INTELS boat contract wasn’t terminated, it expired — NPA MD

The last may not have been heard in the ongoing struggle by INTELS Nigeria Limited to retain its service boat contract in the pilotage district of Lagos, Warri, Bonny/ Port-Harcourt and Calabar, which it entered into with the Federal Government.

While the Federal Government as represented by the Nigerian Ports Authority (NPA) insists that the 10 years contract it had with INTELS expired on August 8, 2020, INTELS claimed that there is an underground move by NPA to terminate the contract. A Federal High Court in Lagos on Monday extended the interim order it earlier granted INTELS which restrain NPA from terminating the role of INTELS Nigeria Limited as manning agent in the pilotage districts of Lagos, Warri, Bonny/ Port Harcourt and Calabar.

At the resumed hearing of the case, Justice I.N. Oweibo ordered all the parties involved in the matter to maintain status quo till October 22, 2020, when the court will hear all pending applications.

The court, had on August 28, 2020, granted an interim injunction restraining NPA from terminating its service boat contract.

The Managing Director of NPA, Hadiza Bala Usman, in this interview culled from Daily Trust, speaks more on why the INTELS boat contract was not renewed by the agency.

Question: What is the situation between NPA and INTELS as INTELS is in court for an interim injunction restraining NPA from terminating its contract?

NPA MD: Let me give you a brief background. The Nigerian Ports Authority (NPA) is responsible for all maritime activities on behalf of the Federal Government. The Authority services the oil and gas exploration needs at the deep sea of which the activities are usually far beyond the ports’ existing monitoring facilities limits.

Messrs INTELS Nigeria Limited was engaged in 1997 to monitor support vessels, rigs, tugs and barges movements in the pilotage district areas for timely reporting and maintenance of relevant data/documents on vessel movements to and from key locations such as production terminals, deep offshore locations, production facilities, operational jetties and other facilities.

Furthermore, INTELS is to ensure delivery of the bills issued for pilotage and other applicable charges to the various vessel owners/operators and collect revenue accordingly.

What were the agreements then?

Messrs INTELS Nigeria Limited was appointed as the Managing Agent on behalf of the Authority for oil industry related activities in the compulsory Pilotage District within the Exclusive Economic Zone of Nigeria Coast at 10 per cent commission rate on all revenue collected via letter reference No. HQ/ABJ/ED/M&O/OP/F.21/504 dated December 18, 1997.

This was followed by an acceptance letter reference No. ISL/GM/98/075 dated April 23, 1998, subsequently an executed contract agreement dated June 8, 1998 with effect from May 1, 1998 was signed specifying the terms and scope of engagement.

INTELS in its letter reference No. INL/ GM/01/010/03 dated January 20, 2003 applied for extension of the Agency Agreement to a period of five years and an upward review of the Agency Commission on Actual Revenue Generated to 22 per cent.

The Authority accepted the offer accordingly; and the Agency Commission was increased to 15 per cent via letter reference No HQ/GM-M/CON/D1/133 dated March 25, 2003. INTELS accepted the offer via letter reference No INL/GM/04/018B/03 dated April 1, 2003. This was followed by a jointly signed Executed Contract Agreement dated June 13, 2003.

On June 6, 2007, NPA conveyed an approval via letter reference No EP/GM(C.S & OPTS)OP/112 to INTELS extending its services as Managing Agent for additional periods of five years at a commission rate of 20 per cent of the turnover.

Upon approval from the Federal Ministry of Transport (FMOT), the Managing Agent Commission Rate was further reviewed to 28 per cent and contract periods extended to ten years via letter reference No HQ/ED/M&O/OP/647 dated August 6, 2010 by NPA.

This was followed by an Executed Contract Agreement dated February 11, 2011. The Authority in compliance with Federal Government directives commenced the implementation of Treasury Single Account (TSA) with the Central Bank of Nigeria (CBN) in September 2015. Messrs INTELS refused to comply with TSA by not remitting the Service Boat Pilotage revenue to TSA as directed and implemented by NPA.

After several negotiations for INTELS to comply, both parties in August 2018 prepared a revised Standard Operating Procedures (SOP) and Executed Supplemental Agreement that clearly state that all Operators of Service Boats should pay through their respective agents who will in turn pay into the Authority’s dedicated TSA account.

Upon the approval of the Accountant-General of Federation, a joint Collection Account was opened with Zenith Bank and Fidelity Bank for the daily remittance of Service Boats Pilotage Revenue to be swept on daily basis to the Dedicated NPA/TSA account with CBN with effect from November 1, 2017.

Thereafter, a cut-off date of October 31, 2017 was fixed in view of INTELs agreeing to the commencement of compliance with TSA policy as directed by Federal Government Directives with effect from November 1, 2017.

The Supplemental Executed Agreement did not detract Messrs INTELS Ltd. as the Managing Agent to the Authority. Article I of the Executed Supplemental Agreement state “to monitor the oil related activities in the compulsory pilotage districts within the exclusive economic zone on behalf of the Principal (hereafter referred to as “the Service”) in accordance with the terms and conditions contained in the Agreement and stipulations of the Applicable Laws”.

Appendix 1(e) of the Executed Contract Agreement – Scope of Services bestowed on INTELS Nigeria Limited NPA Managing Agent to collect all monies invoiced for Pilotage Dues and other relevant bills invoiced against the vessel owners/operator.

Appendix 1 (f) also emphasizes “Prompt payment to the Principal of all money collected on behalf of the Principal in the course of the Managing Agent’s performance of the services”.

Has there been any effort to reconcile all these with INTELS?

A Joint Reconciliation Committee comprising of representatives of NPA and INTELS normally carry out the Service Boats Revenue Generated and Collected in all the Pilotage Districts comprising of the following: Lagos Port Complex (LPC); Tincan Island Port Complex (TCIPC); Delta Port; Rivers Port; Onne Port; and Calabar Port.

The Joint Reconciliation Team carried out the reconciliation exercise at the various locations in order to examine the records and resolve any issues arising thereof.

Before the commencement of TSA i.e. Pre-TSA Implementation by INTELS, the reconciliation process was carried out on quarterly basis.

Post-TSA Implementation commencing from November 1, 2017 the Supplemental Executed Agreement specified monthly reconciliation however, INTELS has not been complying with this hence the delayed and outstanding unreconciled periods.

During the reconciliation exercise, the committee requested for the schedule of Service Boats Revenue Generated from the respective Location Chief Port Accountants in both soft and hard copies for the periods under review.

NPA schedule is reconciled against INTELS schedule in order to establish differences.

In addition, physical verification of bills were carried out in areas where there is dispute and claims from either of the parties.

The committee adequately investigated, authenticated and resolved all reconciliation issues before concluding its report.

A final report of the joint committee duly signed by both NPA and INTELS is therefore regarded as the reconciled/approved revenue for the given period.

What was INTELS’ compliance level before the TSA implementation?

INTELS compliance level pre-TSA implementation of October 31, 2017 was that: there was quarterly reconciliation of Service Boats Revenue Generated and Collected are carried out Pre-TSA implementation where the Committee will determine the collection for the periods under review to ascertain uncollected revenue.

INTELS remitted to the Authority monthly an average of $4 million from the total collection for the periods under review while the unremitted balance remains in their custody. Some Ports Development Projects approved by the Federal Executive Council are being paid for through amortization from the Service Boats Pilotage Revenue. The following are the Projects currently under Amortization using Service Boats Revenue: Phase 4B Ports Development at Onne Port awarded to Messrs Deep Offshore Services Limited (DOSNL).

Redevelopment of Ports Facilities at Bullnose Lagos Port Complex, Apapa awarded to Eko Support Services Limited (ESSL).

Upon Management’s approval for the payment of Amortization Projects based on the approved Certified Interim Project Certificates, Messrs INTELS Ltd is issued Credit Note against unremitted Service Boat Revenue in their custody for the release of funds to the beneficiaries i.e. Developers of those Projects.

Messrs INTELS was granted Credit Note in total sum of $9,380,342.95 being wrong deduction of WHT/VAT on IPC 1 to 9 and Finance cost on IPC 1 to 7 for the Redevelopment of Bullnose Port Facilities at Lagos Port Complex (Credit Note No. 000512 $5,937,720.00 in June 2017 and Credit Note No. 0002526 $3,442,622.95 in April 2018) for the release of funds to Messrs Eko Support Services Limited (ESSL), but INTELS refused to release the fund to ESSL.

Therefore, the management of NPA in November 2019 issued a Debit Note in favour of INTELS in the sum of $9,380,342.95 withdrawing the earlier Credit Note issued due to non-release of fund to ESSL.

Meanwhile, the total reconciled outstanding unremitted Service Boat Pilotage Revenue in INTELS custody after deduction of 28% Agency Commission due to INTELS Ltd, remittance to the Authority and various adjustments amounted to $142,996,938.55 (Pre – TSA).

The value of the reversed Debit Note was added back to the balance in INTELS custody to arrive at $152,377,281.50 ($142,996,938.55 & $9,380,342.95).

The total sum of $4,266,212.80 represents payment into the TSA account from November 1, 2017 to April 30, 2018 for transactions relating to the reconciled periods as at October 31, 2017.

This was deducted to arrive at the sum of $148,111,068.71 being ($152,377,281.50 – $4,266,212.80) balance in INTELS custody as at October 31, 2017.

Therefore, the balance outstanding in INTELS Custody as at 31st October 31, 2017 (Pre-compliance with TSA) amounted to $148,111,068.71.

What is INTELS’ compliance post-TSA implementation commencing from November 1, 2017?

It is worth stating that INTELS failed to comply with the TSA policy even after jointly preparing the revised SOP and Executed Supplemental Agreement.

The total reconciled revenue generated for the periods November 1, 2017 to March 31, 2018 amounted to $77,973,005.49.

While the sum of $22,270,774.32 (INTELS $20,639,406.18 and Other Agents $1,631,368.14) was remitted to the Service Boats dedicated TSA Account leaving an unremitted balance of $55,702,231.17 in INTELS’ custody for the periods November 1, 2017 to March 31, 2018.