Malawi’s State House has dragged the country into a crude oil contract with a Nigerian firm that could be costly for the already troubled economy, Weekend Nation reveals.

At issue is the manner in which State House handled the contract given that this was a highly technical matter; the lack of a clear cost-benefit analysis for Malawi in the deal and the legal pitfalls government could find itself in at the closure of the one-year contract end this month.

The government-to-government deal, signed between the Republic of Malawi and the State-owned Nigerian National Petroleum Corporation (NNPC) on May 16 2012, but which came into effect on May 1 last year; will expire on April 30 2013.

According to a contract and correspondence on the deal, the transaction is two-pronged: (1) crude oil allocation from the Government of Nigeria through NNPC facilitated by an agent firm—Petroleos De Geneve SA Limited (PDG)—and (2) the supply of petroleum products to Malawi through the National Oil Company of Malawi (Nocma) by the agent firm.

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investigations show that to facilitate the deal, President Joyce Banda gave Michael Anyiam-Osigwe—who she had earlier appointed as Malawi’s Honorary Consul-General to Nigeria—authority to sign the multimillion dollar crude oil deal on behalf of Malawi, before involving relevant government technocrats.

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found out that Anyiam-Osigwe—a member of one of Nigeria’s wealthiest families—went ahead and enlisted PDG—a company ran by his relation Raymond Anyiam-Osigwe—to act as the agent in return for some unspecified payment of royalties.

Correspondence Weekend Nation has reviewed in the past weeks confirms the association that Anyiam-Osigwe has with PDG.

The investigations also established that State House only involved technocrats from the Ministry of Justice, Treasury, the Ministry of Energy and Nocma two months after Consul-General Anyiam-Osigwe had signed the contract on behalf of Malawi and when the deal was already in effect.

This arrangement, according to government sources close to the deal, did not amuse senior Capital Hill experts because they never approved of the way Anyiam-Osigwe was appointed as a broker; the perceived conflict of interest, the way the contract was drawn and the involvement of State House in an arrangement whose construction, they argue, should have been led by Capital Hill technocrats not State House advisers such as Shyley Kondowe as was the case with this deal.

Shyley Kondowe

Shyley Kondowe, special adviser to President Banda on policy and strategy, was the main link between Malawi Government officials and Anyiam-Osigwe.

The correspondence shows how Kondowe convened the first ever meeting of Anyiam-Osigwe with officials from Treasury, the ministries of Energy and Justice held at the latter’s conference room on July 19 2012—two months after the contract was agreed upon and in effect.

And Nocma, the agency the Malawi Government appointed to implement the deal on its behalf, only saw the contract later—on August 20 2013, according to the correspondence.

Details of the meeting, prepared by Nocma, say Kondowe introduced Anyiam-Osigwe to a meeting of stakeholders that included then solicitor general (now Attorney General) Anthony Kamanga, secretary to the Treasury Randson Mwadiwa, the then principal secretary in the Ministry of Energy Ben Botolo and Nocma general manager Robert Mdeza.

Both Kamanga and Botolo confirmed attending the meeting in a recent interview with Weekend Nation,but declined to divulge what was discussed.

In one of the correspondence to senior government officials, Kondowe explained the role President Banda personally played in pulling the crude oil deal together to the four senior government officials

“Following Her Excellency’s visit to Nigeria, one of the issues she discussed and negotiated with His Excellency President Goodluck Jonathan is the allocation of a G to G crude oil to the Government of Malawi.

“It pleased Her Excellency to engage the services of Mr Michael Anyiam-Osigwe, now Malawi Consular to Nigeria, to oversee the discussions on Her Excellency’s behalf.

“I am pleased to advise that Her Excellency has secured the allocation of the crude oil for the Malawi Government. Mr Michael Anyiam-Osigwe has arrived in Malawi to brief the Malawi Government on the project and how the government could be seized of the matter,” wrote Kondowe.

Efforts to get comments from Kondowe proved futile. Weekend Nation e-mailed a questionnaire to him two weeks ago when he was with the President in London. He confirmed receipt,but asked for more time. Last week, his phones went unanswered. Even a text message sent by this reporter was not responded to. On Wednesday this week, Kondowe promised a face-to-face interview, but did not turn up at rendezvous where our journalist waited for more than an hour from the appointed time.

Michael Anyiam-Osigwe

President Banda tasked Michael Anyiam-Osigwe, as Honorary Consul-General, to ensure that Malawi got the allocation to purchase and sell crude oil from Africa’s largest oil producer whose proceeds, according to Nocma general manager Robert Mdeza, would be used to import processed fuel suitable for Malawi.

Anyiam-Osigwe comes from a powerful and wealthy Nigerian family running the Anyiam-Osigwe Group. He serves as its official liaison on political affairs.

Anyiam-Osigwe also serves on boards of several companies under the Anyiam-Osigwe Group, a Nigerian conglomerate with interests in oil and gas, shipping and bunkering, mining, agriculture and legal services.

The conglomerate is widely regarded as one of the world’s largest family-run businesses, usually mentioned in the same breaths as Walmart in the United States, Tata Group in India and Samsung in Korea.

But, not everything has been rosy.

One of its companies is embroiled in a $5 million (K2 billion) bribery scandal in which President Michael Sata’s government is accusing one of the Anyiam-Osigwe family members of corruption, according to press reports in Zambia, Nigeria and international media. Lusaka has also thrown allegations of fraud at the family.

The group allegedly signed a contract similar to Malawi to supply oil to the Zambian government under former president Rupiah Banda.

But the administration of Michael Sata now accuses George Anyiam-Osigwe—a relation to Michael who is running the agency that brokered Malawi’s Nigeria deal—to have pocketed $5 million in commission for oil which was never delivered.

The Anyiam-Osigwe family recently released a statement denying participation in any oil transaction with the Zambian government and rejected accusations that one of their members pocketed such amounts of money in commissions, according to online media reports. The family has challenged Lusaka to produce evidence to back their claims.

Investigations by the Zambian government, however, last month culminated into the arrest of that country’s ex-leader Rupiah Banda, under whose watch the deal was brokered.

He was charged on March 25 2013 for abuse of authority for allegedly misappropriating $11 million (K4.5 billion) from alleged oil proceeds of the Nigerian oil deal.

The case is in court in Zambia where the ex-president pleaded not guilty to a charge of abuse of power linked to the oil contract he signed.

It is now four weeks since Weekend Nation first attempted to contact the two Anyiam-Osigwes with no reply. Last week, the mobile phones for the Consul-General went unanswered. A text message to one of his phones also got no reply. We followed up with fresh e-mails and, again, there was no response.

The contract

The G to G crude oil deal was first initiated by the late president Bingu wa Mutharika in his attempts to solve the chronic fuel shortages caused by Malawi’s dollar crunch.

But Mutharika died in April before he could see the deal through.

President Banda took over and flew to Nigeria at the earliest opportunity where she pushed the deal to fulfil her promise to solve the fuel problem, her main priority at the time.

Under the arrangement, Nigeria agreed to supply Malawi with crude oil through the NNPC and allowed Malawi to either process or sell the crude.

Government then mandated Nocma in Malawi to handle the business on its behalf, including accounting for the proceeds received under the arrangement.

The contract was signed between Michael Anyiam-Osigwe, on behalf of Malawi and Goodwin Jedy-Agba, who is group general manager for NNPC.

In the contract, Malawi was the buyer and NNPC, the seller.

The contract gives Malawi approval to buy and sell 30 000 barrels per day of crude oil made up of several grades as specified in the lifting schedule for each month.

This means that, effectively, Malawi was at liberty to buy and sell over half a million barrels a month.

But according to the contract, before making the first uplift of the oil, Malawi as a buyer agreed to pay upfront $2.5 million (over K1 billion).

“Buyer shall pay to Seller the sum of Two Million Five Hundred United States Dollars by telegraphic transfer to the account advised by Seller…” reads Article 10 of the contract in part.

Malawi could not, however, raise such amounts of foreign currency at that time.

Nocma general manager Robert Mdeza raised these concerns in a letter he wrote to Anyiam-Osigwe on July 23 2012.

Anyiam-Osigwe offered to facilitate the financial arrangements under PDG, the agent firm he had enlisted to act for Malawi.

“In light of Nocma’s current financial constraints, assurances were made in earlier exchange of correspondence that the agent firm [Petroleos De Geneve SA Ltd] could make all the necessary arrangements to facilitate the financing required…,” Mdeza wrote in a memo to then secretary to the president and Cabinet Bright Msaka.

We could not immediately establish whether PDG paid $2.5 million needed before the first uplift was made. We could also not establish the terms under which the money would be lent to Malawi and the implications of the same on Lilongwe.

Our investigations also reveal that government officials expressed some misgivings about how the contract was drawn and questioned the logic behind buying crude oil from Nigeria when what Malawi needs are dollars to import fuel.

Also in the contract are some sticky issues such as the total transfer of risk to Malawi in the event of loss of or damage of the crude oil.

Legal experts in government expressed concerns over the clause in the contract and thought that it exposes government to avoidable losses, according to two principal secretaries.

A memo by Mdeza to Msaka briefly touched on concerns raised.

“Clarification was sought by the Malawian stakeholders on how the Presidential Project involving allocation of crude oil to Malawi was going to work. In addition, the Malawian team brought to the attention of the Consul-General the foreign currency challenges faced by Malawi,” Mdeza wrote in the memo Weekend Nation has sourced.

A month of questions by Weekend Nation to Nocma, NNPC and to Anyiam-Osigwe has not yielded concrete responses.

Where is the money from the deal?

It is not known exactly how much Malawi has benefited from the crude oil deal as it nears its end.

Weeks of probing and asking government officials how much has been made or on behalf of the people of Malawi or where the money is did not yield much information.

But Mdeza told Weekend Nation two weeks ago that Malawi has managed to uplift 900 000 barrels of crude of about three cargoes.

Asked on how much the country has realised from the sale of the oil, Mdeza only said: “All that has been remitted and is in our custody and no single cent has been used.”

He refused to say how much has been made, but said the money is in Nocma offshore accounts.

The Energy Ministry was also tight-lipped when asked for details. Dr Wilford Masanjala, principal secretary in the Ministry of Energy, referred Weekend Nation back to Nocma for the details.

Mwadiwa, the secretary to Treasury, also advised Weekend Nation to talk to Nocma when asked whether he had an idea about how much the country has made from the deal.

But a well-placed Ministry of Finance source said the money that was made from the deal has not yet been made official, and not even Treasury Department has the slightest idea where it is.

But in November last year, PDG managing director Raymond Anyiam-Osigwe told Malawi’s Daily Times that Lilongwe was getting US0.4 cents in royalties per barrel, which he said totalled $760 000 (over K300 million) by November.

He said Malawi had uplifted 903 691 barrels in August and 997 416 in the second phase in October last year, which is nearly two million barrels to date, a figure more than double the one Mdeza gave to Weekend Nation.