of N78, 440,090.15 being the worth of items not delivered and WHT totalling N93, 090,090.15. Lt Gen OA Ihejirika (rtd), Maj Gen AI Muraina (rtd) and CEO Hadassa Investment Security Ltd should be held accountable for the poor execution of the contract.

The Committee found that between 2011 and 2014, the Nigerian Army awarded 11 contracts worth N872, 140,500.00 for procurement of arms and ammunition as well as highly technical and specialised military equipment to Clover Nig Ltd. The contract for procurement of 1000 pieces of Tisas Zigana Pistol with 100,000 rounds of ammunition at the cost of N266, 875,000.00 was vendor-driven and without need assessment hence, all the procured quantities remained in the stores unutilised for about 2 years after delivery.

Furthermore, the vendor in collaboration with Nigerian Army processed importation of another single pistol supposedly as a sample for evaluation after delivery of the 1,000 pistols. However, the Committee confirmed that the ‘sample’ was personally customized and officially issued to Lt Gen KTJ Minimah (rtd), the then COAS who had not returned it even after his retirement. The Committee found that the vendor was fully paid before delivery of the items and fraudulently attempted to collect another 30 per cent of the contract sum. The Committee is of the opinion that the procurement of this weapon was wasteful and a misplacement of priority as the expended sum could have been better utilized for more pressing needs. Thus, there is need for further investigation of the unlawful importation and possession of firearms as well as attempt at double payment by Clover Nig Ltd. Lt Gen KTJ Minimah (Rtd), Maj Gen U Buzugbe (Rtd) and CEO Clover Nig Ltd should be held accountable accordingly.

The Committee reviewed the procurement carried out by Chok Ventures Ltd and Integrated Equipment Services Ltd, 2 companies that shared the same registered office, had one Chinedu Onyekwere as common controlling shareholder and sole or mandatory signatory to the various banks accounts of the companies. The Committee further established that between March 2011 and December 2013, the 2 companies exclusively procured various types of Toyota and Mitsubishi vehicles worth over N2, 000,000,000.00 for the Nigerian Army without any competitive bidding. Most of the contracts awarded to the companies were also split, awarded on the same date or within a short space of time at costs and mobilisation higher than the prescribed thresholds. For instance, on 15 Feb 13, the 2 companies were awarded contracts worth N260, 000.000.00 and N315, 000,000.00 respectively for supplies of various vehicles. The Nigerian Army could not justify the exclusive selection of these vendors against other renowned distributors of same brands of vehicles procured.

More seriously, the Committee found no credible evidence of delivery of the vehicles by the 2 companies as there were no receipt vouchers but only unauthenticated delivery notes, invoices and waybills that were purportedly used for the deliveries. Nevertheless, the vendors were fully paid based on job completion certificate authenticated by the then Chief of Logistics, Maj Gen DD Kitchener (rtd). The payment was also made without deduction of WHT. Furthermore, analyses of the various banks accounts of the 2 companies showed transfers to individuals such as Raymond Ihejirika, Nkechi Ihejirika, Ndubuisi Ihejirika, Orji Ihejirika, Kingsley Ihejirika and Naomi Onyeabor. Thus, the Committee recommends further investigation to determine delivery of the vehicles and relationship of funds beneficiaries with Lt Gen OA Ihejirika (rtd) the former COAS and the 2 companies. Furthermore, Lt Gen OA Ihejirika (rtd), Maj Gen DD Kitchener (rtd), Col AM Inuwa and Mr Chinedu Onyekwere should be held accountable for the issues arising out of the contracts.

Nigerian Army awarded contracts to DICON between 19 September 2013 and 11 September 2014 amounting to N4, 329,985,000.00. The contracts were for the procurement of Igirigi and Spartan APCs; arms and ammunition. The Committee noted that 5% each of VAT and WHT were provided for in the contract agreements. It was further observed that DICON did not provide advance payment guarantees for mobilization fees received and there were no pre-shipment inspections conducted for all the contracts. In some of the contracts, payments were made to DICON before award letters or contract agreements were signed. It was also noted that DICON sub-contracted the contracts to foreign companies at costs far less than the amount Nigerian Army paid DICON. For instance, the contracts for the procurement of 40 units of NSVT Heavy Machine Gun with accessories and 10 units of Igirigi APCs were sub-contracted to Kennedy Logistics Ltd and Streit Group FZE at the cost of $1,597,500.00 and $1,850,000.00 respectively. The contracts were awarded to DICON at the cost of $2,237,000.00 and $3,450,000.00 resulting in price differentials of $781,000.00 (33%) and $1,600,000.00 (46.4%) respectively. However, DICON failed to explain utilization of these differentials to the benefit of the Company.

Furthermore, the post-delivery Technical Inspection Reports revealed that the APCs, over aged and unlinked ammunition were unsuitable for the NE operation. For instance, only One Million out of the 2 Million rounds of 7.62 x 51mm Ball had been linked till date. The APCs also had inadequate support spare parts, maintenance support equipment, ergonomics, operators’ training and were not amoured plated enough to withstand medium and heavy calibre weapons. Despite these deficiencies, the then COPP Maj Gen U Buzugbe (rtd) authorised the full payment to DICON. One of the Igirigi APCs was destroyed by RPG-7, killing a Colonel inside. As at 13 May 2016, only one of the 10 Igirigi APCs deployed to NE was serviceable. The same observations were made against the Spartan APCs. The Committee noted that despite the observations made in the technical reports, DICON was paid in full for all the contracts without deduction and payment of 5% each of WHT and VAT totalling N462, 541,000.00 that were provided for in the contracts. Thus, the contributions of the Igirigi and Spartan APCs to the NE operations were abysmal as attested to by the field commanders who appeared before the Committee.

The Committee discovered that suspicious transactions to the tune of N845, 600,000.00 and $3,450,619.00 were made from DICON’s domiciliary and Naira accounts with Fidelity Bank. Out of this amount, the then DG DICON`, Maj Gen ER Chioba (rtd), personally withdrew N81, 000,000.00 and $131,740.00 in cash from the accounts. The sums of N764, 600,000.00 and $3,318,879.17 were also transferred to the accounts of Lava Trade Ltd, 7×7 Ltd and Oranto Petroleum Ltd. The explanations offered by Maj Gen ER Chioba (rtd) that the transfers were payments of services and foreign exchange were unconvincing as there was no evidence of formal business relationship between DICON and these companies. Consequently, the Committee opines that the poor procurement process associated with DICON contracts contravened financial regulations, encouraged illegal withdrawals leading to wastage of public funds, diminished capacity of the Nigerian Army in the campaign against terror and served as a conduit for misappropriation of entrusted funds. The Committee is of the view that Lt Gen OA Ihejirika (rtd), Lt Gen KTJ Minimah (rtd), Maj Gen AI Muraina, Maj Gen U Buzugbe (rtd) and Maj Gen ER Chioba (rtd) are to be held accountable.

NIGERIAN ARMY PROCUREMENT FUNDED BY MINISTRIES DEPARTMENTS AND AGENCIES

The ONSA on 13 May 2013 requested funds for the conduct of Operation BOYONA aimed at dislodging terrorist camps along the common borders with Cameroun, Chad and Niger. Consequently, the government released N1, 340,000,000.00 from the Ministry of Foreign Affairs which were disbursed to DHQ and the Services accordingly. In August 2013, ONSA requested and got approval for additional N2, 000,000,000.00 for logistics requirements and sustenance of troops, which was credited to ONSA’s account. However, DHQ and the Services confirmed non receipt of any additional funds for Operation BOYONA. The Committee is of the view that the then NSA, Lt Col MS Dasuki (rtd) should be made to account for the N2, 000,000,000.00.