The ECOWAS Court of Justice on Friday ordered the Cross River State Government to repay about $6.46million loan owed the ECOWAS Bank for Investment and Development (EBID) for defaulting in the payment of outstanding loan granted the state government in 2005. The amount excludes interest on loan of 6.5 percent interest per annum payable from August 31, 2018 when the loan became due for repayment.
Tinapa is a business and leisure resort located in the Calabar Free Trade Zone in Cross River State. It was built at the cost of $350 million borrowed by the state from various financial institutions.
The project, initiated by former Governor of the state, Donald Duke, was commissioned in April 2007. It was initiated to boost business and tourism in the state.
The legal status of the Tinapa Free Trade zone has, however, been uncertain since it is owned by the Cross River State government, while the constitution allows only the Federal Government to license and operate a free trade zone.
Delivering judgment on Friday in a suit brought by the bank before the ECOWAS court, Justice Edward Amoako Asante said the sum represents the situation of the Tinapa Free Zone Project loan in the applicant’s book as at August 31, 2018.
Justice Asante asked the Cross River government to submit to the court within two months a report on its measures to implement the court’s orders relating to the loan with which the government used in financing the Tinapa business resort.
Although the court granted most of the reliefs sought by EBID, which is a financial institution and arm of ECOWAS, it declined the request for immediate execution of the Irrevocable Standing Payment Order (ISPO).
The ISPO is a loan condition precedent mandating the Accountant General of the Federal Republic of Nigeria tagged “Guarantee” in Clause 7.05 of the loan agreement to satisfy the indebtedness.
The court also refused to grant the bank’s claim for solicitor’s fees on the ground that it was not backed by documentary evidence.
EBID had filed suit no ECW/CCJ/APP/14/19 on April 2, 2019 urging the court to declare its loan agreement No 7/AP/LAR/FRDF/04/05 with the Cross River State government as valid, binding and subsisting between the parties.
The bank also asked the court to declare the Cross River State Government failed to fulfil a loan condition precedent and compel the repayment of the loan with interest.
The bank had alleged that despite several demands, the State government refused and or neglected to repay the loan with duration period of seven years after a two-year moratorium.
The Cross River State Government admitted approaching EBID, an investment and development bank, to part-finance its Tinapa business and resort project.
The state government said both parties signed a loan agreement on May 20, 2005 for about $6.53million. Although the state government claimed it made repayments until 2010, it said it defaulted due to an administrative issue and that the repayment schedule for the outstanding payment of $5.69million was restructured to run from January 7, 2010 to January 1, 2020.
The state government said it paid instalments totalling $3.27million until January 1, 2014.
But the court noted that the state government defaulted on its repayment schedules, and therefore liable for the offence.