By Lucky Fiakpa
Battle-tested African Petroleum and its chairman, Mr. Femi Otedola, are in for another major legal tussle with Access Bank and this could take several years to decide given the Nigerian legal system, Lucky Fiakpa writes
What could be the problem with African Petroleum Plc? The company has always been in the media limelight either for good or for bad since its privatisation. The initial buyers, Sadiq Petroleum unable to stand the storm, decided to opt out and since Mr. Femi Otedola bought into the company, the currency with which the company has been making media headlines has been on the increase.
It is either Mr. Otedola, the chairman of African Petroleum Plc (AP), has not fully come to terms with the intrigues and subterfuge that are hallmark of Nigeriaâ€™s industrial environment or he simply does not like things done awkwardly, it has been said. One of the two, it is said, could be the reason why he is having many battles to contend with in the company.
The raging feud between him and Alhaji Aliko Dangote over the price manipulation of APâ€™s share is still very much on. In fact, arising from that feud, the police last Tuesday went to the premises of Prize Communications and invited its chief executive officer, Mr. Shaka Momodu for questioning.
The police visit was allegedly at the prompting of Dangote who believes Prize Communications was behind various publications against him. Mr. Momodu had repeatedly denied being behind the publications, most of which were on-line.
Apart from the AP share price manipulation saga, there is yet another feud involving the two in the Chevronâ€™s share episode. Dangote is said to have agreed to let go the shares at a given price. It is however not clear if Otedola would accept the price Dangote is offering the Chevronâ€™s shares.
These two high-profile cases are seen as enough for one man. But last week, another dispute erupted between AP and Access Bank over non-payment of credit facilities put at $35.15 million (N5.6 billion). The matter, which is already in court, came up for hearing last week and was adjourned till today, July 27, 2009.
In its petition, Access Bank wants an order to wind up the company for non-payment of the facility but AP on the other hand is accusing the bank of hidden charges, a factor the oil giant claims is responsible for its unwillingness to settle the loan.
At the resumed hearing of the matter last week, counsel to the respondent, Mr. P. A. Ajibade (SAN), told the court of his preliminary objection dated July 21, 2009 to the petition by Access Bank Plc on June 25, 2009, which he said had been filed and served the petitioner. He argued that since the petition for winding up a company was under the Companies and Allied Matters Act (CAMA), there was no need for a written address and thus, was ready to proceed on the matter.
But counsel to the petitioner, Mr. Norrison Quakers, requested the respondent to file a written address on the matter in conformity of Order 183, of the 2009 Federal High Courtâ€™ Rules, which he said should precede the CAMA rules.
Ajibade however countered his argument saying that Order 183 cited by the petitioner was not decisive but rather left the decision at the courtâ€™s discretion. At the end, the argument was resolved in favour of the respondent and Justice Ibrahim Auta, on the request of the respondent, adjourned the matter till today for hearing without written addresses.
Access Bank had through the petition and signed by Mr. Olisa Agbakoba (SAN), prayed the court to wind up AP. The bank anchored its position on APâ€™s alleged inability to repay the two year-old facility on the grounds that the company is â€œinsolvent and unable to pay.â€
Specifically, the bank told the court that since its repeated demand for the repayment of the $35.15 debt, being the outstanding obligation on a letter of credit opened on July 18 last year in favour of AP, could not yield any positive result, the order seeking to wind up the company was inevitable.
Access Bankâ€™s Claim
Access Bank is insisting that the petroleum marketing firm should honour its contractual agreement, which takes account of the currency risk agreement by paying up its debt.
Sometime in 2007, AP established a banking relationship with Access Bank that warranted a formal offer of banking facility of $100 million, which was later reviewed in 2008 to $50 million.
Information from the bank claim that the loan agreement specified the terms and dynamics of the facility including the fact that the â€œfacility is subject to possible exchange rate risk and this risk remains the primary obligation of the customer and that there is no obligation on the part of the bank to provide the customer with funds (either in local or foreign currency) to repay any exposure from the utilisation of the facility.â€
AP was said to have accepted the facility prompting Access Bank to establish an Irrevocable Letter of Credit on the former. But when the facility became due for repayment and AP was asked to provide funding for the Naira $35,153,822.15 to enable the bank purchase forex for repayment of this obligation, the company rejected the debit advice sent on December 2, 2008 from Access Bank requesting that the debt be repaid using an exchange rate of N127 to the dollar. Rather than repay the loan, AP decided to petition the Central Bank of Nigeria (CBN) on the matter.
In the bankâ€™s response, it noted: â€œYou will recall that as of the date of this transaction (i.e. 1st December 2008) the foreign exchange regime in operation was Wholesale Dutch Auction System (WDAS) under whose guidance authorized dealers bought and sold forex. As of this date, the bankâ€™s Open Position Limit (OPL) was $300 million, which enabled the bank to buy and sell foreign exchange into/from its position at market-determined rates subject to the OPL.
â€œIn line with our view of the direction of rates in the market during the period, we offered to sell foreign exchange to AP at the rate of N127/USD to cover their outstanding and unpaid USD facility exposure of $35,153,822.15 in line with the term of offer letter; we debited their (AP) current account with the naira equivalent. We are shocked that despite the fact that this rate was favourable to AP, they rejected the offer and demanded that we reverse the debit to their account. You will recall that this rate was in tune with the market as the CBN effective rate was N127.3610 as at 3rd December, 2008.
â€œAs a result therefore, AP continues to owe the Bank $35,153,822.15. This foreign currency exposure has continued to run to date as an expired facility and despite several demand letters, AP has refused/neglected to repay the facility without any justifiable reason.
â€œFinally, we state with high sense of responsibility that in all our dealings with AP, we have complied with official regulations and policies. Access Bank prides itself on levels of governance and professionalism in all facets of its activities and will always strive for 100 per cent compliance with regulatory requirements,â€ Access Bank stated in a letter of protest to the CBN.
But APâ€™s managing director, Tunde Falasinnu, at meeting with the media last week, said the companyâ€™s refusal to repay the debt was because Access Bank was requesting for debt repayment in dollars and at black market rate. He said the company was still awaiting the decision of CBN on the matter, because according to him, the bankâ€™s request sounds very ridiculous. â€œWe cannot just allow ourselves to be cheated because if we pay that amount, the bank is ripping us off to the tune of N440 million in just one transaction,â€ he said.
Falasinnu maintained that the company has never denied owing Access Bank, â€œbut we consider the demand inappropriate since it will amount to round tripping to use the same documents to purchase foreign exchange from the CBN.â€
He added that the debt arose from facility extended by the bank to finance the importation of petroleum product. He further explained that pursuant to financing of the fuel shipment, AP opened a Form M with the Central Bank of Nigeria and a letter of credit was opened by the bank at the rate of N160 to the dollar.
He added that the trouble started when Access Bank on December 2, 2008 sent a debit advice, saying the money should be paid at the rate of N127 to a dollar.
Officials of Access Bank however, insisted that the claim by AP that the amount sourced from the CBN was different from the amount used in paying the supplier has no basis, as the amount offered to company and the amount due under the LC has always been $35,153,822.15. Accordingly, the issue of diversion of $3,639,177.85 as claimed by AP is arising either out of ignorance or mischief.
Court of Public Opinion
Perhaps, suspecting that the ongoing dispute if not resolved on time could mar its public image, the management of African Petroleum, last Thursday decided to reach out to the court of public opinion to enable the public see and judge for themselves if it was in anyway wrong in the entire transaction.
The company supported its position with some correspondences between it and the bank. African Petroleum started by saying that the action of Access Bank is about a disputed debt arising from a facility granted by Access Bank to AP for the purpose of opening Letters of Credit (LC) for the importation of refined petroleum products.
Upon maturity of the LC, the company went on; Access Bank debited AP at the converted rate of N127 to one US dollar.
Apparently sensing some wrong calculations here, the company in their claim, protested the rate of the exchange applied by Access Bank pointing out that Central Bank of Nigeria, CBN, spot rate on November 30, 2008 which was the maturity date of the LC was N116.62 to one US dollar and even the black market rate was between N119 and N122 to one US dollar at that time. â€œHowever, we stated our willingness to pay but at the appropriate rate via our letter dated December 2, 2008,â€ AP insisted.
Several correspondences were said to have been exchanged in a bid to amicably resolve the matter but were unsuccessful. At this point, AP decided to petition the CBN in a letter dated May 15, 2009 to adjudicate on the matter. â€œCBNâ€™s decision was being awaited when Access Bank filed this suit,â€ AP claimed.
The correspondence that actually kicked off the dispute was written on December 2, 2008 and signed by Chris Labiran and Grace Adamu both of the Oil and Gas Group of Access Bank. Attention Mrs. Lola Segun-Idahor, General Manager, Treasury and Planning with African Petroluem the letter was actually a debit advice and it goes in parts thus: â€œPlease be adviced that your current account with number 0140010040312 was debited as followsâ€¦ amount at $/N127â€¦ being settlement amount on LC A20081132CLâ€¦ Please note that your account balance with us is in debit of N5,965,988,082.50 as at December 1, 2008.
â€œWe thank you for your continued patronage and reiterate our commitment to provide you with excellence services alwaysâ€.
APâ€™s response was brief and immediate. The same day it got the letter from Access Bank, it replied to underscore how bad the company felt about what the transaction was turning to be.
In their letter signed by Segun-Idahor and Falasinnu, AP wrote as follows: â€œYour letter on the subject matter was received with great shock. The CBN spot rate on 30th November when it matured was N116.62/$ and the black market rate is between N119 & N122/$. We hereby advice that you amend your records accordinglyâ€.
After five months and with the matter still unresolved, the company decided to petition the CBN to see if the apex bank could help resolve it.
Titled â€œLetter of Protest on Foreign Exchange Transaction between African Petroleum Plc and Access Bankâ€, the letter was directed to the Director, Banking Supervision Department of the CBN and signed by M. S. C. Aviomoh, executive director, Finance/IT and Falasinnu.
The protest letter goes thus: â€œWe write to formally protest about the unacceptable action of Access Bank Plc on Foreign Exchange Transaction with African Petroleum Plc. We opened an account with Access Bank Plc in 2007. They availed us a $50m facility on 12th May 2008 for the purpose of importing petroleum products through letter of credit.
â€œOn 25th July 2008 a letter of credit was opened in favour of Glencore Energy UK Ltd on our behalf by Access Bank Plc. The receiving Bank â€“ BNP Paribas SA. Amount on the letter of credit $38,973,000. The actual amount negotiated and paid was $35,153,822.15 as contained in the commercial invoice dated 5th August, 2008 by Glencore Energy UK Ltd.
â€œOn 2nd December, 2008 Access Bank Plc advised as through a Debit Note dated 1st December, 2008 that our account has been debited with N4,464,535,413.05 being the Naira value of $35,153,822.15 at N127/$. We objected to this rate and informed them of the official rate of N116.62 by Central Bank as at that date through our letter dated 2nd December, 2008.
â€œThe bank has done four (4) other Letters Of Credit before this disputed one. The letters of Credit were paid according to normal documentary Credit through the CBN Bid Options. Copies of the letter Credit, Form M, Commercial Invoice and Debit to our account in October 2008 for the same product financed are attached.
â€œThe request of the Bank for us to pay them in foreign currency (United States dollar) is inappropriate for the following reasons:
(a)Â Â Â The Form M and the Proforma Invoice were used to open a letter of Credit for the import
(b)Â Â Â The suppliers have been paid using the Central Bank of Nigeria fund at the rate as at November 2008 or earlier
(c)Â Â Â Using the same forms to purchase Foreign Exchange will amount to round tripping, an offence we will not like to associate our company with.
â€œOn the strength of the above, we hereby appeal to Central Bank of Nigeria being the regulatory body in matters of this nature to adjudicate in the interest of equity and fairnessâ€.
It appears Access Bank has no patience for this type of legal process whose outcome may not be very binding hence its recourse to the law court for proper adjudication on the matter.
Beginning from today when the matter would be thoroughly examined by the court till the end of the case, surely more facts would be emerging until the end when the truth would be well established. The only clause is that given the Nigerian legal system, this case could take almost a decade to decide.