Some $2.2bn-worth of Nigerian energy contracts were awarded without a bidding process by the former president and his energy minister, officials say. One was to a company with less than $200 of base capital at the time, a witness told a parliamentary committee.
It is investigating why $16bn of investment in the energy sector during Olusegun Obasanjo's eight years in power failed to end power shortages.
Ex-President Abdulsalami Abubakar heads one of the firms, the committee heard. He is chairman of Energo Nigeria Ltd, which received a $163m contract to build a power station by 2009.
According to a state official, only five per cent of the work has so far been completed. The staff in the Ministry of Energy was never involved. This week's parliamentary hearings, which are being aired on television, are causing a stir with their shocking revelations.
Many parts of the country go for days without electricity and businesses and many homes rely on their generators. When President Umaru Yar'Adua came to power last year he announced he would declare a "state of emergency" on the country's energy crisis.
Nigeria currently has 10 power stations - they are all between 20 and 30 years old. Last month, Vice-President Goodluck Jonathan said power cuts were an "embarrassment" to Nigeria - after black-outs affected a meeting he was attending.
The House of Representatives committee is investigating why six power stations - already paid for by the government - are yet to be completed years after they were begun.
It has called all the contractors to give testimony about their progress. Two witnesses told the hearings, which began on Tuesday, that bushes from the the site where a South African company, Pivot, had been contracted to build a station in the oil-rich Niger Delta have yet to be cleared.
Pivot, which had a base capital of $200 at the time it received its contract, had received about 75 per cent of the money for the project, government official James Olotu said. Olotu heads the National Integrated Power Projects, a government organisation set up by Obasanjo to try to attract private investment into the energy sector.
He and another official said that Obasanjo and former Energy Minister Liyel Imoke personally approved all the contracts.
"The staff in the Ministry of Energy was never involved," Olotu told the committee.
Obasanjo is one of the leaders of the ruling People's Democratic Party and is considered by pundits to be the power behind President Yar'Adua, whom he chose to succeed him. e made a name for himself by claiming to crack down on the country's endemic corruption when he set up the Financial and Economic Crimes Commission.But some commentators say that the move was a cynical attempt to get the international community, wary of Nigeria's bad reputation, to cancel huge debts. It is likely that Obasanjo himself will be called to give evidence.
The committee is expected to give its recommendations within a month.