Wednesday, 29 April 2015

HOW SECURITY LAPSES LED TO THE COLLAPSE OF NAFCON


How Security Lapses Led to the Collapse of NAFCON

At 100% production, the NAFCON’s expected daily revenue from its installed capacity of 1,500 metric tones of ammonia per day; 1,000 metric tones of urea per day; and 1,000 metric tones of NPK per day was 100,000 USD (about N14 million per day, conservatively). When the National Fertilizer Company of Nigeria (NAFCON) began production in July, 1987, it was producing between 110% - 115% installed capacity and was adjudged Nigeria’s most successful indigenous manufacturing company and the highest foreign exchange earner, after petroleum.

 

The market for NAFCON brand of blended NPK was very large, because of the recognition of its high quality and availability of multiple grades. By 1990, when NAFCON’s workers salary was one of the highest remuneration packages in Nigeria, the company’s total staff strength stood at 5,500 employees with 2,000 casual workers. By 1991, NAFCON was already a huge success and a monument of national honour and pride. From 1989 – 1992, the company received several international awards as best producers of urea products in the world. Its premium ammonia and urea far exceeded world standard. NAFCON was therefore declared self-reliant and self-sustaining.

 

Government conflicting policies also contributed immensely to the early demise of NAFCON. Supervision of the company by federal authorities looked unfocused as control of the company oscillated among federal ministries, especially after the completion of the Nigerianization process in 1991. From inception to 1995, NAFCON was under the control of the Federal Ministry of Industries.  Later in 1995, the supervision of NAFCON shifted to the Federal Ministry of Agriculture, just because the company was producing fertilizers for farming, and remained there till 1997 when supervision of the company moved to the Presidency.

 

In 1998, the Federal Ministry of Agriculture once again took back the supervision of NAFCON until 2001 when the company shifted back to the Federal Ministry of Industries. For a successful company such as NAFCON, established with billions of the tax-payers’ money, the apparently unending shift of supervision looked unguided, unfocused, and uncertain.

At the peak of its glorious days in 1992, the Federal Government of Nigeria, under General Ibrahim B. Babangida, announced that NAFCON was among industries to be privatized, but never advanced any reason(s) for the planned action.

Shortly after the announcement, the Technical Committee on Privatization and Commercialization (TCPC) made many trips to Onne to inspect and valuate the company in readiness for privatization or outright sale.

 

Workers of the company became worried, not sure of their fate. Management had no explanation. In reaction, sabotage through over-invoicing of goods and inflated prices of spare parts, duplication of form “M” and Letters of Credit as well as splitting of contracts in favour of foreign companies, which did not service them, became the order of the day. Management who ought to have helped to put the situation under control began to get deeply involved in daily business in NAFCON, in order to make quick gains before the company became privatized.

 

Following this development, the fortunes of NAFCON nose-dived, leading to the first management/union confrontation in June,1992 at some stage, the union held management staff hostage for several hours in the company’s premises until agreement was reached on staff benefits. While the situation above waited for attention, the company was split into two, NAFCON 1 and NAFCON 11, on April 6, 1993.

 

This situation suddenly polarized the staff, further deepening uncertainties among the agitated workforce and heightening insecurity, increased widespread suspicion, acrimony and malice. Staff accused of disloyalty were unfairly treated and even retrenched. That laid the foundation for heightened union activities and demands, acts of sabotage, forgery, pilfering and hostage taking and eventual collapsed of the company. On the whole, NAFCON had four Managing Directors in four years; and was enveloped by a cloud of uncertainties.

 

Although from its inception till NAFCON stopped production, it produced a cumulative total of 6,600,000mt (six million, six hundred thousand metric tones) of granular fertilizer and 3, 500, 000mt (three million, five hundred thousand metric tones) of ammonia, NAFCON potential to produce explosives, fibre glass (for boats), glass-sheets, and plastics were untapped. In fact, NAFCON was the only company in Nigeria that could produce high grade explosives at the time of its operations. Management and workers in the urea plant were aware of the enormous untapped potential of the company, but chose to concentrate on fertilizers and depend on the revenue therefrom. 

 

             According to available statistics, Nigeria lost an average revenue of N336 million daily from the collapse of  NAFCON between  the time it was  shutdown  till it was  sold to O-secul Nigeria  limited  in August  2005. Its 5,500 employees and 2,000 causal workers lost their means of livelihood; over 350,000 households that NAFCON was providing livelihood by its downstream and upstream activities lost their sources of income. As Kharbanda and  Stallworthy put it, “company  failure affects not only those most  immediately  concerned,  those  employed by and trading with  the company but also industry  in general, the overall  economy and the well-being of the country in general, the overall economy and the  well-being of the country or countries  where the company operates”.

 

Collapse of NAFCON

The downturn in the fortunes of NAFCON began in 1995, when the company in the face of numerous odds, surpassed the production target of fertilizer required for the Federal Government to stop importation that year.  After the bumper production, the company could not undertake the necessary turnaround maintenance of the plant which was then overdue because proceeds from the sales of fertilizer did not come on time and when it did, it came in trickles.

 

The last installmental payment from the 1995 sales was received in the year 2000, five years after. The expected revenue from the 1995 sales was slashed in 1996 from N19 billion to N12 billion when government unilaterally fixed the prices of NAFCON fertilizer products below the operating cost. This resulted in the slow and steady decay of the plant and equipment as critical spares required to keep the plants minimally on stream could no longer be produced. 

 

On July 7, 1999 the failure of the Waste Heat Boiler Tubes in the Ammonia plant caused the entire facilities to be shutdown. Prior to the shutdown, the plants had operated below 50% capacity utilization caused by the erratic operations of the Water Treatment Units.

 

In all, three proposals for completing the revamp work were received from engineering firms and evaluated both by NAFCON and the Technical Board but no directives were received from the supervising Ministry of Industries.

 

The was low moral among the staff resulting from observed gross indiscipline of some members of the upper management of the company and the failure of the Ministry of Industries and the Technical Board to take disciplinary actions based on several investigations.

The Federal Government did set up a Commission of Inquiry followed by that of the Senate Committee on Industries, bit the impacts of these investigations were never felt, thereby compounding the moral problem among the staff. 

 

Security in NAFCON

Available documents indicate that before the commencement of construction of the company, an Environmental Impact Assessment (EIA) was conducted by the Ministry of Industries. There is nothing to show that SECURITY survey was ever carried out in the company whether before construction, during construction or when fully operational.

 

The head of security in NAFCON was a retired Captain of the Nigerian Army, who served as Security Manager and reported directly to the company’s Managing Director. He had no formal training in Industrial Security. The security department had about 50 policemen who worked under him in the department.

 

The 50-man security team was made up of policemen posted from the Rivers State Police Command in Port Harcourt to NAFCON to help maintain security in the company, and the Supernumerary Policemen (Spy Policemen), directly recruited by NAFCON, were trained for three months in public policing at the Police Training School at Nonwa in Tai Local Government Area of Rivers State, about 10 kilometers from the NAFCON plant. Again, they were not exposed to any training in industrial security. The head of the Spy police, called, “OC SPY” had the Security Manager as his direct boss and to whom he reported cases directly.

 

During this period NAFCON premises did not have a wall or perimeter fence. NAFCON had gates to the administrative block (the main office complex) and to the production area but there were no electronic detectors and no effective access control. In the production area, only workers in the area, contractors, suppliers, or visitors cleared from within could gain entry, but this was not very strict. The areas of NAFCON with some levels of access control were the ammonia, urea and NPK (blending) plants.

 

There were no closed circuit television (CCTV) installed in strategic locations in NAFCON for surveillance and monitoring of intruders. Retrenchment of staff was haphazardly done. Many workers were laid off without any reason or with flimsy excuses. Accusations were not investigated before sentencing the suspected culprits to punishment. At the same time, some persons recruited were not properly screened, especially those in the junior and casual staff categories. As a result, some staff earlier retrenched found their way back to the company and were reemployed. Such people, surely, did not come back with their whole heart to work for the progress of NAFCON, but on a reprisal mission to attack the company through stealing and sabotage.

 

NAFCON jetty, through which fertilizers were exported to international market, was not properly protected resulting in the conveyor-belt conveying fertilizer from the production plant for loading into a waiting ship berthed at the jetty slacking and some bags of fertilizer felling into the river. The river became polluted and killed fishes which were found floating the next day. The Onne and Okochiri communities who live by the river protested and were settled by the management of NAFCON.

 

This apart, NAFCON was a big polluter. Poisonous fumes from NAFCON plants were not released into the atmosphere, but piped underground to a nearby creek. As a routine, the pipeline was cleansed every month and the effluent released into the creek, resulting in the death of fishes and some other aquatic life. Because of pollution caused by NAFCON, the company witnessed several conflicts with its host communities – Onne (Eleme) and Okochiri (Okrika).

 

Fertilizer is a highly toxic/poisonous chemical. It is recommended the world over that people should not work in a fertilizer company for more than five years and should not work at the plant more than six months. It is also recommended that persons beyond the age of 45 should not work in a fertilizer company because of the toxicity of the environment.

 

But NAFCON management which adopted the policy ab initio apparently did not encourage the workers of the production department to observe this policy. Instead, they pampered them with sizeable allowances, beverages and milk. With this, the plant workers viewed themselves as special workers deserving special packages and were satisfied with that.

 

My investigations revealed that several plant workers died while NAFCON was still producing, but management would not give the minutest information as to the cause of their death, but only shoulder the cost of burial and give “maintenance packages” to the bereaved families. According to the National Network Newspaper (a Port Harcourt based tabloid) in September, 2005 “before the laid-off NAFCON staff were paid their entitlements, more than 500 members of NAFCON had died since the company stopped production as a result of their exposure to ammonia gas”.

 

Workers at the plants (production department) were at liberty to use facilities and materials meant for production the way they liked. It was therefore easy for them to manufacture mirrors, glass sheets, etc. to few interested buyers without management detection. These workers were also in charge of the urea plant where explosives could be produced.

 

As a safety precaution, workers in the bagging area were supposed to wear protective armours, but even when they were provided with the items, they preferred to sell it and make quick money and then exposed themselves to danger.

 

The technical audit carried out by M. W. Kellogg, the original builders of NAFCON between August, 1995 and May, 1999revealed the dilapidating state of the company. A company that was barely 8 years old was said to technically 15 years old. The Turn Around Project (TAP) which is the same as Turn Around Maintenance (TAM) were not genuinely executed. The plant engineers merely collected money, ordered few spare-parts and did not do any thorough job. Besides, the plant was over-flogged, having been made to produce at 110% - 115% above installed capacity. The report also added that the staff strength of NAFCON should not be more tha 800 people. But NAFCON had 5,500 workers.

 

NAFCON witnessed many management-employee conflicts which were often protracted. During lock-outs, hostage-taking and other forms of protest by the workers, management invited soldiers and mobile policemen with live ammunition to try to arrest the situation.

 

Misappropriation of funds was common at the slightest opportunity. Theft cases were never properly investigated. These prepared grounds for flagrant cases of sabotage against the company.

 

There were some dilapidated buildings in and around NAFCON that were not manned in any way by security personnel. They constituted hide-outs for criminals who from time to time went into the company to steal fertilizers and spare-parts from the warehouses and food from the catering stores.

 

Above all, there was massive waste in NAFCON. Top management and supervisors openly engaged in over-invoicing huge sums of money, obviously because of what they stood to gain in monetary terms. My investigations also revealed that huge heaps of raw materials that could have conveniently taken care of NAFCON’s production at least for several months were left lying waste at various points in the production department. In the same vein, equipment ordered for millions of dollars were left to waste at the Oil and Gas Free Zone, Onne.

 

In 2003, the Management of NAFCON at the time discovered a cartel in the company that specialized in duplicating Form “M” and Letters of Credit as well as splitting of contracts in favour of foreign companies which did not service them. Forty-four such Letters of Credit were detected and out of these, one of the foreign companies had 20 Letters of Credit. Precisely, on 28th October, 2003, the management of NAFCON wrote a letter reference MMD/FP/ABJ/C10/2003-003 to the Central Bank of Nigeria, requesting the cancellation of Letters of Credit fraudulently issued to some foreign companies which did not service them, an economic crime against the Federal Republic of Nigeria. The Letter of Credit amounted to USD 1, 235, 855.70 (One million, two hundred and thirty-five thousand, eight hundred and fifty-five dollars seventy cents).

 

From the foregoing, we can briefly deduce the following security blunders as being the core cause of the collapse of NAFCON:

1.      NAFCON was a case of total neglect of security.

2.      The company was established and commenced operations without security survey.

3.       Its security department was manned by commercial policemen, headed by a retired army captain, none professionally qualified and none had formal training as security practitioner.

4.      There was total absence of relationship between covert and overt security.

5.       Security principles were violated ignorantly.

6.      Security programme/designs were never given attention.

7.      Management attitude towards security was indifferent thus enforcement of security rules suffered. 

8.      Management was exemplary only in fraudulent acts and wastes paving the way for vandalism, terrorism, theft, embezzlement and eventual collapse of NAFCON.

 

It has been estimated that Nigeria loses almost N166 billion annually (excluding human lives, sufferings, and pains that cannot be quantified appropriately in monetary terms) to vandals, fraudsters, and other categories of criminals. A breakdown of this figure reveals volumes. According to the NNPC, the annual lose inflicted on the corporation by oil theft, vandalism and repairs arising therefrom is put at N150 billion. The Nigerian Extractive Industry Transparency Initiative (NEITI) also reported huge annual lose of over N10.9 billion to criminal activities. While the annual lose suffered by other industrial and commercial concerns is said to be over N5.5 billion.

 

This is not only threatening the sustainability of the socio-economic development of the country, but also posing great threat to national security, business operations and individual welfare. It also discourages labour, investments and genuine investors. The menace cut across both the public and private sectors. Organizations such as NNPC, PHCN, SPDC, NAOC, to mention but a few, have several tales to tell about what criminals have done to their facilities and activities.    

The basic aim of security in business is to contribute to business profits, reduce or eliminate preventable crime and losses; evolve and maintain an environment of peace and tranquility; and boost staff moral and public confidence. This, security does by providing effective protection services; interfacing between the organization and its publics; creating and maintaining a peaceful and serene environment devoid of crime or fear of crime, which enables the business to survive, be in service, generate incomes,  and meet its obligations to the various publics.  

A security programme for any business undertaking must define its underlying motivations for effective security and this must incorporate the following:

1.      Desire for reduce losses;

2.      Desire to create employee’s awareness of the consequences of violation of policies;

3.      Desire to inform employees of their responsibilities for assets protection;

4.      Desire to involve employees in loss prevention actively;

5.      Desire to modify values, behaviour, or attitude while on the job;

6.      Desire to provide job enhancement; and

7.      Desire to sustain serene environment with the company publics.

In other words, a business security programme must as of necessity provide realistic answer to the following basic questions:

a.       How can the security function enhance profitability?

b.      What must be done to protect the main interests of the facility or company?

c.       What programmes are essential to provide required protection?

d.      How much staff is needed to carry out required tasks?

e.       How much money is needed to fund required programme?

All security programmes must be based on a hierarchy of needs, which addresses corporate, facility, personnel and environmental issues. It must identify and place a series of barriers between what the company wants protected and what the company wants protected from. That is what I called total solution for a total problem.

 NAFCON management was badly informed of the fact that there is no security without some methods of establishing accountability. For many numbers of reasons some people will steal and a few items missing each day could amount to a staggering sum. Hence it is an economy necessity to prevent losses no matter how small they appeared at first. All loss problems start small, and if they are not controlled or prevented at the infancy stage, they grow and become serious problems, which may threaten the efficiency, effectiveness and the very survival of the organization.

NAFCON therefore, is case of losses that start small and eventually grown to become the cancer that killed the company. Those who neglect security always pay dearly for.

 

No comments:

Post a comment