Zhongshan Fucheng Industrial Investment Co. Ltd., a Chinese private company that recently obtained a controversial court ruling to confiscate Nigeria’s sovereign presidential jets due to a failed multi-million dollar contract with the Ogun State government, was relatively very young in 2007 when it won the contract, FIJ can report.
A deal to develop a special economic zone in the Igbesa area of Ogun was struck between the government of Governor Gbenga Daniel and the company in 2007, the same year the company was created.
But both the company and the Ogun Free Trade Zone Company, the state-owned company controlling the zone, only perfected the agreement on June 29, 2010. This zone was 10,000 hectares wide, according to court papers reviewed by FIJ.
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Named Ogun-Guangdong Free Trade Zone, the contract between the two parties fell through in 2016, marking the commencement of arbitration over the matter in foreign jurisdictions. The latest French court order has empowered the company to take possession of Nigeria’s three presidential aircraft.
Narrating how Zhongshan Fucheng Industrial Investment was founded, a statement of claim dated May 1, 2019, stated that it was created in a bid to expand operations to an overseas country.
“In 2007, the global private equity firm, CVC Capital Partners, acquired a 29% stake in Zhongfu Enterprise for approximately US$225 million,” a part of the statement of claim on pages 9 and 10 stated.
“Following this acquisition and injection of capital, Zhuhai Zhongfu began looking to develop opportunities outside of China. This led to Zhuhai Zhongfu establishing Zhongshan (the Claimant) as its subsidiary to make a significant investment in Nigeria.”
Zhongshan Fucheng was a subsidiary of Zhuhai Zhongfu Industrial Group Co. Ltd., a polyester/polyethylene terephthalate (PET) manufacturing company owned by Lefu Huang.
The parent company claimed it had a successful record operating free trade zones in China, but the subsidiary with which it secured the Nigerian contract did not have such a record.
Narrating how Zhongshan Fucheng Industrial Investment was founded, a statement of claim dated May 1, 2019, stated that it was created in a bid to expand operations to an overseas country.
Zhongshan Fucheng was a subsidiary of Zhuhai Zhongfu Industrial Group Co. Ltd., a polyester/polyethylene terephthalate (PET) manufacturing company owned by Lefu Huang.
The parent company claimed it had a successful record operating free trade zones in China, but the subsidiary Zhongshan Fucheng with which it secured the Nigerian contract did not have such a record.
The Ogun government has since accused the Chinese company of attempting to defraud it in a style similar to how Process and Industrial Development (P&ID) nearly ripped Nigeria of billions of dollars arising from a dubious contract award.
“It should be recalled that the underlying contract between Ogun State and Zhongshan was executed in 2007, 12 years before the present administration, for the management of a free-trade zone,” Kayode Akinmade, a special adviser to Governor Dapo Abiodun on media and strategy, wrote on Thursday.
“The parties entered into a dispute in 2015 with arbitration commencing in 2016. By 2019, when the current state administration took office, the hearing at the arbitration had been all but concluded.
“The arbitral panel awarded over 60 million USD against the Federal Government of Nigeria (FGN) which was a co-defendant, when all Zhongshan had done was to build a perimeter fence around the free-trade zone. Needless to say, this was a bad/unfair decision.
“The present State Administration could not in all good conscience allow such an unconscionable and baseless decision, which would dissipate the commonwealth of the good people of Ogun State, to stand.
“Accordingly, and based on erudite legal advice, this Administration resolved to resist the enforcement of the award. The resistance was successful in 8 different jurisdictions. Currently, there are pending appeals against recognition orders issued in both the US and UK.”
It is unclear what criteria the state considered in awarding the contract to the Chinese firm at the time.
However, it has become a pattern for relatively young and inexperienced foreign companies to foray into Nigeria, many with local collaborators, to secure multi-billion naira government contracts.
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FIJ had earlier reported how MPH Rail Development Ltd., a company registered in the United Kingdom in 2019 without any record of activities, signed a memorandum of understanding (MoU) with the Federal Ministry of Transportation on March 15 towards the construction of the Port-Harcourt–Enugu–Calabar–Abuja Standard Gauge Rail Line, a project worth several billions of naira.
Responding to the story, the Ahmed Alkali-led ministry later said that the company was a “special purpose vehicle (SPV)”, adding that the MoU was still subject to further presidential scrutiny.
Since then, nothing has been said of the contract.
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