By Aaron Ukodie
Mono-Sourcing: The Case Against a Dominant Supplier
One of the dominant features of Nigeria’s telecommunications business during the years of NITEL’s reign was the controversy surrounding mono-sourcing — a procurement strategy that favoured a single dominant supplier for major equipment contracts. The strategy effectively sidelined other companies that competed for NITEL contracts, particularly during the period of the network’s digitalization.
In the post-privatization era, some NITEL contracts for telecommunications projects did not follow due process. In some cases where tenders were requested, only one supplier’s submission was considered. There were even instances where tenders were not requested at all; instead, a single supplier was invited to submit a quotation. Many critics regarded this as an abuse of process — a system of mono-sourcing that inflated contract costs.
Within NITEL, mono-sourcing was understood as the award of contracts to a single dominant supplier. Opponents of the system argued that it encouraged inefficiency and was responsible for the high cost of contracts.
However, defenders within the organization maintained that mono-sourcing was sometimes inevitable — especially for projects that required urgent execution under difficult circumstances.
Records show that contracts such as the Abuja Telecommunications Expansion Project and the Ikeja/Apapa Digital Exchanges and Extended Line Plant (ELP) were mono-sourced.
The decision to adopt this method always originated from the Federal Government through the Ministry of Communications. In such instances, NITEL management had no choice but to comply with government directives.
During the tenure of David Mark as Minister of Communications, the Ministry often obtained anticipatory approvals from the Presidency — allowing contractors to mobilize and begin execution before final pricing was agreed upon.
The argument in favour of mono-sourcing the Ikeja and Apapa exchange contracts was based on the urgent need to restore services after both exchanges were destroyed. Given the industrial and commercial significance of these areas to NITEL’s revenue, the government deemed immediate restoration essential.
Because of time constraints, the contractor’s unit prices under the North-East Expansion Project (Bauchi) were used as a benchmark to establish price fairness.
Similarly, for the Abuja Telecommunications Expansion Project, the Babangida administration instructed NITEL to mono-source the contract to Siemens. The unit prices from the Apapa and Ikeja contracts were again used to determine competitiveness.
Despite these exceptions, several NITEL projects did follow competitive tendering procedures — including the Kaduna International Telecommunication Switching Centre (ITSC), the Jos (North-East Project), and the Bauchi and On-Line Building Projects, which were awarded through open competition.
International Contract Pricing Benchmarks and Bloated Rates
Questions often arose about whether NITEL’s contract pricing met international standards. Critics argued that the company’s contracts were overpriced, far above globally accepted benchmarks.
NITEL, however, defended its pricing by pointing out that the cost of executing telecommunications projects in Nigeria could not be compared with those in developed countries. Factors such as electricity, transportation, customs duties, and exchange rates significantly affected pricing in Nigeria.
Supporters of NITEL’s approach argued — with documentation — that lower quotations did not necessarily make a tender more competitive. Sometimes, higher quotations offered better long-term value, especially when deadlines and logistical challenges were considered.
Indeed, there were instances where contractors with lower bids later requested price revaluations, citing newly imported items or unforeseen conditions midway through execution.
The company’s procurement approach also aimed to ensure flexibility and cost-effectiveness in sourcing parts and peripherals from various vendors, not just from the main equipment supplier. Industry analysts observed that NITEL’s contract standards were designed to meet international CCITT requirements and were based on open rather than proprietary systems.
However, critics like Dr. Ernest Ndukwe, former Executive Vice Chairman of the Nigerian Communications Commission (NCC), strongly opposed mono-sourcing.
According to him:
“It is only in Nigeria that I heard of mono-sourcing for the first time. Telecommunications did not start in Nigeria. In those days, there were over three major telecom manufacturers for any single equipment — whether switches, microwave, or transmission systems.”
Dr. Ndukwe, who was once Managing Director of GPT West Africa Limited, one of the major telecom equipment suppliers in the 1980s, further stated:
“If equipment is purchased from only one or two companies, they will dictate prices. But when you spread purchases across multiple manufacturers, you create competition — and competition is good for the market.”
He described mono-sourcing as a gimmick designed to avoid competitive bidding, calling it “a major drawback” to NITEL’s growth.
“It was a tactic used to favour one equipment vendor. Some of the so-called Siemens equipment were not even manufactured by Siemens. For instance, Siemens supplied billing systems that were actually made by other companies,” he revealed.
The Siemens Defense
Siemens, the German company that benefitted most from Nigeria’s mono-sourcing policy — and which many accused of overpricing — did not remain silent.
Chief Rufus Odusanya, former Secretary of the Ministerial Tenders Committee who later became General Manager, Corporate Communications at Siemens, offered a spirited defense of the company’s pricing practices in the 1980s and 1990s.
He argued:
“If you want to sell A and B and another person wants to sell A, B, and C, there is a big difference. When comparing prices, we must compare apples to apples. Reducing price just to win a bid may lead to poor delivery.”
Odusanya cited the example of a Motorola and Ericsson contract for M-TEL’s GSM network, which was expected to be completed within four months but remained unfinished by July 2003.
“Whatever gain was expected became a loss. If the network had gone live as planned, the company would have earned substantial revenue. That’s part of the real cost consideration,” he said.
Continuing his argument, he added:
“There is a big difference between someone who wants to finish a job in six months and another who plans to do it in a year. The one working faster must deploy more labour and resources. Unfortunately, people emphasize price alone.”
He criticized the practice where contractors drastically reduced bids merely to secure contracts:
“If Contractor A quotes N10, Contractor B N9, and Contractor C N5, and suddenly A drops to N6 just to win, something is wrong. Such desperation leads to poor-quality work because no contractor wants to lose money — they’ll cut corners.”
Odusanya concluded:
“At Siemens, once we quote a price, we don’t reduce it by more than 10% during negotiation because our pricing is thoroughly researched. When compared with international rates, you’ll find it nearly identical.”
Between 1988 and 1996, contract price variations became common, as contractors routinely sought revisions midway through projects, often citing new requirements. Many digital development projects in the North-Eastern network — particularly those in Bauchi and Jos — suffered delays and prolonged integration into the national network due to such practices.
Contract Pricing and Oversight
Mr. Ige, a long-serving senior official in the Ministry of Communications, admitted that he was not deeply involved in international contract benchmarking but offered insights into how pricing decisions were made during his time.
According to him, contract pricing in the old P&T Department was handled by the planning unit in collaboration with experts from the International Telecommunication Union (ITU).
These experts were responsible for planning, specification writing, tender evaluation, and final selection.
He emphasized that the lowest bid was not always the best, noting that the World Bank also applied similar evaluation methods — first assessing technical competence before financial bids.
“Some contractors are cheaper because they offer less advanced systems. For example, a manual billing system cannot be compared with a computerized one. The difference reflects in the price,” he explained.
Ige further described the multiple layers of checks that guided the procurement process — from the departmental tender board to the Ministerial Tenders Committee, and finally the Finance and General Purpose Committee (FGPC) — before Cabinet approval.
Each level, he said, reviewed and queried pricing to ensure accountability.
“It’s easy for people to read newspapers and claim one contract is overpriced. But when you go through the process, you’ll see the due diligence involved,” he noted.
Odusanya agreed:
“It makes for good newspaper headlines, but the truth is, every contract passes through multiple vetting stages before final approval.”
