Nigeria Taps Tinubu’s Ally to Build a $13 Billion Highway

(Bloomberg) — Nigeria’s federal cabinet last week approved construction work on the second section of a $13 billion highway awarded to an ally of President Bola Tinubu, a project that’s ignited a political firestorm in Africa’s most populous country.

The 700-kilometer (434 miles) Atlantic coastal road linking the commercial hub of Lagos to Calabar in the oil-rich Niger Delta has been mired in controversy since being awarded in September to Hitech Construction Company Ltd., a business owned by tycoon Gilbert Chagoury, who was listed by the government as Tinubu’s “confidante” when part of Nigeria’s delegation at last year’s COP28 climate conference in Dubai. The government has been forced to hold a series of public meetings, press conferences and speeches to defend the project, while surrogates have been sent to explain its position on television.

Authorities have demolished dozens of houses and buildings, including sections of the popular Landmark beach complex in the Lagos district of Victoria Island. That’s led to protests from businesses and residents in the area, home to many of Nigeria’s richest people and local headquarters of TotalEnergies SE and Standard Chartered Plc. Nigeria is littered with ambitious projects that are abandoned after huge amounts of money have been spent, and those that are completed often experience lengthy delays. 

Chagoury, 78, has been a fixture of Nigerian politics and business for decades. In 2000, he was convicted in Switzerland of laundering money for Sani Abacha, the notoriously corrupt Nigerian dictator, and has admitted to making illegal campaign contributions in the US. The Chagoury Group didn’t respond to a request for comment. 

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Hitech has built a number of major infrastructure projects, including the privately developed Banana Island luxury housing estate and the 10-square-mile Eko Atlantic development — both on land reclaimed from the sea. The firm has constructed two highways in Lagos that are 16 miles and 31 miles long, but critics question its capability for large-scale projects.

“We don’t feel like we caught the best deal,” Lagos opposition politician Gbadebo Rhodes-Vivour said by phone. “Because this whole project did not go through the Senate, did not go through the regular due process and we’re just being stuck with the bill that seems extremely overbloated.”

The bidding process for the contract wasn’t conducted publicly, which has also drawn criticism from civil society groups and opposition politicians. 

Works minister Dave Umahi told journalists that the government approved a “restrictive bidding” round for the project, without elaborating on what other companies were involved or why it wasn’t made public. 

“People say it was not listed in the 2024 budget,” he said during a May 14 speech at the presidential villa in Abuja, the seventh time he has addressed the controversy around the highway since April. “Yesterday, I quoted the budget number and so everything about coastal road followed due process.” 

This year’s budget contains two line items for the project totaling 1 billion naira, a fraction of the 2.6 trillion naira ($1.8 billion) approved so far, according to the version posted on the website of the budget office in January.

“It is curious that the terms of such an audacious project continue to be shrouded in secrecy,” opposition leader Atiku Abubakar, who lost to Tinubu in last year’s presidential election, said in a statement. “It is no secret that both Tinubu and Chagoury are business partners.”

The president’s office didn’t respond to a detailed list of questions, instead referring to an April 8 statement that called the highway an “economic gamechanger.” 

Tinubu, who was governor of Lagos from 1999-2007, has long been dogged by allegations of corruption, which he denies. He was being investigated by Nigeria’s anti-graft authorities as recently as June 2021, two years before he was elected president. In 1993, he forfeited $460,000 to resolve a lawsuit in Chicago after US federal authorities said bank accounts in his name held the proceeds of heroin trafficking. Tinubu’s lawyers have said he was never charged over the matter.

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Nigeria ranks among the world’s most graft-ridden countries, according to a Corruption Perceptions Index published by advocacy group Transparency International, a key reason why the economy is mired in crisis. Since coming into office, Tinubu has talked about enhancing transparency in government and vowed to fight corruption. In April, he described corruption, self-interest and fraud as “an enemy” of the country.

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The task of completing the coastal road project will extend beyond Tinubu’s first term, and cost more than Nigeria’s 9-trillion naira budget deficit for this year. Civil society groups and opposition leaders have questioned the rationale behind spending so much on a highway while ordinary Nigerians battle a cost-of-living crisis and citizens have died in stampedes to get food. 

“With the cost involved, you can see that it’s an inflated contract that has been given simply because some people believe that they will make money out of it,” said Auwal Rafsanjani, Nigerian head of Transparency International. Lack of transparency around Nigerian projects like this is “the reason why we are not making any progress in terms of improving transparency and accountability in public sector.”

23-Year Plan

Estimated at 15 trillion naira, the Lagos-Calabar Coastal Highway is part of Nigeria’s 23-year plan to improve the nation’s infrastructure. The project was first designed as a railway under President Goodluck Jonathan and awarded to the China Civil Engineering Construction Corp. for $12 billion, but fell apart when he left office in 2015. 

The following year, the plan was revived by President Muhammadu Buhari’s administration for $11 billion and given a timeline of three years, which expired without significant progress. 

Minister Umahi then announced the project had been resurrected once again, but as a coastal highway alongside some rail, and this time awarded to Chagoury’s Hitech.

As much as 30% of the funding for the highway is expected to come from the government, with Hitech sourcing the rest, according to Umahi. The road will also be tolled, costing as much as 3,000 naira to use for a one-way trip — the equivalent of two day’s salary at the current national minimum wage.

–With assistance from Gina Turner.

©2024 Bloomberg L.P.