Huawei Moves to Sue FG in London over $304m e-Customs Project

Huawei Technologies, one of the Special Purpose Vehicle (SPV) partners in the disputed $304 million e-Customs project, would next month sue the Nigerian government in London, over moves by the Nigeria Customs Service (NCS) to award the concession agreement to a company formed late last year as against the federal government’s approval for the engagement of a consortium led by Bionica West Africa Limited.

Since the approval of the deal, the management of NCS, which wanted a different shareholding structure and control of the SPV, had been battling the lead sponsor, resulting in litigations.

The project, initiated by Bionica West Africa Limited in 2018, with Bergman Security Consultant and Supplies Limited (representing the NCS), Huawei, and African Finance Cooperation (AFC) as partners, was approved by the federal government on September 17, 2019. This followed a memo sent to the Federal Executive Council (FEC) by the Minister of Finance, Budget and National Planning.

Acting on the memo by the Minister of Finance, Budget and National Planning to FEC for approval, President Muhammadu Buhari had vide letter SH/COS/08/10/4/225 of 17th September, 2019, granted anticipatory approval for the engagement of the Consortium Bionica Technologies West Africa Limited (Lead sponsor), Bergman Security Consultant and Supplies Limited (Co-sponsor), Africa Finance Corporation (lead financier), and Huawei (lead technical service provider), to establish a project SPV to enter a 20-year concession arrangement with NCS and ICRC for the Customs Modernisation Project (Establishment of digital/paperless Customs Administration).

But the management of NCS had been at loggerheads the lead sponsor.

It was learnt that NCS allegedly falsified documents to enable it expunge Bionica, the lead sponsor of the project, and hand same to a company allegedly formed late last year by an ally of the Customs Comptroller General, Col Hammed Ali (rtd.).

In a letter dated May 23, 2022, which was received by the president’s office on May 24, 2022, the Comptroller-General of Customs claimed that following the final vetting and approval of the concession agreement by the Attorney General of the Federation (AGF) for execution by parties, Bionica Technologies West Africa Limited, one of the co-sponsors, had rejected the approved concession agreement by the AGF as directed by FEC. He added that Bionica rejected and refused to execute the concession agreement extensively reviewed by all stakeholders and approved by the AGF.

Ali also alleged that Bergman Security Consultant and Supplies Limited and other parties had indicated their readiness to execute the concession agreement and that the technical partners (Huawei) and the lead financier AFC had confirmed their willingness to perform their roles in the Implementation of the project.

He concluded in the letter to Buhari, “In the light of the foregoing, Your Excellency is kindly invited to graciously approve that the NCS and ICRC proceed with the implementation of the customs modernisation project with Bergman Security Consultant and Supplies Limited as project sponsor, AFC lead financier and Huawei lead technical service provider under the SPV designated as Trade Modernisation Project Limited with the exclusion of Bionica Technologies West Africa Limited.”

However, documents seen by press showed that Bionica initiated the project six years ago and had put partners together, spending N5.7 billion in the process.

The NCS had in another letter to the president dated May 4, 2018, with reference number NCS. ADMMGTO18/S 15/C/ Vol VI, proposed to partner with Huawei Consortium, comprising Bionica Technologies West Africa Limited (lead promoter}, Bergman Security Consultant and Supplies Limited (co-promoter), African Finance Corporation (AFC Lead financier), Huawei Nigeria Limited as the Technical Partners with other Original Equipment Manufacturers (OEMs).

This was to be done under a PPP Concession arrangement to develop, design, implement and maintain the required e-Customs End-to-End ICT platform to digitalise Customs Business Processes and Procedures, upgrade Customs ICT infrastructure to world-class, and address NCS critical operational challenges and loopholes, management, regulation, control supervision and prevention of smuggling of goods across the country’s borders, and also effectively tackle the current national security challenges of terrorism.

Based on this, Bionica sought and got approvals from PenCom, the Infrastructure Concession Regulatory Commission (ICRC), and related government agencies and had proceeded to secure the federal government’s approval for the take-off of the project.

But things took a different twist when the Customs ignored federal government directive and made efforts to delete Bionica as lead sponsor.

In a suit filed by Bionica, which had the federal government and the Attorney General of the Federation (AGF) as respondents, the company prayed the court to intervene in the subject matter, threatening the e-Customs project expected to automate and digitalise all NCS business processes and procedures and establish a digital paperless Nigeria Customs organisation, thereby, institutionalising the use of emerging smart technologies in all NCS operations.

Despite the suit pending in the court, the NCS secretly made moves to have the concession agreement signed with a company that was formed last year

Meanwhile, Bionica’s lawyers in a letter to the AGF dated October 21, 2022, requested for the intervention of the AGF on the lingering issues on the execution of FEC-approved concession agreement, which had delayed the progress of the e-Customs project

Bionica’s lawyers stated, “Surprisingly, we received a letter from the office of the AGF of the Federation dated 17th of January, 2023, but received 19th January, 2023 directing and informing that due to the pendency of the matter in Court in suit No: FHC/ABJ/CS/848/2022 between E-customs HC projects Limited & Anor -V- Federal Government of Nigeria &ORS we should wait for the decision of the court before any possible step can be taken.”

The total cost of implementing the project was approximately  $1.896 billion, made up of Capital Expenditure (CAPEX) and Operating Expenditure (OpEX).

It was learnt that the e-Customs project would be implemented in three phases over the 20-year concession period with investment cost of about $304 million CAPEX in phase one, while the second phase would be $465.382 million CAPEX and phase three investment of $435.8 million.

The CAPEX covers each deployment phase covering Hardware, Application, Equipment, Application Implementation Service, ICT infrastructure Service, Marine Deployment and the SPV costs, while the Direct Costs for OPEX for the duration of the concession is estimated at $1.896 billion, which includes all fixed and variable costs, expenses and charges directly and completely attributable to the day-to-day operations of the e-Customs platform.

The project was to be financed through contributions from promoters’ investments and vendor finance. The proposed financing plan for the project showed that it would be financed with an initial investment of $304 million from the project sponsors, vendor finance and debt finance in phase 1.

Sources with knowledge of the deal told press that the full development and implementation of the e-customs project would generate a total revenue of $176.2 billion over the concession period and would adopt a staggered revenue sharing formula between the concessionaire and the federal government of Nigeria.