…How FG Overvalues Telco Security Network by $490m

By Joseph Chibueze and Torkwase Nyiekaa,  Abuja

The Fiscal Responsibility Commission (FRC) has accused 32 government agencies of failing to remit their 80 per cent operating surplus to the Consolidated Revenue Fund (CRF).

The revelation came on heels of the House of Representatives recovery that a Federal Government investment to improve security, built with a loan of $490million was valued at just $17 million after an audit by KPMG.

These and other irregularities, according to FRC, have hindered accurate determination of operating surplus liabilities and diminishing accountability and transparency in handling government revenue.

FRC said over N1.2 trillion in revenue was still being withheld by the defaulting agencies, keeping money away from government’s reach for funding of its budget.

The Chairman of the Commission, Victor Muruako, who spoke while briefing National Assembly correspondents yesterday, said the agencies failed to submit their audited account to the commission to enable it calculate their operating surplus which is supposed to be paid into the Consolidated Revenue Fund of the Federation.

Murako said over 60 per cent of the agencies have always failed to associate their annual budget with the Medium Term Expenditure Framework, the template for which annual federal government budgets is prepared.

The agencies are ”the National Drug Law Enforcement Agency (NDLEA),

Nigeria Security and Civil Defence Corps (NSCDC), Bank of Agriculture,

Bank of Industry (BoI), Federal Radio Corporation of Nigeria (FRCN),

National Broadcasting Commission (NBC), Standard Organisation of

Nigeria (SON), Nigeria Immigration Service (NIS), Nigeria Content

Development and Monitoring Board (NCDMB), National Integrated Water

Resources Management Commission, National Sports Commission (NSC),

Administrative Staff College of Nigeria and National Business and

Technical Examination Board (NBTEB).”

Others are ”Cement Technology Institute of Nig, Centre for Black

African Arts & Civilization, Chad Basin National Park, Gashaka Gumti

National Park, Gurara Water Management Authority, Hadejia-Jamaare

River Basin Development Authority, Kainji Lake National Park, National

Food Reserve Agency, National Lottery Trust Fund, National Theatre

Iganmu Lagos, National Troupe Iganmu Lagos, Nigeria Agricultural

Quarantine Service (NAQS), Nigerian Copyright Commission, Nigerian

Railway Corporation and Small & Medium Enterprises Development Agency

of Nigeria.”

Muruako explained that by the provisions of the Fiscal Responsibility

Act 2007, government-owned enterprises and corporations are supposed

to remit 80 per cent of their operating surplus to the CRF at the end

of every year to make money available for government to fund the

annual budget.

He said that some of the agencies have also developed the habit of

writing to withdraw their audited account after the commission must

have calculated their operating surplus which is done after the

agencies has submitted such audited account.

He said while the Fiscal Responsibility Act provide for offences, it

however failed to make provision for sanction and punishment, thereby

making implementation difficult.

According to him, ”From our records, the total figure paid as

Operating Surplus since the establishment of the PRC to date is beyond

N2.15 trillion, which by the way, could not have been possible without

the Act and the commission, given that there would have been no law,

rule, regulation or institution requiring such returns. These figures

are confirmed from our analysis of the annual audited financial

reports submitted to our commission by the concerned agencies.

”Much more is yet out there in the hands of MDAs that either have

failed to dutifully audit their accounts or that have done so but

choose not to forward copies of their audited financial reports to the

commission as required by law.”

The chairman further said that from the agency’s verification of

government capital projects, it was discovered that 60 per cent of

government agencies often undertake more projects than they can handle

because they fail to abide by the approved MTEF.

He added that the penchant of approving new contracts by government to

the detriment of existing contracts, as well as inadequate funding has

led to several abandoned projects across the country.

How FG Overvalues Telco Security Network by $490m

The House of Representatives learnt this on the second day of a two-day investigative hearing by the House ad-hoc committee to investigate the governing lease of Federal Government owned assets.

The investment, which is network of about 700 base stations is called the National Public Securities Communications Systems (NPSCS) and was started around 2008 and commissioned in 2012.

Its objective was said to be make provide advanced communications capabilities for the police and other security agencies.

Members of the committee led by Daniel Asuquo could not hold their shock as Director for Projects of MTS Technologies, who are to run the project through a concession agreement, Mathew Udanogh, disclosed this during the investigative hearing.

Udanogh said by the agreement they are to manage the network for 33 years of which the first three years would be to get it up and running before operating for profit.

The concession agreement calls for is a minimum investment of $100 million towards a rehabilitation of the network, he added

It is a security network, a telecommunications network that was built and commissioned approximately 2012. It was built with a technology called CDMA. The sponsoring Ministry is the Ministry of Police Affairs. It is a network of about 700 base stations and towers built around the country,He said

He also said the original intention was that the network would be operated using government subventions and allocations from the National Assembly, but the government decided that was not going to be feasible and decided to concession it. 

He said the the concession process started in 2014 which they won and got the necesary approvals.

He said the Federal Executive Council gave approval to the concession in 2019 with the condition that an audit needed to be performed on the network first to ascertain a fair value which would be used as a input for the concession agreement. 

He said, “So thereafter they appointed a committee to select one of the top four accounting companies, KPMG, to do a nationwide audit of all the assets associated with this NPSCS. They conducted that audit and the conclusion of that audit, that led us to a full business case using the ICIC process and all of that information was resubmitted to the FEC and gave its approval for it to be entered to. This was in December 2020. In January 2021, the concession agreement was signed.

“And our job is to rehabilitate a network with this investment and make services available to the police and other security agencies so they can have advanced communications capabilities. We provide the services to the police but also provide it in a more limited way to commercial customers. 

“There would be a three year rehabilitation period to bring up the network. All the equipment have to be replaced as it is an older technology. Network technologies have advanced since that time. So in fact we want to implement the latest technologies available. We would be launching with an advanced technology. After the three years, we engage fully in commercial services.

“An audit was performed on that network to bring up what is its current value today and it came to approximately $17 million. This network was not used so all the base stations have to be totally replaced and it cannot be used for any other thing.