Response to House of Representatives' Allegations

By

Chief Olusegun Obasanjo, GCFR

The Committee on Executive/Legislature Relationship

Suite 512

NICON Hilton Hotel

Abuja.

Response of the President of the Federal Republic of Nigeria, Chief Olusegun Obasanjo, GCFR, to  Allegations made against him by the House of Representatives  to the Peoples Democratic Party

INTRODUCTION

I welcome you to  this meeting and I thank you for your sacrifices which make you worthy members of our great Party, respected citizens of our country and mediators at this time of crisis. 

I am happy to present my explanations to you not only because it is just but also because I have absolute confidence in your integrity and objectivity.  Your courage, your experience, your patience, your dedication to our Party and to our country and your understanding of our strength and weaknesses will enable you to appreciate the responses which I now make to the questions that have been raised.  I assure you that I am not angry with the complainants and so I shall present my points dispassionately.  From me you shall hear nothing but the truth.  All that I have done I have done according to the law.  All that I have done I have done in the best interest of our great country.  I have not deliberately violated the law or the constitution and I have not sought personal gain.  I am not accused of corruption or mis-use of my power.  

In a country as complex and complicated as ours no single man or woman can have all the answers.  It is for this reason that I have always consulted widely and been open to suggestions from all quarters.  Nevertheless, the ultimate responsibility for the governance of the country is mine and it is I who must answer when questioned like now and before the bar of the public. 

I thank the National Chairman of our Party and members of the National Working Committee for living up to their responsibilities at this time.  I commend their efforts at asserting the supremacy of the Party and their insistence on order and discipline without which the Party’s effectiveness and influence will be grossly undermined.  That effectiveness and influence is as essential in the Legislature as it is in the Executive.  Without discipline and respect for constituted authority  the nation would never have entrusted its affairs to us at this critical time.         

I regard what was forwarded to the Party by the Speaker of the House on behalf of the PDP cacus of the House as a complaint to be explained rather than a querry to be answered as there is no legal basis for such.

Without too much preamble , let me go straight to the issues raised and let me respond to them point by point.  At the end, I would like to throw more light on some aspects of executive/legislative relationships at the Federal level which will need a change of attitude and orientation for progress to be made.

Now I address the issues as presented.

First Allegation:

That sometime between the months of April and July, 2002, the president purportedly amended the Capital Provisions of the 2002 Appropriation Act by reducing the Capital budget to 44% without forwarding the said amendments to the National Assembly for passage in violation of Section 80(4) of the 1999, constitution which acts amounts to gross misconduct.

Response

Shortly after the 2002 Appropriation Act was passed, it became apparent that the revenue projections which underpinned it were unrealistic. I immediately took the initiative of inviting the leadership of the National Assembly led by the President of the Senate and the Speaker of the House of Representatives to a meeting at the Presidential Villa on 4^th June, 2002 to brief them on the implications of the revenue shortfalls as well as the judgment of the Supreme Court on the 2002 Appropriations. I also informed them of the need to prioritize the Budget in the face of the dwindling revenue.  Subsequently, on 16^th June, 2002, I had a meeting with a delegation of nine Senators led by the Senate President, amongst whom were the Chairmen of Senate Committees on Appropriation and Public Accounts,  during which detailed responses were given to the charges of the Senate Public Accounts Committee alleging non-implementation of Budgets since 1999.

Among other things, the Senate delegation was informed that there had been a significant shortfall in the revenue profile of the Budget, notably the unrealised US$1.3 billion and US$1.2 billion as a result of the botched privatization of NITEL and non-recovery, as yet, of looted funds, respectively. At that meeting, we agreed that a Joint Executive/Legislative Committee of twelve persons, consisting of  six persons from each arm, should be set up under the Chairmanship of the Vice President to prioritize the 2002 Appropriations in the light of the changing revenue profile.

I immediately followed this up with a formal request to the leadership of each Chamber of the National Assembly to present the names of their nominees to the Joint Committee. Instead of presenting the names as previously agreed, the leadership of the National Assembly refused to do so. I had no option but to direct that the prioritization exercise should proceed as planned. The National Assembly was notified of the outcome of the exercise on 10^th August, 2002 as well as my intention to send a Supplementary Bill to the National Assembly in respect of some outstanding programmes and projects, inadvertently omitted from the 2002 Appropriations.

I should stress that the  exercise was limited to putting preferential order to the projects and programmes already included and approved in the 2002 Appropriation Act, within the limits of the resources available to implement the Budget. It neither involved new expenditure, nor a reduction of the appropriations in the approved Budget. The capital budget has not been reduced to 44% as a result of the prioritization exercise, as alleged. It was therefore not necessary to send a fresh Bill to the National Assembly for amendment of the 2002 Appropriation Act.

If during the course of the financial year the revenue profile improves, the priority will only be enhanced within the already approved budget. An Approved budget can never be regarded as sacrosanct with regard to implementation especially in the face of dwindling  revenue.  The need may often arise for urgent additional  funds that cannot be covered by the contingency  vote. An example of an institution whose needs may often be substantial and unforeseen and yet urgent and imperative is the Independent National Electoral Commission (INEC) and/or few on-going projects. It was for this reason that the National Assembly was notified of the Executive’s intention to send a Supplementary Appropriation Bill for those items inadvertently omitted from the 2002 main Appropriations or urgent new items.   If anything, my action should be hailed as prudent management of the economy. 

Section 80(4) of the 1999 Constitution provides that “No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.” By virtue of this provision I am not allowed to exceed the limit set by the National Assembly in  the Appropriation Act. However, I can, as I have done, apply limited funds to meet the needs approved in the Appropriation Act, having regard to the national interest. The implementation of the budget is the responsibility of the Executive and it need not consult the National Assembly in order to determine its priorities. I am therefore not guilty of any gross misconduct as alleged.

Second Allegation

On or about the month of July 2002, he issued a presidential order purporting same to constitute an amendment to the revenue allocation Act which action amounts to a violation of Section 162(1) and (2) and Section 313 of 1999 Constitution which amounts to a gross misconduct.

Response

Sequel to the Supreme Court’s judgment on the On-Shore / Off-Shore suit, I set up a Committee under the Chairmanship of the Attorney-General of the Federation and Minister of Justice to examine the judgment and advise me on its implications, particularly as it affected the 2002 Budget and the principle of derivation.  At that time, tension was rising in the country, especially in those littoral states most affected by the judgment.  It was clear that action needed to be taken quickly to reduce or eliminate tension and avoid possible grounding of the machinery of government. Simultaneously, I set up another Committee under the Chairmanship of the Minister of Works and Housing to seek a political solution to the problems arising from the judgment, particularly on the derivation principle of revenue allocation.

It became apparent from the report of the first Committee that the judgment had far reaching implications for the 2002 budget and the three tiers of government. The Supreme Court, amongst other things, declared unconstitutional, the deduction of 7.5% special funds as a first line charge on the Federation Account with the exception of 1% allocated to derivation in the existing Law i.e Cap 16, (as amended).  Furthermore, the Court held that the 1% allocated to derivation was inconsistent with the Constitution which provides for payment of not less than 13% as derivation.  The Court also declared that there was no legal basis for the payment of 13% derivation then being made to the oil producing states as the National Assembly  had not enacted the relevant law giving effect to it nor the President, as the Appropriate Authority, modified the existing law in order to bring it into conformity with the Constitution pursuant to Section 315(2) of the constitution.

While awaiting the Report of the Second Committee, and on the advice of the Attorney General of the Federation, I issued the order subject of this charge dated 8^th May, 2002 which, modified the existing law on revenue allocation and brought it into conformity with the Constitution. The Order also gave legal backing to the payment of 13% derivation to the oil-producing states hitherto stopped.  I transferred to the Federal Government the funds and responsibility for the Federal Capital Territory (1%), Development of the Mineral Producing Areas (3%), General Ecological Problems (2%), Stabilisation Account 0.5% previously covered by the Special Funds, deduction of which, as a first line charge on the Federation Account, the Supreme Court had declared unconstitutional.  It is to be stressed that the Federal Government’s share remains 48.5% as  the  7.5% was applied by the Federal Government to the purposes for which the funds were orginally intended.  It should be noted that even before the modification of the law these responsibilities were discharged by the Federal Government and the funds accordingly allocated to it. 

I took that action in absolute good faith and as necessitated by the exigencies brought about by the volatile situation at hand and in accordance with the Constitution.  I was guided by the Supreme Court’s judgment which stated as follows:

“Now, sub-Section (2) of Section 315 of the Constitution provides for modification of an existing law to bring it into conformity with the Constitution. The sub-Section reads:

(2)  The appropriate authority may at any time by order make such modifications in the text of any existing law as the appropriate authority considers necessary or expedient to bring the law into conformity with the provisions of this Constitution.

The word “modification” is defined in sub-Section (4) of Section 315 as including-

“addition, alteration, omission or repeal.”

See Att.-Gen Ogun State v. Att.-Gen of the Federation (1982) 1-2 SC13. And the appropriate authority in respect of Cap 16, a law of the Federation, is the President. Thus, the President has constitutional power, by order, to modify Cap 16 either by way of addition, alteration, omission or repeal, to bring it into conformity with the Constitution. This he has not done. At least, our attention has not been drawn to any order made by the President modifying Cap 16 to bring it into conformity with the 1999 Constitution.”

It is apparent from the above that I acted within the limits of the powers conferred upon me by the Constitution, in the best interest of the nation and as dictated by exigencies of the time.  Nevertheless,  I intend to table proposals before the National Assembly for a new revenue allocation formula as soon as I receive the necessary advice from the Revenue Mobilisation Allocation and Fiscal Commission.  Moreover, this has become necessary since the proposal I earlier submitted on 16^th August, 2001 to  the National Assembly on the new revenue allocation formula for consideration had not been acted upon before it was withdrawn as a result of the obvious implications of the judgment of the Supreme Court on the proposal.  The House of Representatives is entitled to dispute the constitutionality of my order.  In such a situation, it is my humble view that judicial interpretation ought to be sought rather than raising allegation of gross misconduct.  It is a matter of interpretation of Constitutional provisions, and this lies exclusively in the domain of the Judiciary.

Third Allegation

That from 1999 to 2002 you have consistently indulged in extra budgetary expenses contrary to Section 80 (2), (3) and (4) of the 1999 Constitution which act amounts to a gross misconduct to wit:

(a)     Expenditure on the National Stadium Contract in excess of appropriated sums.

(b)           Expenditure on the National Identity Card project.  He authorized the spending of the sum of N9.5 Billion vide letter of credit as against the sum of N5.9 Billion cumulatively approved for the years 2001 and 2002 in the Appropriation Acts respectively.

(c)     He authorized the purchase of 63 houses and their furnishing for Ministers in the years 2000 to the tune of N3,019,153,178.06 without any budgetary provisions in the 2000 Appropriations Act.

Response

            National Stadium Contract

(a)      The contract for the National Stadium, Abuja was awarded on the basis that payment to contractors was to be sequenced over three years of successive budgetary appropriations. In the 2001 budget,  N12.8 billion was appropriated for the National Stadium, out of which N8 billion has been paid leaving a positive balance of N4.8 billion.   It is apparent, therefore, that no expenditure was incurred on the National Stadium contract in excess of appropriated sums.  On the contrary, the expenditure so far incurred is below the amount appropriated.

National ID Card Project

(b)     The chequered history of the National ID Card project is well known.  It suffices to add that, in the past, a great amount of time and resources was spent on the project with very little to show for it. In fact, the National Assembly had itself inquired into this project. I believe that its findings must be quite revealing.

The following appropriations have, so far, been made for the project:

                                                      NBillion

FY 2000    6.00

FY 2001         4.431

FY 2002           .5

                             TOTAL 11.931

The Federal Executive Council decided to complete the National ID card project given its enormous potential for enhancing national security amongst other benefits. Pursuant to that decision, the Council awarded contract for the project to SAGEM AG of France after a transparent process involving competitive international bidding. SAGEM demanded mobilization fee in order to execute the contract expeditiously. This was paid from the appropriated sums.  I should add that so far the sum of N9.5 billion spent on the National ID Card project as stated by the House is less than the appropriated sum of N11.931 billion thereby leaving a credit balance of N2.431 billion.  It is apparent, therefore, that no excess expenditure was incurred in respect of the National ID project as alleged.

          Purchase of Houses

(c)     On assumption of office in May, 1999, the present Administration was faced with acute shortage of both office and residential accommodation, but especially the latter. Members of the National Assembly were themselves victims of this harrowing experience. Huge sums of money, by way of allowances, were initially paid out to distinguished Senators and Honourable members of the House in lieu of accommodation.

Similarly, a number of Ministers, Advisers, Special Assistants and other political office holders were initially not accommodated due to the shortage of government owned houses. It was in the face of this situation that the Federal Executive Council decided to provide official accommodation to several public office holders who would otherwise have had to be paid huge allowances in lieu of official accommodation. Consequently in 1999, the Federal Government sought from the National Assembly an additional capital allocation for the Ministry of Federal Capital Territory (MFCT). In response to this request, the National Assembly approved the sum of N5.2 billion as supplementary capital budget for the MFCT.

Of this amount, approximately N2.8 billion was spent for the procurement of houses and furniture for Federal public office holders. This was well within the appropriated sum.  Moreover, it is worthy of note that the 1999 Supplementary Appropriation Act did not specify the matters for which the appropriated funds were to be applied.

It is not true that N3.019 Billion was expended exclusively on the houses and furniture of ministers.  The houses were purchased for many public office-holders that require official accommodation.

Fourth Allegation

That in the year 2000, he authorized the deployment of military troops to Odi to massacre innocent citizens without recourse to the National Assembly contrary to Section 217(2) C of the 1999 Constitution which requires firstly for some conditions to be prescribed by an Act of the National Assembly for the use of the Military in that regard.

Fifth Allegation

That in the year 2001, he without lawful authority authorized the deployment of military troops to Zaki Biam, which occasioned the murder of innocent citizens and the destruction of properties, contrary to Section 217(2) C of the 1999 Constitution which requires firstly for some conditions to be prescribed by an Act of the National Assembly for the use of the Military in the regard.

Response

When the unfortunate incidents in Odi and Zaki-Biam escalated beyond the capacity of the Nigeria Police Force to control, I decided to deploy the Army to assist the Nigeria Police in restoring order as not only were properties being destroyed on a large scale, civilians and law enforcement agents were also being killed.   In the case of Odi, four Policemen and a total of seven soldiers deployed there on law enforcement and peacekeeping duties were killed.  The Governor of the State, who is also the Chief Security Officer of the State, had reported his inability to contain the  rapidly escalating lawless situation.  It was only after these developments that additional troops were sent to restore law and order.  No responsible Government will fold its hands and allow such a situation to continue unchecked.  In authorizing the deployment of the Army to the affected areas, I was guided by the provisions of Section 218(1) of the 1999 Constitution and Section 8(1) of the Armed Forces Act No. 105 of 1993.

Section 218(1) of the Constitution provides that “the powers of the President as the Commander-in-Chief of the Armed Forces include power to determine the operational use of the Armed Forces”.  Likewise, Section 8(1) of the Armed Forces Act No. 105 of 1993 vests power in me “to determine the operational use of the Armed Forces. .” Subsection (3) of this Section defines “operational use of the Armed Forces”  to include the operational use of the Armed Forces in Nigeria for the purpose of maintaining and securing public safety and public order.  I am also empowered by Subsection (2) to issue general or special directives to delegate responsibility for the day to day operational use of the Armed Forces to the Chief of Defence Staff and the respective Service Chiefs.  In the exercise of these powers,  I am not required either by the Constitution or  the Armed Forces Act No. 105 of 1993 to have recourse to the National Assembly. This allegation is, with due respect, totally misconceived and the use of the term “massacre” is particularly offensive and inciting.

In addition, I have power under Section 217(2)(c) of the Constitution to deploy troops in aid of civil authorities. In deciding whether or not to do so I need not consult the National Assembly. The National Assembly is not required to prescribe conditions for the operational use of the Armed Forces under Section 8(1,2&3) of the Armed Forces Act No. 105 of 1993 (now deemed to be an Act of the National Assembly).  Once I have exercised any power to deploy troops those troops are to be governed in their conduct by conditions laid down by the National Assembly. In my judgment I have ample powers under the existing law to act as I did.  In any event, under our Constitution both the Executive and the National Assembly can initiate necessary bills. The necessity for troops in aid of civil authority arises only after the Police have failed. Such situations demand urgent and decisive  action to maintain law and order and save lives and property.

The National Assembly, has neither enacted a new law nor amended the existing law prescribing any such conditions.  Similarly, the Armed Forces Act No. 105 of 1993, which is an existing Law and deemed to be an Act of the National Assembly within the contemplation of Section 315 of the Constitution, is what we have as guide on these conditions. And, as the President of the nation, I am under obligation to ensure the security and safety of lives and property of the citizenry in any part of the nation.  Undoubtedly, it was not the intention of the framers of the Constitution that a  Section of the country that is engulfed in crisis be allowed to degenerate and be destroyed only because the National Assembly is yet to enact an Act prescribing conditions under which the Armed Forces would operate when called upon to act in aid of civil authorities.  And if the National Assembly has to enact laws for each situation the affected areas would have been completely destroyed before the Law is enacted. The deployment of soldiers to Odi and Zaki-Biam where nineteen soldiers were decapitated with the loss of many civilian lives was for the purpose of assisting the Police to restore order. This was done within my constitutional powers and in absolute good faith with the aim of containing the worsening situation in the areas in the interest of security and to maintain  law and order and save lives and property.

Sixth Allegation

That in the year 2002, he refused to fully implement the recurrent budget as it affects the salaries of staff and overheads for Ministries contrary to the provisions of the Appropriation Act 2002, which amounts to gross misconduct

Response

A budget is an indicative plan which can only be implemented to the extent that resources are available. Recurrent expenditure of a budget, particularly personnel cost, is a first charge. The surplus arising thereafter, if any, is dedicated to the capital programme. Capital expenditure is a function and product of recurrent surplus from the Consolidated Revenue Fund Account. If there is no sufficient surplus after meeting recurrent obligations, capital projects will be difficult or impossible  to fund.

Based on available revenue, the budgets for 1999, 2000 and 2001 were correspondingly implemented. In fact, in the years 1999, 2000 and 2001 there were in-built deficit items which were not realized even though the core revenue, ie, revenue from oil and non-oil sources, was surpassed. Total revenue fell short of expectations as indicated in the table below:

BUDGETED EXPENDITURE COMPARED WITH ACTUAL REVENUE 1999 - 2002

The level of implementation of the budget is shown below through detailed analysis of the components of the budget from 1999 – July, 2002.

DETAILED ANALYSIS OF BUDGET PERFORMANCE FROM 1999 - JULY 2002

The above table shows, that during the period January 1999 - July 2002, while recurrent expenditure was fully implemented, except for overhead in 2002, the capital expenditure could not be fully implemented. In 1999, the capital budget was 52.40% implemented, while in 2000, it was 70.06% implemented.  However, in 2001, it was 66.24% implemented while in year 2002, capital budget implementation was only 18.51% of total budget as at 31^st July, 2002.  This low performance is due to the low revenue realised during the first seven months of the year.  Revenue shortfall in the first seven months of the year 2002 occurred in both oil and non-oil revenue.  In the case of oil revenue, it was due to the cut in our OPEC quota while in the case of non-oil revenue, it was due to the  yet unrealised revenue and unrealistic revenue  contained in the Appropriation Act. The full details of revenue shortfall, as it affects the 2002 budget, is as shown below.

Revenue Performance for Budget 2002 as at 16^th August, 2002

The 2002 budget also has in-built deficit financing items expected to be funded from proceeds of the privatization of NITEL (projected to be in the region of US$1.3 billion) and recovery of loot from the Abacha family (expected to be in the region of US$1.2 billion). These proceeds have not been realized. In addition, the nation’s oil quota has been cut by about 400,000 barrels a day from our previous level of 2.1 million barrels per day to 1.78 million barrels a day.

The fiscal 2002 budget was predicated on a production quota of 2.1 million barrels a day as against the current production of 1.788 million barrels a day. While it is true that the international price of crude oil has averaged US$25.00 per barrel as against US$ 18.00 per barrel on which the 2002 budget was based, the average price of the basket of the different grades of oil sold by Nigeria in the international market has hovered around US$20.68. This, coupled with the reduced production quota, has inevitably led to a significant shortfall in oil revenue.

Recurrent budget has always been regarded as a first charge on the Consolidated Revenue Fund.  In particular, all established personnel costs are fully paid in respect of civil servants, both  at home and abroad. The only occasion when there was a delay in the payment of salaries was in July 2002 when the Federation Account Allocation Committee could not reach agreement in time due to the fall out from the Supreme Court judgment.  Presently, salaries of all staff of Federal Ministries and Agencies have been paid up to the end of August, except a few cases involving staff in the Field Offices of a few Federal Ministries and Agencies whose salaries have been delayed due to some administrative lapses. The staggered release of budgetary appropriations for overheads was an expedient measure taken in the face of the revenue shortfalls earlier described, and in order to make enough funds available for the payment of staff salaries to be effected as a matter of priority. Even under normal conditions, it may be expedient, for reasons of macro-economic stability, to adopt measures to ensure the good management of the economy. This action, taken in good faith and in the overall public interest cannot be described as gross misconduct.

Seventh Allegation

That in the year 2002, he refused full payment of recurrent expenditure for the judiciary as it affects monies for the payment of salaries and overhead costs contrary to the Appropriation Act of 2002 which act amounts to gross misconduct, contrary to Sections 80(3) and 162(9) of the Constitution.

Response

Prior to the judgment of the Supreme Court on the On-Shore / Off-Shore suit, recurrent expenditure of the Judiciary had always been a first line charge on the Federation Account.  However, the Supreme Court declared this practice unconstitutional on the ground that recurrent expenditure of the Judiciary is a charge on the Consolidated Revenue Fund.  Eventually, from the provisions earlier made before the said judgment, the sum of N10.566 billion was paid directly to the National Judicial Council between April and July, 2002 for disbursement to the heads of the relevant courts.  The Judiciary, which has since expressed full satisfaction with this arrangement and on the sufficiency of the funds allocated, has not complained to me over any shortfall in its recurrent expenditure.  It is surprising, therefore, that the House of Representatives has made this allegation going so far as to describe it as a gross misconduct on my part. There is no factual basis for this allegation which, I sincerely hope, was not meant to cause disaffection and to incite the Judiciary.

Eighth Allegation

(a)          On or about the 31^st day of October 2001, the office of the Accountant-General of the Federation issued two separate letters mandating the Governor, Central Bank of Nigeria, Abuja to debit CBN/NCC USD Account No.400938294 with Chase Manhattan Bank, New York in the sum of US$40 million (Forty million United States of America Dollars) and N16,015,500,000.00 (Sixteen billion, Fifty-one million, Five hundred thousand Naira) without enabling legislation by the National Assembly.

(b) On or about the 31^st day of October 2001, the office of the Accountant-General of the Federation by the aforesaid letters mandated the Governor, Central Bank of Nigeria Plc. Lagos Account No.3582059979001 with Standard Chartered Bank N.Y., 7, World Trade Center in the sum of US$40 million (Forty million United States of America Dollars) and First Bank of Nigeria Plc. Account No.40000701-35 with Central Bank of Nigeria (CBN), Lagos in the sum of N16,051,500,000.00 (Sixteen billion, Fifty-one million, Five hundred thousand Naira) without an enabling legislation by the National Assembly.

ISSUES GIVING RISE TO CHARGE

Ø    The proceeds from the GSM licence auction were disbursed from an overseas Account maintained by CBN/NCC S.162(1) of the 1999 Constitution stipulates that all revenue or other moneys raised or received by the Government of the Federation shall be paid into the Federation Account. For this purpose, S.162 of the 1999 Constitution creates “the Federation Account”.

Ø    There was no Act of the National Assembly authorising the withdrawal of the US$185 million from the proceeds of the GSM licence auction.

Ø    The mandate letters of the Accountant-General of the Federation prescribed the manner of disbursement from the CBN/NCC Account without any enabling Law by the National Assembly. 

Ø    The President, in authorising the withdrawal of US$185 million, has usurped the powers of the National Assembly and violated the 1999 Constitution.

Ø    The President has similarly violated the principles of transparency and accountability provided for by S.162 of the 1999 Constitution in dealing with and managing the Federation Account. For instance, at what rate of exchange was N16,051,500,000.00 (Sixteen billion, fifty-one million, five hundred thousand naira) paid out of the CBN/NCC Account?

Response

It came to me as a surprise that NITEL did not have enough funds to participate in the bidding process for the Global System of Mobile telecommunication (GSM) licence. NITEL had to borrow timeously from First Bank of Nigeria Plc to facilitate its participation in the GSM bidding. The amount borrowed was in two currencies amounting to N16.005 billion and US $ 40 million. The initial mandate issued to the CBN was for the payment of US$ 185 million, but this was subsequently amended to payment in the two currencies in which the loan was made. The amount borrowed was to be repaid from the anticipated revenue accruable to the Federation Account from the GSM licence auction process. Since the GSM licence auction proceeds were to accrue directly to the Federation Account, it was convenient to borrow from this account on the authority of the Federation Account Allocation Committee (FAAC), the statutory body which controls the account.

Attention should also be drawn to the fact that whereas the National Assembly has constitutional power to authorize expenditure predicated on the Consolidated Revenue Fund (CRF), it does not exercise control over drawings from the Federation Account which is solely controlled by Federation Account Allocation Committee.  The membership of the Committee comprises  Commissioners of Finance from all the States of the Federation, Accountants-General of all the States of the Federation, Accountant-General of the Federation, Representatives of the Central Bank of Nigeria (CBN), the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) with the Minister of State for Finance as its Chairman. The FAAC was informed about the loan and its approval duly sought.  Repayment of the loan to the Federation Account will be effected after NITEL’s privatization. If NITEL had not been able to participate in the GSM bidding process the value of NITEL would have been greatly reduced.

The foreign Account in question from which the payment was authorized, belongs to the Federation Account. It is the account into which all payments accruing to the Federation Account in foreign currency are made before monetization of same in Naira by the Central bank of Nigeria (CBN). Thus the Federation Account is always rendered or reported in Naira, our country’s legal tender.

Ninth Allegation

That in spite of the coming into force of the 1999 Constitution, he continued to operate and maintain dedicated accounts in the Central Bank of Nigeria contrary to Section 80(1) and 162(1) of the Constitution. E.g. Bank for International Settlement Account and Proceeds for Port Development charges Account among others.

Response

It is not true that dedicated accounts are still being operated and maintained by government despite the coming into effect of the 1999 Constitution as all such accounts had been closed even before the emergence of the present Administration. There are, of course, accounts into which, certain funds established by law for specific purposes are paid pursuant to the exemptions provided under Section 80(1) of the Constitution.. The Port Development Charge Account referred to in the allegation falls into this category. The account at the Bank for International Settlement, also referred to in the allegation, is being operated on behalf of the Federation Account for the purpose of receiving all offshore accruals. These accruals as earlier stated, are subsequently monetized into Naira by the CBN and paid into the Federation Account for distribution to the beneficiaries.

Tenth Allegation

That he refused and neglected to pay in full the thirteen % derivation revenue to benefiting states contrary to Section 162(2) of the 1999 Constitution, and act which amounts to gross misconduct.

Response

Contrary to the above allegation, with effect from January, 2000, oil-producing states were regularly receiving the full payment of 13% of the revenue accruing to the Federation Account directly from oil.  However, in its judgment, the Supreme Court declared the payment as having no legal basis in the absence of either an appropriate law enacted by the National Assembly or a modification of the existing law by me for the purpose of bringing it into conformity with the 1999 Constitution. As a result of this development, the payment was stopped while the monies were deposited in an escrow account, pending the modification order  pursuant to Section 315 of the Constitution. Payment to the oil producing states has, however, since resumed in full following the signing of the relevant Order by me in line with the judgment of the Supreme Court.

Eleventh Allegation

That Mr. President has refused to appoint a Minister of Petroleum Resources which action has occasioned the following violation:

(a)           That since inception of this Government in 1999 Mr. President refused, failed and or neglected to appoint a Minister of Petroleum Resources contrary to the Petroleum Act cap 350, laws of the Federation as amended by the Petroleum (Amendment) Act of 1996 and Petroleum (Amendment) Act No. 22 of 1998 and thereby authorising the performance of or performing yourself the functions of the Minister of Petroleum Resources.

(b)           That in breach of Section 9(1) d III laws of the Federation 1990 appointed the Committee which has increased the prices of petroleum products which function is that of a Minister of Petroleum Resources under the said Act, which Act constitutes a gross misconduct.

(c)            That a process of establishing refineries through bidding was established and provisional licences were issued without the approval of the Minister of Petroleum as required by 3(1) of the Petroleum Act which action amounts to gross misconduct.

Response

Under Section 5 of the 1999 Constitution, the Executive powers of the Federation are vested in the President who may exercise same directly or through the Vice President, Ministers or officers in the public service of the Federation. It is apparent from the wordings of this section that it is within my discretion to exercise these powers directly or delegate same to certain functionaries.

In the same vein, Section 147(1) of the Constitution makes provision for such offices of Ministers of the Government of the Federation as may be established by the President. This clearly gives me the discretion over which office of Minister to establish.  The Constitution does not specify the Ministries which I have to establish or the powers which I may delegate to Ministers. 

It is therefore within my constitutional powers to choose not to establish the office of the Minister of Petroleum Resources and directly exercise executive control over petroleum matters.  It is immaterial that the office of Minister of Petroleum Resources is provided for in the Petroleum Act as the provisions of the Constitution take precedence over that of an existing law in the event of a conflict.

The same applies to the allegations in items 11 (a)-(c).  However, suffice it to add that, a Bill for the establishment of an Autonomous Petroleum Products Pricing Regulatory Agency, referred to in Item 11 (b) of the charge, was forwarded by me to the National Assembly as far back as 21^st March 2001.  More than nineteen months after the presentation of the Bill, it is yet to be considered by the National Assembly.

Twelfth Allegation

That Mr. President has unilaterally cut across board all overheads cost contained in the 2002 Appropriation Act by 50 % without recourse to and approval of the National Assembly contrary to Sections 80(3) and (4) of the 1999 Constitution.

Response

Provisions for overhead costs contained in the 2002 Appropriations Act could not, so far, be released as budgeted, again due to the significant shortfall in the revenue profile that underpinned the 2002 Budget as described earlier in this submission.  This shortfall in the release of appropriations for overhead costs is, therefore, a purely expedient administrative measure dictated by the realities of the revenue situation of the 2002 Appropriations. It is not tantamount to withdrawal of moneys from the Consolidated Revenue Fund of the Federation other than as prescribed by the National Assembly in the context of Section 80 (3) and (4) of the 1999 Constitution. 

Thirteenth Allegation

That Mr. President has unilaterally merged the Federal Road Safety Commission, a body established by an Act with the Nigerian Police without a Bill for an Act to harmonise the two Bodies, or repeal the FRSC Act.

Response

There has not been any merger of the Federal Road Safety Corp (FRSC) with the Nigeria Police Force.  The Law establishing the FRSC is still in place.  The FRSC still has its personnel wearing their original uniform different from that of the Nigeria Police.  They are also still using separate sets of vehicles, while FRSC has its own different nomenclature and a complement of its leadership.  What exists between the two bodies is nothing more than an administrative cooperation for operational convenience designed to enhance security, especially on the nation’s highways.

Fourteenth  Allegation

That Mr. President has, without an enabling Act merged the Nigerian Bank for Commerce and Industry (NBCI), the National Economic Reconstruction Fund (NERFUND) and the Nigerian Industrial Development Bank to form the Bank of Industry while the Acts establishing the said institutions are still valid and subsisting.

Response

The Nigerian Bank for Commerce and Industry (NBCI), the  National Economic Reconstruction Fund (NERFUND) and Nigerian Industrial Development Bank (NIDB) have not been merged to form the Bank of Industry as alleged.  These institutions are still in place, while the laws establishing them are intact.  When Government decided to reorganise the Nigerian Industrial Development Bank and  rename it Bank of Industry in furtherance of its policy on industrialization, it was considered appropriate and cost effective to second some of the staff of the said institutions to the reorganised and renamed Bank of Industry in order to ensure its smooth  operation with minimum cost.  As soon as the Bank is revitalised   and becomes fully operational, Government will decide on the fate of the institutions concerned. If a decision to dissolve any of them is reached, Bill(s) will be forwarded to the National Assembly to seek for the repeal of the relevant law(s).  The National Assembly will also be fully briefed on the raison d’etre for Government’s recommendation and action.  To repeal the  law establishing an organisation before knowing what will replace it is like putting the cart before the horse  and will cause untold hardship to the staff of such organisation.

Fifteenth Allegation

That Mr. President merged the Peoples Bank of Nigeria, Family Economic Advancement Programme, both bodies established by law and the Nigerian Agricultural and Co-operative Bank to form the Nigeria Agricultural and Rural Development Bank without legislative authority.

Response

It is not true that the Peoples’ Bank of Nigeria, Family Economic Advancement Programme and the Nigerian Agricultural and Co-operative Bank have been merged to form the Nigeria Agricultural and Rural Development Bank (NARDB).  These institutions are still in place as the Laws establishing them have not been repealed.  However, due to financial constraints arising from poor management and wrong policies, most of them have not been active.  In order to reduce operational costs and redundancy, when NARDB was  being incorporated,  it was decided to second most of the staff to assist in its effective operation.  If a decision is eventually taken by Government to dissolve any of the institutions, appropriate Bills will be forwarded to the National Assembly to seek for the repeal of the relevant laws.  However, with regard to the Family Economic Advancement Programme, some of its staff were also seconded to the National Poverty Eradication Programme (NAPEP). NAPEP is not conceived as a permanent organisation or institution but as an adhoc instrument for accelerating poverty alleviation and reduction.

Sixteenth Allegation.         

That in the year 1999, Mr. President appointed Mr. Musiliu Smith as Inspector-General of Police without consultation with the Police Council, contrary to the 1999 Constitution.

Response

It will be recalled that Alhaji Ibrahim Coomassie, the former Inspector-General of Police, retired from service and left with the Government of General Abdulsalami Abubakar.  Upon coming to office on 29^th May, 1999. I had need immediately for a person to head the Police Force and so I  directed Alh. M. A. K. Smith to act in that office until the Police Council was constituted.  At the time  I gave the directive, the Police Council was yet to be constituted.  However, as soon as the Police Council was constituted, I sought the concurrence of the Council on 15^th July, 1999 for the retroactive appointment of Alhaji M.A.K. Smith as the Inspector-General of Police from 1^st June, 1999. The Council had since concurred.

Seventeenth Allegation

That Mr. President caused the appointment of, and Service as Acting Auditor-General of the Federation for a period exceeding six months without Resolution of the Senate contrary to Section 86(3) of the 1999 Constitution which act Amounts to gross misconduct.

Response

Following the retirement of Mr. P N Akubueze as the Auditor-General for the Federation and, on the recommendation of Mr. P. N. Akubueze and the Federal Civil Service Commission, I appointed Mr. J O Ajiboye, the most senior Director in that office as Auditor-General for the Federation, and forwarded his name to the Senate for confirmation. In the meantime, on 15^th January, 2002 I approved the appointment of Mr. Ajiboye as Acting Auditor-General for the Federation for a period of six months in accordance with Section 86(2) and (3) of the 1999 Constitution. The letter appointing him referred to this Section of the Constitution which spells out acting appointment for only six months duration. This appointment expired on 15^th July, 2002 and Mr. Ajiboye, whose name I had submitted twice to the Senate, had to revert to his substantive position of Director.

In the absence of a Senate confirmation of Mr. Ajiboye as Auditor-General or the sanction of a resolution of the Senate extending the acting appointment of Mr. Ajiboye, I approved the appointment of Mr. V S C Azie, the second most senior Director in the Department, as the Acting Auditor-General for the Federation for a period of six (6) months with effect from 13^th August, 2002. It is, therefore, not true that Mr. J O Ajiboye served for more than six months as Acting Auditor-General for the Federation.

CONCLUSION

Distinguished members of  the Mediation Committee, let me thank you for the patience to listen and hear me out.  Looking at the issues as presented, there is no doubt in my mind that there is abundant evidence of lack of information, misinformation and disinformation between the Executive and Legislative Arm of Government.  If the three arms of Government have to work complementarily and cohesively, albeit separately, together for the good, progress, prosperity and development of our country, there must be free flow and sharing of information unstintingly.  In this regard, I have decided to review and refurbish the liaison arrangement between the Executive and the National Assembly.  I strongly believe that we must close the information gap through formal and informal contact between the Executive and the Legislature on a geo-political zonal basis at the Party and national levels.   We would have reduced areas or opportunities for mischief from within and without if we could close the information gap.

Democracy is a process in which stakeholders have to humbly and respectfully learn, a journey rather than a destination.   Democracy works only when the stakeholders work within their jurisdiction and cooperatively with others within their own jurisdiction.

By our Constitution the Party must have a say in who and who is in what jurisdiction. The Party must have oversight responsibility for the performance of its members within each jurisdiction and must remain engaged and responsive.  In this regard there must be laid down rules of operation by the Party for its members within each jurisdiction and there must be a code of conduct that is strictly  enforced. 

The vision, ideals, mission and manifesto of the Party must be clear and unambiguious and must guide the actions and programmes of all stakeholders in the interest of the Party and the nation. 

With the explanation and the few general comments I once again thank you and I am ready to answer any questions that you may still have for me. 

Long Live our great Party the PDP.

Long Live Nigeria.

Dated this 7^th day of September, 2002

Olusegun Obasanjo