Local meter manufacturers in Nigeria have taken legal action to stop the procurement process by the Transmission Company of Nigeria (TCN) over the $500 million Distribution Section Recovery Loan, alleging a violation of the procurement process.
The Association of Meter Manufacturers of Nigeria (AMMON) has requested that the minister encourage local manufacturing to reduce importation and build sustainable local manufacturing capacity to create employment.
This is as the Federal High Court Sitting in Kano will commence hearing on the matter between AMMON and TCN, NERC, Federal Ministry of Finance, Budget and National Planning, Federal Ministry of Power and Bureau of Public Procurement on October 18, 2023
AMMON said that despite an interim injunction granted by the presiding judge, TCN opened the bid on October 5, 2023.
However, NATIONAL ECONOMY recalls that the Federal Ministry of Power had said the court case was withdrawn following the intervention of the minister of Power, Adebayo Adelabu at a stakeholder meeting held at ministry prior to opening the bid on October 5.
The loan from the World Bank for the National Mass Metering Project (NMMP) has been secured by TCN, but the association has protested that the procurement process for the project has been prejudicial to local manufacturers. The association has an installed capacity of about five million meters and can supply and install the 1,250,000 meters within six months if given the chance.
The Federal High Court Sitting in Kano will commence hearing on the matter between AMMON and TCN, NERC, Federal Ministry of Finance, Budget and National Planning, Federal Ministry of Power and Bureau of Public Procurement on October 18, 2023.
TCN had sought and secured $155m loan from the World Bank for the National Mass Metering Project (NMMP).
TCN however, advertised for bids for the phase 2 of the project for only foreign companies without protecting the interest of Local Manufacturers.
In a letter of protest and reminder to the Minister of Finance and Coordinating Minister of Economy Chief Olawale Edun, the Association of Meter Manufacturers of Nigeria (AMMON), the group reminded the Minister that even as there is a subsisting court order to the bid opening slated for Thursday October 13, 2023 the TCN insists on violating the procurement process.
In the letter signed by Engineer Ademola Agoro the Acting President and the secretary, Engineer Duro Omogbenigun, AMMON referred to “their correspondences to the Ministers of Finance, Budget and National Planning on the 17th of April 2023, and letter to the Permanent Secretary Finance (dated 7th June 2023, presented their grave concerns on the systemic violation of the procurement act insensitivity and misalignment with local content directives as contained in Executive Orders 2 and 5”.
The 36 members Company Association explained that the Distribution Section, Recovery Program (DISREP) is a $500 million loan facility by the World Bank approved by the Federal Executive Council (FEC) for the supply of and installation of 1,250,000 fully Built Unit (FBU) Smart meters to the 11 Distribution Company (DisCos) in Nigeria.
The bulk metering procurement process at the cost of $120 million is managed by the Project Management Unit (PMU) of TCN and supervised by (BPE) on behalf of the finance Ministry.
The tender notice for the International competitive bidding (ICB) was issued on the 30th day of March 2023 with the submission deadline on 17th May, 2023”.
The Association of Meter Manufacturer of Nigeria (AMMON) is the umbrella body of Local Meter Manufacturers and Assemblers (LMMAs) with the sole objective of full domestication of all meter supply chain and currently boast a significant Local capacity in the manufacturing of key parts and assembly of all CKD/SKD components of smart meters spread across the Federation.
(Since the commencement of the bidding process, AMMON, persistently drew the attention of the office of the Chief of Staff (OCoS), Federal Minister of Finance (FMF), Federal Minister of Trade and Industry (FMITI), Federal Minister of Power (FMoP), Nigerian Electricity Regulatory Commission (NERC), Transmission Company of Nigeria (TCN), Bureau of Public Enterprise (BPE) and all relevant stakeholders that the tender notice is completely prejudicial to the 35 local meter manufacturers, who have been unlawfully hindered from participating in the procurement process and the multiple violations and deviations from the Procurement Act (2007) and also Executive Order #3 (Support for Local Content) and Executive Order #5 (Promotion of Nigerian Content).
Upon receipt of the Associations letter as conveyed by the CoS, the FMF organised a stakeholder committee meeting on 25th July 2023, chaired by the Permanent Secretary Finance (PSF) and attended by representatives of FMITI, TCN, NERC, BPE, NBET, DMO, CBN and AMMON to provide a constructive platform for stakeholders to chart a path to address the concerns. At the meeting AMMON pointed out that, there are 5 areas which unfairly impacts Local manufacturers including,
Importation of Fully built Units (FBU), Provision granting 45% import duty waiver to foreign bidders, Huge Financial Performance and Experience criteria that eliminate LMMAs in favour of foreign OEMs and Limited Number of Lots.
The inclusion of the overly punitive criteria according to AMMON is completely unrealistic, untenable considering that TCN is a Market participant and fully aware of the lingering liquidity and meter market activity”.
The stakeholder meeting was also notified that the bid requested solely for importation of FBU (with a 45% import duty waiver) had deliberately overlooked the existing reality of the abundant availability of CKD/SKD already imported by AMMON, which puts the patriotic venture by AMMON at a huge disadvantage, placing the valiant and patriotic investment at risk of collapse. It is worthy to note that AMMON has relied solely on commercial bank loans with no direct intervention or support from the FGN”.
AMMON stated that TCN, as understood published the bid without due consultation with the Borrower and wasn’t duly reviewed by other relevant stakeholders (e.g. NERC etc). Reference to relevant documents of the bank on this matter indicates that objective is to revive the nations power sector by granting access to power to about 80 million Nigerians by guaranteeing the financial viability of the distribution companies so that they “Become job creators along with local meter providers who will be encouraged to participate in the DISREP operation, either alone or in partnership with international providers”.
It also became clear that, “the DISREP Procurement Strategy as contained in the Loan Agreement, allowed for both International Competitive Bidding (ICB) and National Competitive Bidding (NCB), since “…there are a good number of prepaid meter manufacturers” in Nigeria. Therefore, the unilateral adoption of the ICB approach by TCN (with a proviso for 45% duty waiver), contradicts the Loan Agreement and the Procurement Act (PART VI – Section 24 “…. effects public procurement by offering to every interested bidder, EQUAL simultaneous information, and OPPORTUNITY to offer the goods and works needed). This principle is further clarified and supported by the standard practice of “slice and package approach” as prescribed in Procurement Procedures Manual (Section 69.1(b)), to encourage the development of domestic capacity”.
The meeting resolved that, an inter-agency team should conduct a field inspection of the existing facilities of AMMON to ascertain actual capacity and status of readiness of local entities and to provide factual basis to enable FMF propose credible and realistic recommendation for a mutual resolution of the matter. Therefore, TCN agreed to issue a notice of suspension of the bid process while AMMON accepted to halt or withdraw the court proceedings.
On the 14th day of August, 2023, while FMF is in the process of sourcing the funds for the field visit, a notice to Bidders was abruptly issued by TCN, again without consultation with FMF and/or AMMON which is against the agreement reached at the stakeholder meeting. The FMF intervened and reminded TCN of their commitment to maintain status quo and FMF urged TCN to cancel the notice. TCN agreed and sent a cancellation notice with the assurance that no further action until the conclusion of the field visit and an amicable outcome is confirmed. AMMON reciprocated the gesture and in genuine good faith to the Government withdrew the pending suit in the High Court in Kano, with expectation of a mutually beneficial resolution”.
Moreso, the inter-agency visitation by 3 teams to all meter manufacturers took place between 15 – 20th September 2023 to 30 locations across the country. The report of the field visit is still in the process of compilation for presentation to the stakeholder committee for deliberation. However, on 21st Sept 2023, (a day after the visit) and without any consultation with FMF or the stakeholder, TCN unit (who are also part of the inter-agency visit), unilaterally sent a request bidder of the World Bank Procurement to submit bids on October 5, 2023. It is unfortunate that TCN took this rash and unliteral action despite the amiable overture of AMMON and without waiting for the conclusion of the report, consultation with the Borrower and/or BPP.
AMMON also stated that to prevent a permanent and irreversible damage to our investment we are compelled to notify you of the multiple violations of the Procurement Act (2007) and/or other critical breach of DISREP Loan Agreement, including; Lack of Borrower Consent and Evidence of BPP review BEFORE Bids are Invited, Non-Implementation of “Slice and Package Approach”, Provision of 45% Import duty waiver expiry: Invalid Information in Bid Contents and No Equal Opportunity and Omission of “Ex-Factory or Off-the-shelf” in Margin of Preference (ITB 33)
To determine the 30% for labour and raw materials in a Purchasers Country and when compared with description of Group A provided in Section 133 – Pricing of International Bids (Public Procurements (Goods and Works) Regulation 2007), the words “Ex-Factory or Off-the-shelf “are omitted in the published Bid and the 30% estimation is restricted to “EXW price” only.
The direct implication of the “off-the-shelf” omission is that majority of AMMON are excluded from being classified under Group A which will diminish their opportunity and offers unfair advantage to the foreign suppliers who are privileged and fall into all the 3 cases, considering that the second condition requiring engagement in manufacturing/ assembling since bid submission date is a mere formality.
In addition to the highlighted violations and implications, the ICB approach according to AMMON is clearly against the key national developments policies, misaligned with World Bank strategic objective of “eliminating poverty” since it is impossible to achieve this goal by shipping Nigerian jobs to overseas locations. Several weak links in the implementation of the DISREP using ICB are lurking, such as the source of funds for customs/port clearance and logistics, as evident from the risk of budget appropriation/release (for port/other logistics charges) and the growing number of stranded power consignments at the ports, which continuously caused failure of various internationally funded projects by TCN and other FGN agencies”.
It is on record that the Local Meter Manufacturers have an installed capacity of about 5 million meters, and currently have about 500, 000 meters that can be deployed to the market immediately and can source another 500,000 to reach Nigeria within the next three months. Given the same terms, conditions, and incentives we can supply and install the 1,250,000 meters within 6 months from today if given the chance.
