Central Bank of Nigeria has said that its foreign reserves have grown by $200 million after a London court ordered the release of a guarantee put in place as security for a failed gas project. Nigeria’s dollar reserve has lost 15% of its value in the last year and has come under pressure as demand for hard currency soared after the coronavirus pandemic triggered a collapse in the price of oil, the country’s main export.
In November, the Nigerian government deposited a bank guarantee of $200 million with a high court in London to secure a stay on asset seizures of up to $9 billion related to a failed gas project. Process & Industrial Developments (P&ID), a firm based in the British Virgin Islands set up solely to build a gas processing plant in Nigeria, won a $6.6 billion arbitration award after the 2010 deal collapsed. The award has been accruing interest since 2013.
Nigeria successfully sought the right to appeal a ruling last year that would have converted the arbitration award to a judgment, which would make it easier for P&ID to seize its assets. It has said it would fight making any kind of payment to P&ID.
The central bank said the court awarded a 70,000-pound cost in favour of Nigeria in addition to an earlier award of 1.5 million pounds.
The CBN in a statement said “Nigeria’s Foreign Reserves received a $200 million boost on Tuesday, September 29, 2020, following the order of the London Commercial court, instructing the release of the $200 million guarantee put in place as security for the stay of execution granted Nigeria for the appeal filed against the judgment of Justice Butcher for the execution of the Arbitral award of $10b in favour of Messrs. Process and Industrial Development Limited (P&ID). The Court presided over by Sir Ross Cranston rejected the request of P&ID to increase the security to $400 million and instead ordered cost of £70,000 against P&ID. It will be recalled that same court, earlier in September 2020, had also granted another cost of £1.5Million against P&ID.
“Commenting on the outcome, the Governor, Central Bank of Nigeria (CBN), Godwin Emefiele expressed pleasure that the Court rejected the P&ID’s application to increase the guarantee, which he noted was clearly intended to be a diversionary tactic and entirely misconceived. According to him, “Due to the substantial evidence of prima facie fraud established before the Court, we are pleased that the Judge has agreed to release the guarantee. This release, which is an accretion into the reserves will further enhance the nation’s management of the exchange rate of its domestic currency, the Naira while ensuring monetary and price stability,” he added.
Tuesday’s order is seen as a further and significant victory for Nigeria in its determination to overturn the US$10 billion award procured through fraud and corruption by P&ID and former government officials. Analysts are of the view that P&ID and its backers, Lismore Capital and VR Advisory, are increasingly fighting a lost battle, as they continue to resort to employing delay tactics, disseminating misleading claims, and taking every step to obstruct investigations across multiple jurisdictions. A government source said: “The Nigerian Government is determined to secure justice for the people of Nigeria – no matter how long it takes. Investigations are ongoing, and we are confident that more of the truth will be revealed over the coming months.”
