A Review Of The Purported Contract Between Etha Pharmaceuticals Limited And Association Of Local Governments Of Nigeria (ALGON): A Call By Human Rights Writers Association Of Nigeria On Nigerians To Rise Up And Stop Any Attempt To Defraud Local Gov't

Nigeria is the world’s sixth largest producer of crude oil with a very high income earning though just about 17% of its GDP being the fourth largest sector of its economy. In fact following an April 2014 “rebasing”, Nigeria emerged as the largest economy in Africa with 2014 GDP of US$479 Billion with an interesting estimated annual growth rate of 6-8% driven largely by agriculture as the largest sector, wholesale as the second largest, and retail and services as the third. The Local Government Councils take a third share of the income so generated.

However Nigeria has over 70 percent of its population below poverty line and62 per cent of its 170 million people living in extreme poverty, a fact largely attributable to corruption and mismanagement of resources. It has been observed that all Local Governments in Nigeria do not spend the funds allocated to them by the Federation Account Allocation Committee (FAAC) for the development of their areas. The argument has been long on for granting autonomy to the Local Governments to severe them from the unholy yoke to the States that mostly squander their resources as the managers of the Local Government Councils.

The strength of this argument is however being weakened by the near-shame performance of the Local Governments as dictated by the Association of Local Government of Nigeria (ALGON). A ready reference point is the subject-matter of the case of ETHA PHARMACEUTICALS LIMITED V. ASSOCIATION OF LOCAL GOVERNMENT OF NIGERIA (ALGON) recently decided by His Lordship, Hon. Justice Y. Halilu of the High Court of the Federal Capital Territory sitting at Jabi.

This work is a review of the purported contract in that case in the light of the status of the Local Government Councils vis-à-vis its relationship with ALGON.

In that case the Plaintiff (Etha Pharmaceutical Limited) sued the Defendant (ALGON) at the High Court of the Federal Capital Territory Abuja through a writ of summons under the Undefended List Procedure claiming the following reliefs:

a. The sum of $147, 500,000 (One Hundred and Fourty Seven Million, Five Hundred Thousand US Dollars) only , being the money owed to the Plaintiff by the Defendant for 10,000,000 packs of Plexi Breast Self-Examination Device, which the Plaintiff supplied to, and at the instance of the Defendant at the unit of $14.75 per pack.

b. Cost of Action.
c. Interest of 10% per annum from the date of judgment until the judgment debt is fully liquidated.

The Defendant filed its Notice of Intention to Defend supported by a 35 paragraph affidavit on 24/3/2015.

However on 14/4/15 the court struck out all pending applications by the Defendant for lack of diligence, discountenanced the Notice of Intention to Defend for being filed out of time without regularization and accordingly entered for the Plaintiff as per its claims.

Brief Summary of Facts
The case of the Plaintiff as made out in the writ of summons and the affidavit in support is that it was awarded contract for the supply of 10,000,000 (Ten Million) packs of Plexi Breast Self-Examination Device (PBSED) at a unit price of $14.75 and a total contract rate of $147,500,000 (One Hundred and Fourty Seven Million, Five Hundred Thousand US Dollars). Payment, according to the Plaintiff, was agreed to be on this wise: initial 25% of the total contract sum to be deducted from the Local Government Joint account with the Federal Ministry of Finance upon execution of the contract subject to the provision of Bank Guarantee from a reputable Bank in Nigeria and that 75% balance to be paid within 24 months by deduction at source from Local Government Joint account with the Federal Ministry of Finance.

It was the contention of the Plaintiff that it completed the supply of the contract goods by March 2014 where upon the Defendant issued various acceptance certificates annexed as Exhibits EPL 8, EPL 9, EPL 10, EPL 11A, EPL 11B, EPL 11C, EPL 11D.

Defendant however denied entering into the contract.

Analysis of the Contract
This work is not concerned with legal technicalities and the merit or otherwise of the judgment of the case but the raw facts of accountability of government and the legality or otherwise of the alleged contract between the parties in the case in the light of the relationship.

We shall however use the documents of the case as our reference sources for facts.

Was there actually a valid contract? Was it performed?

The Plaintiff referred to the following documents which are relevant to the issues under the heading:

1. Letter dated 29/6/2010 from ALGON to the President of Nigeria requesting for Partnership with the Federal Ministry of Health (Exhibit EPL1). This letter did not state that ALGON would make contract for the Local Government. It is clear that it cannot make contract for them. ALGON was to engage them towards the project and by implication, any relevant contract. It states:

“The Association of Local Government of Nigeria (ALGON) is desirous of embarking on a campaign against breast cancer in the rural areas of the Federal Republic of Nigeria.

The Association shall be willing to engage all the Local Government Councils of the Federation for the purpose of procuring the breast cancer Self Examination Check Kit.” (emphasis provided).

2. Exhibits EPL 5 dated 15/11/10 is the purported Agreement between the parties.

3. Exhibit EPL 6 dated 01/12/10 is Authority to Issue Irrevocable Standing Payment Order (ISPO) from ALGON to the Hon. Minister of Finance and states:

we write to authorize the issuance of an Irrevocable Standing Payment Order (ISPO) in favour of Etha Pharmaceuticals Limited in respect of the contract for the supply of Ten Million Packs of Breast Self-Examination Kit (Plexi Breast Check) to ALGON valued at $147, 500,000.00 only.”

4. Exhibit EPL 7 is Instruction to Deduct at Source in Respect of ‘ALGON BREAST CANCER PREVENTION AWARENESS CAMPAIGN’ from ALGON to the Hon. Minister of Finance dated 9/12/10. It states in part:

“We the Association of Local Governments of Nigeria (ALGON) hereby issue this Irrevocable Mandate to deduct at source from our account with the Federal Ministry of Finance in respect of the contract for the supply of Plexi Breast Self Examination Device in favour of Etha Pharmaceuticals Limited.”

The Minister of Finance refused to honour Exhibit 7 but that such be supported by a National Executive Committee (NEC) Resolution of ALGON. ALGON then did Exhibit EPL 7A headed ALGON National Executive Committee (NEC) Meeting Thursday, December 9, 2010 signed by 24 persons.

Exhibits EPL11, EPL 11A, EPL 11A, EPL 11B, EPL 11C, EPL 11D are Certificates of Acceptance issued by the Secretary General of ALGON acknowledging receipt of a total of 10, 000,000 (Ten Million) packs of Plexi Breast Self-Examination Device from Etha Pharmaceuticals Limited.

1. Due Process was not followed in the award of the contract. Both the internal process to obtain the approval of the Local Government Councils and law generally were flouted.

a. This capital intensive project of $147, 500,000 (even calculated by a dollar to a conservative two hundred naira is N29, 500,000,000 ie Twenty-Nine Billion, Five Hundred Million Naira) did not have the backing of the resolution of the NEC of ALGON from the outset. The purported resolution of 9/12/10 was only hurriedly done by a few persons as an afterthought to ensure and secure illegal payment from the Federal Ministry of Finance.

b. ALGON was to engage and sell the idea of the Cancer Prevention Campaign and purchase of the Cancer Self Examination Devices to the Local Government Councils which it never did. ALGON was not and cannot make contract for the Councils without their express approval.

The affidavit of the ALGON president further states at paragraph 6:

that the Defendant, even though is body of willing Local Governments in Nigeria, has no powers whatsoever to make decisions that will bind all 774 Local Government and Area Councils in Nigeria given that every Local Government and/or Area Council is distinct and enjoys individual corporate personality.”

Paragraph 11there of states that:
That following the issuance of Exhibits EPL 6 and 7, the Federal Ministry of Finance requested a written consent from all the 774 Local Governments and Area Council in Nigeria before it can give effect to the ISPO and the authority to deduct at source. …”

Note: Exhibit 6 is Authority to Issue an Irrevocable Standing Payment Order (ISPO) from ALGON to Minister of Finance and Exhibit 7 is Instruction to Deduct at Source.

It is our view that ALGON cannot by a purported resolution of 24 persons, hereby considered even as after-thought, contract to bind all 774 Local Government Councils and apply for deductions from the account of all the Local Government Councils. The rule of privity of contract simply states that the benefits and burdens of a contract are only enjoyed and borne by the parties to the contract. The monies of the Local Government Councils belong to the individual Councils and not ALGON as an association.

This is clear from the provision of the Constitution of the Federal Republic of Nigeria and relevant subsidiary legislation. Although the Constitution provides for “State Joint Local Government Account” under section 162(6) into which shall be paid all monies belonging to those Local Government Councils, section 162(8) is explicit that each Local Government Council enjoys its separate share from the pool. It provides:

“The amount standing to the credit of local government councils of a State shall be distributed among the local government councils of that State on such terms and in such manner a may be prescribed by the House of Assembly of the State.

The corollary of this separate ownership right by each Local Government Council is that each of them has the right to allocate it to their needs as necessary. Not even the States which exercise supervisory roles over the Councils can dictate how the Councils should spend their money let alone ALGON which is a mere association. ALGON cannot arrogate to itself the powers which even the States lack. That is illegal. Each of the Local Government Councils must rise to challenge it. It is further advocated that the States directly under which the Local Government Councils function must respond to this face of fraud within the powers granted them by law.

By Section 1(1) of the Monitoring Of Revenue Allocation To Local Governments Act, 2005:

“Each State of the Federation shall establish a body to be known as the State Joint Local Government Account Allocation Committee (hereinafter referred to as "the Committee).”

Section2 of the Act further provides for the function of the Committee in the following words:

“The functions of the Committee shall be to:

(a) ensure that allocations made to the Local Government Councils in the State from the Federation Account and from the State concerned are

promptly paid into the State Joint Local Government Account;

(b) ensure that the funds paid into the State Joint Local Government

Account under paragraph (a) of this section are distributed to the Local

Government Councils in accordance with the provisions of the Constitution of the Federal Republic of Nigeria 1999 and any law made in that behalf by the House of Assembly of the State; and

(c) monitor the payment and distribution of the funds mentioned in

paragraphs (a) and (b) of this section so as to ascertain the actual amount paid to each Local Government.”

Section 7 (1) of the Act forbids the re-allocation of funds of the Local Government thus:

“It shall be unlawful for any organ, authority or official of a State or the Federal Capital Territory, however described or constituted, to alter, deduct or re-allocate funds standing to the credit of the State Joint Local Government Account or the Federal Capital Territory Joint Area Councils Account.”

Moreover the Federal Government must perform its avowed role in respect of probity at all levels of governance in Nigeria. President Buhari is forthwith reminded of his promise during his inauguration where he said:

Elsewhere relations between Abuja and the states have to be clarified if we are to serve the country better.

Constitutionally, there are limits to powers of each of the three tiers of government but that should not mean the Federal Government should fold its arms and close its eyes to what is going on in the states and local governments.

Not least the operations of the Local Government Joint Account, while the Federal Government cannot interfere in the details of its operations, it will ensure that the gross corruption at the local level is checked.

As far as the constitution allows me, I will try to ensure that there is responsible and accountable governance at all levels of government in the country.

For I will not have kept my own trust with the Nigerian people if I allow abuse under my watch.’’

The President must have the courage to ensure that this defrauding of the Nigerian rurals in the guise of contract is frustrated to the benefit of the Nigerian people more so that ALGON has become notorious in squandering the meager resources of the poor. In the twilight of the administration of the President Olusegun Obasenjo, the whooping sum of 18 Billion Naira was deducted from the Local Councils account for contract allegedly awarded to Mathan Nigeria Limited for the construction of health care centre in each of the 774 Local Government Areas which never happened. But on assumption of office President Yar’Adua intervened and ordered it the so called contract stopped.

We thus align with the Comrade Governor of Edo State when on Thursday July 25, 2013, he queried deductions from the Local Government Account in the name of contracts awarded in favour of the Local Government Councils. He said:

“as you are aware, we have on your behalf also asked our lawyer to file a suit challenging the right of ALGON to any one purportedly acting on their behalf at the national level to deduct directly from the federation account in the name of ALGON. I believe that ALGON is a voluntary association, it is the local government equivalent of the Governors’ Forum, states make their contribution on voluntary basis, you cannot ask the Accountant-General to deduct from source ALGON money and we believe it is meant to enrich a few individuals.”

c. The third part of our observation here is that the due process of law for the award of the contract was not followed. Assuming without conceding that ALGON can make contract for the Local Government Councils after necessary internal procedure is followed by obtaining the approval of all the Councils, such contract since is on behalf of the government, it has to go through the procedure for public procurement.

Section 15(1) of the Public Procurement Act CAP.P44, LFN2004 makes clear the application of the Act. It provides:

“The provisions of this Act shall apply to all procurement of goods, works and services carried out by-

(a)The Federal Government of Nigeria and all procurement entities;

(b)All entities outside the foregoing description which derive at least thirty-five per cent of the funds appropriated or proposed to be appropriated for any type of procurement described in this Act from the Federation share of Consolidated Revenue Fund.”

Section 60 of the Act defines procurement entity to mean:

“any public body engaged in procurement and includes a Ministry, extra-ministerial office, government agency, parastatal and corporation;”

The section further defines public procurement as “the acquisition by any means of goods, works or services by the government.” These definitions are broad and clear enough to bring ALGON for the Local Government Councils under the Act.

Sections 23, 24, 25, 27, 30, 31, 32, 33, 34, 36 of the Act stipulate the procedure for Public Procurement from invitation to bid, submission of bid, acceptance, domestic preferences and approval. Section 36 specifically provides that:

The provision of a Performance Guarantee shall be a pre-condition for the award of any procurement contract upon which any mobilization fee is to be paid, …..”

All these were not taken into cognizance in the purported contract under review. The implication is that cost effectiveness, quality or standard assurance of the goods and domestic preferences contemplated and enshrined in the law were all jettisoned in the award of the contract that now seeks to gulf an amount which is equivalent of one-third of average whole monthly revenue allocation to all the Local Government Councils in Nigeria.

2. The contract did not benefit the Local Government Councils

Although there is a purported acknowledgement of the supply of a total number of 10,000,000 packs of the Plexi Breast Self-Examination Device, only a megre number are acknowledged received by various States Offices and none is acknowledged received by the Local Government Councils.

A division of the total number of Plexi Breast Self-Examination Device being 10,000,000 by the total number of Local Government Councils in Nigeria being 774 Local Government Councils will give at least 12,919 packs to each Local Government Council. But in the purported acknowledgement of delivery by the various states, no State as a whole got up to 50,000 of the devices which each Local Government Council ought to get at least 12,919.

The fraud of the contract is more evidently revealed in the light of the foregoing that most of the acknowledgements in Exhibits EPL12 to EPL12M are a far cry from the number each Local Government ought to get in terms of the total number of 10,000,000 allegedly delivered assuming without conceding that they were actually delivered.

The Letter of Award of the alleged contract, Exhibit EPL 4, states at paragraph 2:

You are to deliver all the goods within 12 months of coming into force of the contract agreement and payment of the first installment.

The purported Agreement attached as Exhibit EPL5 is dated 15th November 2010. It means the agreement came into force on that date. However Paragraph 5 of the Affidavit sworn by Felix Akhabue, President of ALGON in 2010 in support of the Notice of Intention filed by the Defendant (ALGON) states:

during my term as ALGON president (at which time Exhibit EPL5 was purportedly contracted), that no such contract between the Plaintiff and the Defendant crystallized.”

Defendant alleges that there was no Secretary General when Exhibits 8 (Request for Payment) and 10 (Demand for Payment) were purportedly received by the Defendant and that Exhibit EPL 9 (Acknowledgement of supply and promise of payment by Secretary General of ALGON) did not emanate from Defendant.

Paragraph 29 of Affidavit in support of Notice of Intention to defend says:

That at about 2pm on the 13th day of March 2015, I was informed by Mr. Micah Y. Jibah, the current national president of the Defendant at the National Secretariat of the Defendant in Abuja of the following facts which I verily believe to be true that:

i. Upon receipt of the Plaintiff’s Exhibit EPL 13, he caused an investigation to be made on the allegations therein.

ii. His investigation revealed that none of the 774 Local Governments and Area Councils in Nigeria received any unit of the kits allegedly supplied by the Plaintiff.

iii. Sensing fraud and collusion, and view of the towering amount of money being claimed, he wrote a letter to the President of the Federal Republic of Nigeria urging him to cause an inquiry to be made into the case. Now shown to me and marked Exhibit AL 2 is the said letter.”

Whether or not these depositions are true, they strengthen our view that they cannot allow any deduction from their account for what they don’t know about and for purported supplies which they did not get. In other words, they was no benefit conferred on them to demand or require a reciprocal performance of obligation from the Councils.

We hold a strong view that the Local Government Councils are established with their funds under their respective controls.

It is further our considered view that ALGON is a mere association that cannot make contract to be funded from the account of the Local Government Councils without the express approval of all the Councils in that regard.

It is further our strongly held opinion that any contract by ALGON on behalf of the Local Government Councils for procurement should comply with the Public Procurement Act otherwise it will qualify as illegal contract not enforceable in law.

Finally we submit that there was actually no benefit conferred on the Local Government Councils from the purported contract between Etha Pharmaceuticals Limited and ALGON to warrant any deduction or payment from the accounts of the Local Government Councils.

NATIONAL Coordinator.

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Articles by Emmanuel Onwubiko