Chinese Firm to seize 3 Nigerian Jets
By Eniola Akinkuotu
President Bola Tinubu exiting the Airbus A330 released by Zhongshan as a “goodwill gesture”. (photo: X)
When President Bola Tinubu travels to Beijing for the Forum on China-Africa Cooperation to drum up investment and prop up the naira, the elephant in the room will be Nigeria’s publicised feud with Zhongshan, a firm that describes its ordeal with Nigeria as a “foreign investor’s worst nightmare”.
Chinese firm Zhongshan Fucheng obtained an injunction last week from a French court to take ownership of three jets belonging to the Nigerian government. In an effort to protect these assets, the Nigerian government had offered $5m in compensation, to no avail.
Zhongshan is in dispute with Nigeria over a contract to develop a free trade zone in Ogun State. Insiders in negotiations told The Africa Report that talks continue to hit a brick wall for this case, which has bounced around numerous jurisdictions since 2018.
The seizure included a newly purchased Airbus 330 worth over $100m. On Friday, however, Zhongshan announced that it was releasing the jet as a “goodwill gesture” to allow President Bola Tinubu to fly to France for a scheduled meeting with President Emmanuel Macron.
“Last year, we travelled to London with Nigeria’s Attorney-General, the state Attorney-General, the Solicitor – General, the Ogun State Governor and others, where we offered $5m to the Chinese firm, but they rejected it,” a top Nigerian government official says.
“We equally offered them over 2,000 hectares of land in Ogun State to operate another free trade zone, but they declined our offer,” the official says, adding that the offer remains on the table, but that the Chinese firm remains adamant.
Investors’ nightmare
On the 4th of September Tinubu will travel to Beijing with his African counterparts for the Forum on China-Africa Cooperation (FOCAC) summit. The trip is part of a bid to woo investors to Nigeria, which is in dire need of foreign investments to strengthen the naira.
But as Tinubu lobbies Chinese investors, the elephant in the room will be Nigeria’s publicised feud with Zhongshan, a firm that describes its ordeal with Nigeria as a “foreign investor’s worst nightmare”.
The episode exposes the difficulty in doing business in Africa’s erstwhile largest economy, says Paul Alaje, Chief Economist and partner at SPM Professionals.
“Nobody will want to invest in an environment with so much uncertainty,” Alaje tells The Africa Report.
Nigeria has constantly ranked low on the ease of doing business, a development that has forced several investors to flee.
Tinubu himself has acknowledged this, hence his constant refrain that his administration signals that “Nigeria is back in business”.
Ogun State has its share of political vendettas
But the business environment continues to face problems such as corruption and undue political interference.
State Governors in Nigeria have a penchant for indiscriminately revoking contracts initiated by their predecessors as a political vendetta.
Ogun State, one of the most politically volatile states, has seen its fair share of accusations, especially the administration of Ibikunle Amosun, who was Governor between 2011 and 2019.
Africa’s wealthiest man, Aliko Dangote, said last month that he lost over $500m after witnessing a three-year delay in setting up a refinery in Olokola Free Trade Zone in Ogun State during the Amosun administration.
He eventually was forced to leave and set up shop in Lagos State. Amosun was blamed for this debacle, as he set out to revoke contracts initiated by Gbenga Daniel, his predecessor, who was also a member of the opposition.
One such contract revoked is the one between the state government and Zhongshan, but many other contractors have started to come forward.
“I too was a victim of Amosun,” said renowned Nigerian Economist, Pat Utomi, who claimed to have lost a sum the equivalent of over $550,000 after the Governor revoked his contract.
A Chinese deal gone wrong
In 2001, the Nigerian government and China signed a bilateral investment treaty. This treaty was a manual that would guide business relations between the two countries and provide guidelines for corporate entities registered in China and Nigeria that were willing to do business together.
The treaty outlined several agreements, including a provision that requires Nigeria to protect Chinese companies and vice versa.
Following this treaty, the Ogun State Government in 2007 entered into a deal with Chinese companies to develop the Ogun Guangdong Free Trade Zone. It was a partnership between the state government and Guangdong, a Chinese subnational.
By 2010, the Ogun Guangdong Free Trade Zone Company contracted with Zhongshan’s parent company to develop an industrial park in the free trade zone. The plan was for Zhongshan’s parent company to develop the park and build factories in it for tenants. The parent company then transferred its rights in Nigeria to Zhongfu International Investment.
The firm claims it invested millions of dollars in the project, building roads and utilities, hospitals, hotels, supermarkets and a bank.
Multiple sources tell The Africa Report that when Amosun became Governor, his acolytes – Abiodun Onasanya aka Abbey Onas and Taiwo Adeoluwa – took charge of the project behind the scenes. During this time, a squabble ensued, which culminated in revoking Zhongshan’s contract.
But Amosun denies allegations of stifling businesses. He claims, in two statements sent out over the weekend, that he decided to revoke the Zhongshan contract based on a letter from the Chinese consulate. The letter clarified that the rights to that free trade zone be transferred to China Africa Investment FXE. Zhongshan denies this, insisting that the letter was misconstrued.
No going back
The Chinese firm accused the Ogun State government of using policemen to harass their employees off the free trade zone. They claimed to have been detained for at least 10 days and tortured by the police.
In an SOS message from Managing Director, Jason Han, sent to President Muhammadu Buhari back in 2016, the firm said, “We are experiencing a foreign investor’s worst nightmare. Our contract that is governed by Nigerian law is being treated with impunity, the Nigerian legal process is failing us and we desperately need your protection.”
The company claimed to have spent more than $60m on the free trade zone and over N160m ($812,000 at the time) had been paid in taxes. However, the Buhari administration did not take any action, even as the government claims Zhongshan only built a perimeter fence as opposed to its claims of expending $60m on the project.
Learning lesson
After failing to get any justice, Zhongshan dragged Nigeria before an independent arbitral tribunal in London for violating an international treaty. Although Nigeria argued that the actions were those of its subnational and not the central government, this argument failed because Nigeria had provided a sovereign guarantee on behalf of Ogun State.
The tribunal awarded compensation of $55.6m as well as $75,000 for moral damages and interest of $9.4m and costs of £2.8m ($3.6m).
Nigeria has made unsuccessful attempts to appeal this judgment, which is enforceable across Europe and the US, where most of its foreign assets are domiciled. Its argument that its sovereign assets are covered by diplomatic immunity has been dismissed by a US Appeals Court.
Foreign Affairs Minister, Yusuf Tuggar, says Nigeria is now exploring a diplomatic solution to the crisis, while Attorney General, Lateef Fagbemi, assembles a team of lawyers to brainstorm on the way forward, which may include approaching the US Supreme Court.
In a chat with The Africa Report, Economist Muda Yusuf described the episode as a lesson the Nigerian government must learn from.
“The experience reflects impunity and that culture needs to change. It is important that the government rises to the occasion and deals with it legally and promptly, because this is very embarrassing,” says Yusuf, the CEO of Centre for the Promotion of Private Enterprise.