AKK pipeline abandoned over alleged 570% inflated contract sum

Financiers of Abuja-Kaduna-Kano pipeline have pulled out of the project, citing alleged 570 per cent inflated contract sum, far above global threshold.

Currently, the country has less than 1,000 kilometres, a factor responsible for the low power generation currently 10,000 megawatts and a contributor to delayed offtake by industrial and commercial plants, especially in northern part of Nigeria.

The Ajaokuta-Kaduna-Kano 614 kilometres gas pipeline, identified as one of the eight major transmission infrastructure critical for development, is riddled with inconsistencies for several reasons.

A close source said: “The 693 kilometres Yucatan Peninsula Gas Pipeline in Mexico cost $266 million. The 460 kilometres Export La Moran Pipeline built between Argentina and Chile cost $360 million. The 3,700 kilometres Export Pipeline between Bolivia and Sao Paolo cost $1.8 billion. These examples clearly show that Nigeria has the highest cost of contract in the world. These companies cannot afford to go into cahoots with Nigerians because they would be easily caught when they submit their financial reports to their countries of origin.”

Companies that are involved in gas transmission and distribution are subject to Corporate Income Tax exemption for a period of five years cumulatively, as well as possible waiver on imports through the Industrial Incentives Act. It is possible that the equipment imported into Nigeria might have led to revenue losses for government and reduced the cost of Engineering, Procurement and Construction (EPC).
   
The source added: “Assuming the imports are not waived, the cost of duties and tariff at the ports would not exceed 15 per cent of $268,337,369 million or $40,250,605 million ($308,587,974 million), which is 11 per cent of the EPC that was scheduled for this project, and gives you an insight into why the firms quit. Let us give a benefit of doubt, and assume that the following were not considered: cost of labour, right of way, security, haulage trucks moving pipes from ports to site, compensation to communities, the question we should ask ourselves are as follow: How remotely possible can these indirect cost to income be equivalent to 89 per cent of the cost of the project financing?
  
“Globally, the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometre. In Nigeria, the Final Investment Decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570 per cent inflation above global standards.”