October 23, 2023/CSL Research

The Business and Property Court in London has officially set Monday, 23 October 2023 to pronounce the verdict in the ongoing legal dispute between the Nigerian federal government and Process & Industrial Developments (P&ID) Ltd. This crucial verdict will be rendered by Judge Robin Knowles. In the year 2010, P&ID entered in an agreement with Nigeria to construct a gas processing plant situated in Calabar, Cross River state. P&ID contends that the deal fell apart due to the Nigerian government’s alleged failure to meet its contractual obligations. P&ID subsequently sought legal redress, resulting in an arbitral award in their favour against Nigeria. In January 2017, a tribunal ruled that Nigeria was obligated to pay P&ID a total of US$6.6 billion in damages as well as any accrued interest before and after the judgement, set at 7%. 

Following this judgment, Nigeria applied for an extension of time and relief from sanctions, which was granted in September 2020. On Nigeria’s part, they were allegations of fraud with claims that the P&ID officials resorted to bribery (of government officials) to secure the contract. In another trial, the Nigerian government contended the arbitration award, now escalated to US$11 billion due to accrued interests, requesting that it should be invalidated. In September, there were reports that P&ID representatives were in talks with the federal government for a potential out-of-court settlement as there are indications that the ruling may be in favour of Nigeria. 

Considering the current FX situation of the country, a ruling against Nigeria will significantly put pressure on Nigeria’s FX reserves at a time when FX generating capacity of Federal Government is experiencing a downturn. The apex bank’s recently released financial statements suggest the that a significant percentage of the country’s reserves are encumbered. Nigeria has struggled with significant FX shortages causing the naira to fall to a record low against the dollar. The naira has continued to depreciate due to an acute shortage of supply amidst a growing demand. Crude oil sales and Foreign Portfolio Investments (FPIs) are two major sources of FX that have declined significantly. Oil production remains relatively depressed and many foreign portfolio investors are unlikely to return to the Nigerian market if there are no feasible plans to increase FX supply.