The Minister of Power, Works and Housing, Babatunde Fashola (SAN) has revealed that the Federal Government has pledged not to revoke any inherited contracts in the interest of Nigerians.
The Minister made the pledge on behalf of the government at the opening ceremony of a 3-day Nigerian Pension Industry Strategy Implementation Roadmap Retreat.
He said that the norm of reversing projects of previous governments was wrong and not in the best interest of Nigerians.
The Minister explained that: “Newly formed governments begin a review of all contracts signed by their predecessors, cancel or frustrate them even when they are performing. What I am saying is that contracts cannot be terminated or frustrated on trumped up reasons simply because a new government does not like the affiliation of the holder of the contract,”
Expanding on the effects of cancellation or revocation of contracts, Fashola asserted that “it weakens the economy, it frustrates enterprise and leads to poverty and unemployment through job losses, loans taken from banks are endangered and the knock on effect is more than we often can see on the horizon, because the bad word spreads around the global investment community very quickly like wildfire”.
“The previous government has done something wrong; they did not adequately protect the interest of the people and so on. Yes it may be the case sometimes, that the past government did not act in good faith, or even compromised or was even negligent. The answer is not cancellation, if the contract is performing. The answer is renegotiation.”
Fashola further stated that the best course of action for a new government instead of cancelling or frustrating contractors out of previously awarded contract “is to invite the holder of the contract, confront him with evidence of compromise, bad faith or recklessness, and this is easy to get if there is diligence, and you propose new terms”.
He added that: “It is a practice that is particularly prevalent on the African continent and I argue that in some part contributes to our continental deficiency of infrastructure. What they do inadvertently, is to create a climate that diminishes the sanctity of contracts, negatively affecting the ease of doing business.”
“I am not saying that government must not terminate non-performing contracts. Indeed these are rights that are standardly provided in all well-drawn contracts. This I think will enhance the reputation of the state or country or continent for honouring contracts and it is music to the ears of investors. Even then, I say, it must be sparingly resorted to, once the contract has been signed and is performing.”
“For over three decades, we have mouthed the need to diversify our economy in order to open up more sectors for productive activities, income, economic growth and jobs. But we failed to follow through because of oil resources. It was quick and bountiful income even though there were boom and burst cycles. But today’s reality is that we are in another cycle of burst. Oil prices have crashed from over $100 per barrel, and it is now hovering around $30 per barrel and there is a real chance that it will fall lower. Every time the cycle burst, we scampered, and promised to diversify, we take tentative steps, we feel pain. We do not endure, and it is easy to escape because not too far on the horizon is a boom in oil prices and we go back to an old life,” Fashola lamented.