Further details are emerging about the letters of credit (L/Cs) used in financing arrangements for the expansion of Nigeria's power sector.

Some commentators are suggesting that the authorities probing spending in the power sector are failing to realise the significance of L/Cs in the financing arrangements.

Investigations

The House of Representatives Committee on Power and Steel is investigating the US$16 billion spent on the power sector between 1999 and 2007 amidst several allegations of corruption involving officials and private sector contractors.

The authorities maintain that L/Cs helped ensure that contractors could not be paid unless they fulfilled specific conditions. Therefore the L/Cs helped make sure that public money was spent and contractors would not be paid unless they fulfilled contractual terms and conditions (DC World News, 19 March 2008).

L/C usage

It now appears that only a portion of the L/Cs reserved for Nigeria's power sector expansion scheme known as the National Integrated Power Projects (NIPP) have been used.

As of March 2008, the NIPP L/C report indicated a 29 per cent utilisation of US dollar-denominated L/Cs and a 14 per cent utilisation of Euro-denominated L/Cs.

Safeguards

Meanwhile, in an apparent defence of the authorities' probity, Nigeria's Sunday Vanguard newspaper pointed out to its readers the rigorous checks on documentation required before payment is made against L/Cs.

"Clearly, the House committee appears unaware of these safety nets - especially given their insistence that billions of dollars has been paid out with nothing to show for it," a report in the paper said.

It also pointed out that since L/Cs are opened with a government banker - the Central Bank of Nigeria - the government retains control over them and not the contractor.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.