The Federal Republic of Malabu

Charles E. Uche

Once Upon a Time… 

The scandal that surrounded the award of the OPL 245 to Malabu Oil & Gas Limited continues to have a negative impact on Nigeria 22 years after its occurrence. This outrageous breach of law and fiduciary duty has been brought to international limelight – before the comity of nations – where it has further marred Nigeria’s reputation as a nation where corruption is championed from the highest political offices. This has led to a financial downfall and a near unsalvable reputational disaster which affects Nigeria’s GDP and its ability to attract foreign direct/portfolio investment. The impact doesn’t just end there and like any other corrupt practice, it has a significant effect on the standard of living and welfare of the masses. Below is an abridged timeline of “events”:

1998: On April 24, 1998, an oil company by the name Malabu Oil and Gas Limited was incorporated. This company had no legitimate place of business; no employee nor asset.

Just 5 days later, on April 29th, this company was awarded a lucrative Oil Prospecting License ‘OPL 245’ – to one of the most lucrative oil fields in Niger Delta, estimated to have about nine billion barrels of crude oil, and worth about half a trillion dollars.

This grant of license was made without a bidding process; without a formal application process “stating willingness to comply with provisions and conditions that will be imposed, and giving information about the proposed methods of developing the block” pursuant to the Petroleum Act of 1969; and without the full payment of a signature bonus fee of $20 million to be made within 30 days of the grant.

How much was actually paid by Malabu?

$2 million (out of the required $20 million).

What is a Signature Bonus?

A signature bonus is a one-time fee for the assignment and securing of a license, paid irrespective of economic success for the contractor or licensee.

How was this Possible and who were the True/Beneficial Owners of this Faux Company?

Malabu Oil and Gas Limited was (caused to be) incorporated by Chief Dauzia ‘Dan’ Loya Etete “Dan Etete“, the then Minister of Petroleum Resources under the then Head of State, Gen. Sani Abacha, using a false identity so as to award himself (since he has the power to award licenses) and his cronies.

Etete’s Cronies: the owners of this faux company included; Mohammed Sani (alias for Mohammed Abacha, son of the then Head of State, General Sani Abacha); Kweku Amafegha (a fictional character created by Dan Etete, the then Minister of Petroleum Resources, responsible for the award of the license; and Wabi Hassan (wife of Hassan Adamu, a close friend of General Sani Abacha and one time Nigeria’s ambassador to the United States of America). Etete himself was neither listed as a director nor shareholder of the company. He, however, used nominees and had beneficial and ultimate ownership and control of the company.

Who is a Beneficial Owner?

• A person who holds, directly or indirectly, more than 25% of the shares or voting rights in the company; or has the right to appoint or remove a majority of the company’s board of directors.
• A person who takes all or most of the returns of a property’s equity or monetary gains.

2001: In 2001, Malabu conceded 40% participation interest to Shell on the agreement that Shell would pay the Federal Government the outstanding $18 million. That same year, Malabu’s license was revoked and was awarded to Shell after a bidding process.

2002: Subsequently, in 2002, Malabu petitioned the house of representatives which then conducted a public hearing into the transaction and concluded that the revocation of the block from Malabu and reallocation to Shell was done mala fide (in bad faith) and declared it null and void.

2003: The House of Representatives, therefore, passed a resolution in 2003 that the block should be returned to Malabu. The Federal Government did not comply with the resolution of the green chamber.

2006: Malabu went to court and there was a series of litigation between Malabu and the government until sometime in 2006 when they entered into an out-of-court settlement which was subsequently reduced to a consent judgment of the federal high court, Abuja. As a result of the agreement and all the conditions set out to be met by all parties, Edmund Daukoru, who was then the minister of state for petroleum resources, wrote on behalf of the federal government, and on behalf of Obasanjo to convey the decision to return the block 100% to Malabu in accordance with the terms of settlement.

It was part of the terms of settlement that Malabu would pay to the Federal Government within 12 months $210 million less the $2.04 million already paid. This was not done. Furthermore, the then Attorney General of the Federation, Bayo Ojo, was actively involved in the negotiations and settlement. It is alleged that the terms of settlement were reached by corrupt means.

2011: After series of negotiations between Shell/Eni and Etete through Emeka Obi, an investment  banker, the federal government revoked OPL 245 from Malabu, whose beneficial owner was Etete and Abacha and awarded it to Shell and Eni (Agip) consortium after a payment. Both companies purchased the rights to the OPL 245 for about $1.1 billion and the transfer was made “through” the Nigerian government to accounts controlled by a former Nigerian petroleum minister, Dan Etete. From accounts controlled by Mr Etete, about half the money ($520 million) went to accounts of companies controlled by Mr Aliyu Abubakar “AA Oil”.

Senior officers of both Shell and Eni were closely involved in these series of corrupt negotiations and sanctioned the acquisition of OPL 245 and the companies are indicted through the principle of vicarious liability as the senior officers were agents of their respective companies. Both companies also knew or ought to have known the fraudulent and corrupt nature and history of the grant of OPL 245.

Abubakar Aliyu and Emeka Obi, amongst others, are alleged to have acted as “middlemen” for top officials of former President Goodluck Jonathan’s administration and Etete in the scandal. Also, it appeared that the Federal Government of Nigeria, through the then Attorney General, Adoke, and Minister of Petroleum Resources, Deziani, facilitated the papers for the agreement and transfer of the said sum from the Shell/Eni to a Federation Account and finally to accounts controlled by Etete. 

2017: In March 2017, the Economic and Financial Crimes Commission, EFCC, filed fresh charges against Aliyu Abubakar, along with Mohammed Adoke, a former Attorney General and Minister of Justice, and Dan Etete, a former Minister of Petroleum, for involvement in the $1.1 billion Malabu oil scandal. They are being prosecuted alongside two international oil giants – Shell Nigeria Exploration Production Company, and ENI, as well as Malabu Oil & Gas Ltd, Rocky Top Resource Ltd, Imperial Union Ltd, Novel Properties & Dev. Co. Ltd, Group Construction Ltd, and Megatech Engineering Ltd.

2020: As of March, 2020, the Economic and Financial Crimes Commission [EFCC] were prosecuting 8 defendants in the Malabu case on 47 count charges bordering on fraud, bribery, abuse of office, money laundering, unlawful obtainment, and so forth. As of the last court hearing “arraignment” on March 4th, two of the defendants denied ownership of some companies also being prosecuted in the charge sheet. The matter was adjourned to March 17th and 18th pending confirmations from the Corporate Affairs Commission (CAC) before prosecution can begin their duties in earnest. This is 22 YEARS LATER!

The Malabu Scandal, alleged to be Africa’s most controversial and corrupt oil deals has indicted top Nigerian ex-officials such as; Former Attorney General of the Federation, Mohammed Adoke; Former Minister of Petroleum Resources, Alison Deziani, Dan Etete, and so forth, and has set off a series of multifaceted litigations and criminal prosecutions against the litany of local and foreign actors in several jurisdictions including Italy, France, Netherland, Switzerland, United States and Britain. Some of these foreign courts have also indicted Shell, Eni and convicted few Nigerian actors including Emeka Obi in Italy.

It is noteworthy that the entire transactions “Malabu deal(s)” emanating from the grant of OPL 245 was built on a shaky, fraudulent and illegal foundation and thus, neither Etete nor Malabu acquired legitimate rights to OPL 245, as it is a common legal principle that one cannot benefit from his own wrongdoing “Ex turpi causa non oritur actio“. 

In conclusion, the Malabu Scandal isn’t a Scandal. “Scandal” does not do justice to what transpired over 13 years, and managed to be lingering 22 years later without a single conviction of the perpetrators in Nigeria. What happened was a national sellout. Akin to how the Royal Niger Company sold the territories now Nigeria to Britain for £865,000. This time, it’s not the white man; it’s our leaders who hold their offices and manage our resources in trust for the Nigerian people.

Furthermore, it is my firm belief that the outrageous wrongdoings in the Malabu case are of a magnitude such that should stimulate the national consciousness and outcry of the Nigerian people, and actively mobilise them against corruption of any scale and kind. In addition, it is my firm belief that this consciousness and mobilisation, alongside the instrumental provisions of the Federal Audit Service Commission Bill and the Petroleum Industry Bill would strengthen the regulatory frameworks and institutions against corruption, bring Nigeria in tandem with global anti-corruption and extractive best practices, thereby deterring similar future occurrence. 

Other Salient Issues Connected to Malabu:

• A President’s alleged ignorance of the overt acts of Senior Cabinet Officials of his administration – who represented the Federal Republic of Nigeria in the “Scandal”.
• Lack of Public Beneficial Ownership Data/Register, especially with regards to Private ‘LTD’ Companies, as the provisions are directed to Public “PLC” Companies. Private Companies are not bound by Beneficial Ownership obligations of Sections 94-98 of the Companies and Allied Matters Act (CAMA). Guess what? Virtually all companies in the extractive sector today are Private LTD Companies. The NEITI Beneficial Ownership Register recently launched still has a long way to go to address this.
• Excessive Powers of the Minister for Petroleum Resources. The current Petroleum Industry Bill that was refused assent by the President still gave enormous, discretionary powers to the Minister of Petroleum Resources. 
• Arbitrary and Discretionary Grant of Licenses by the Minister of Petroleum Resources.
• Weak Petroleum Regulatory Frameworks. Many of the laws around the Extractive Industry are very outdated. The Petroleum Act; NNPC Act, including the CAMA, to mention but a few, are antiquated; providing fines such as 25 to 2000 Naira.
• Weak/Limited Audit Capabilities of the Office of the Auditor-General for the Federation. The Auditor General of the Federation has no special, comprehensive statutory, enabling enactment (besides Section 85 of the Constitution) that empowers him to audit statutory agencies, corporations, commissions and bodies. He also has no power to sanction MDAs who default in submitting their annual audit reports. However, while the current Federal Audit Service Commission Bill (which was also refused presidential assent) gives the office much of these audit powers, Section 85(3) of the constitution, including specific clauses of the Bill prohibits the office from conducting audit on statutory corporations, agencies, commissions and bodies. Perhaps, if the office had the required audit powers, the Malabu Scandal would have been detected a longer time ago.

Ultimately, Malabu Scandal is possibly one case out of a number; and if all the aforementioned issues are not adequately addressed, there might just yet be another massive, perhaps, worse Malabu in the Federal Republic of Malabu.

Charles E. Uche ESQ. is a Staff Attorney at Connected Development [CODE]. He holds a degree in Public and Private Law from Afe Babalola University, and the Nigerian Law School, Abuja.