The Federal Government has inaugurated the Ajaokuta Presidential Project Implementation Team aimed at realising the economic diversification agenda of the regime of President Muhammadu Buhari. The Secretary to the Government of the Federation, Boss Mustapha, is the chairman of the team while the Minister of Mines and Steel Development, Olamilekan Adegbite, is the Alternate Chairman. Inaugurating the committee, the SGF said that the government desired to industrialise the country within a diversified economy. He said, “The Ajaokuta Steel plant has languished in economic unproductivity for about four decades, and previous efforts at reviving it had proved abortive. This has resulted in avoidable massive foreign exchange losses at an intolerable opportunity cost to the country. “The pressing need to redress these avoidable challenges has necessitated this presidential intervention at this time. This is further underscored by difficulties being witnessed with present challenges in the global oil industry.” The SGF said it was the focus of the regime to make Ajaokuta steel West Africa’s largest fully integrated steel producer and most importantly, to accelerate industrialisation in steel-related industries. He added that the government placed a lot of value on the diversification of the economy, hence, the President’s participation at the Russia/Africa summit in Sochi, Russia, hosted by his Russian counterpart, President Vladimir Putin. Mustapha pointed out that the Ajaokuta Steel Project would “be resuscitated on the basis of a Government-to-Government agreement with funding from the Afrexim bank and the Russian Export Centre”.
It would be recalled that the Nigerian government has debunked the reports that it has plans of selling the over $8 billion Ajaokuta Steel plant in Kogi state, despite its redundancy. Yahaya Bello, Kogi State Governor, revealed this to State House reporters recently after he met with the country’s Vice President, Yemi Osinbajo. “The Vice President said there is no plan by the Federal Government to sell Ajaokuta Steel Company. The Vice President said Ajaokuta is an asset of the Federal Government and that they are looking into how best to make good use of that particular complex for the benefit of Nigerians at large,” Bello said.
Recently, the Central Bank of Nigeria, CBN, Governor, Godwin Emefiele, had, while briefing the Nigerian delegation at the end of the International Monetary Fund/World Bank Group meetings in Bali, Indonesia, said the company will be sold. “I am aware, as a member of the National Council on Privatization, that more is coming and I believe in due course that the Bureau of Public Enterprise, BPE, will make this available for us. I am aware of the situation of Ajaokuta Steel Company of Nigeria. It is also on the cart, first for a total review of the process of privatization and payment, so that our aluminium sector can eventually come alive,”
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The steel plant which has 12,000 plots large, 68-kilometre road network and another 24-kilometre road network underground, was built four decades ago and has never produced any steel due to the dispute over the ownership of the Ajaokuta Steel Complex and Nigerian Iron Ore Mining Company (NIOMCO). The dispute made it impossible for the government to make any long‐term plans for the concession or privatization of the two companies.
However, the federal government in an attempt to revitalize the steel sector signed a renegotiated concession agreement with Global Steel Holdings Limited for the Nigerian Iron Ore Mining Company (NIOMCO), Itakpe. By the new agreement, the Ajaokuta Steel Complex was reverted to the Federal Government, effectively freeing the entity from all contractual encumbrances that had left it uncompleted and non-functional for decades, while GSHL retains NIOMCO. The agreement, which came after four years of mediation, was signed at a short ceremony presided by Osinbajo.
Recalled also that, the Federal Government has said it would not repeat the mistake of the former President Olusegun Obasanjo’s administration on the Ajaokuta Steel Complex in Kogi State. The former Minister of Mines and Steel Development, Dr. Kayode Fayemi, who stated this at a press conference in Abuja, also said the present administration would not spend any money to complete the steel plant. Fayemi stated that the Federal Government had sunk over $ 8 bn into the project since 1979 without any result. The minister stated that no fewer than 14 organizations from different countries had since 2016 indicated interest in the Ajaokuta Steel Complex.
He said, “We have also said to them that we are not going to repeat the mistake of the Obasanjo administration. We will not undertake the re-concession without one, a technical audit; two, a transaction advisory service that will look into all these and advise us accordingly as to who really has the technical capacity, the financial wherewithal and the track record to really bring Ajaokuta back to life. “However, the government took a principled position on one thing: that Nigeria will not spend one dollar on the so-called completion of the Ajaokuta steel plant. The reason for that is very simple; today from our record, we have spent close to $ 8bn since 1979 when this process started and we have not seen the result.”
The minister added that the government and the House of Representatives agreed on the concession of the plant and that the House approved the sum of N2 bn for the purpose in 2017.
The House had last week passed a vote of no confidence in Fayemi and the Minister of State for Mines and Steel Development, Alhaji Abubakar Bwari, following their failure to appear before it for sectoral debate on the steel plant.
The lawmakers also instructed the ministers to suspend every step towards the concession of the plant, adding that they preferred that the government should invest and complete the project. Fayemi, however, said that the government had taken a decision not to spend any money on Ajaokuta since over $ 8bn had been sunk into the project by successive administrations since 1979.
According to him, the House agreed on the need to give out the plant as a concession by approving N 2bn for the process in the 2017 Appropriation Act. He said “We are just implementing what was passed by the National Assembly. That is why we are surprised that we have been subjected to an unwarranted attack over the matter.
“Ajaokuta is an inherited challenge. The Chief Olusegun Obasanjo administration gave it out on concession; the President Umaru Yar ‘Adua government revoked it. And the case went to the London Court of Arbitration. Its resolution in 2016 led to the signing of the Modified NIOMCO Agreement, which ceded the complex back to the Federal Government and NIOMCO to Global Steel.
“No fewer than 14 parties have shown interest in running the complex, but the government ‘s position is that we would not do any concession without a technical audit. “PricewaterhouseCoopers was engaged to do a review of the company’s indebtedness and statutory liabilities as part of the settlement agreement.” The minister added, “The National Assembly appropriated N 2, 096, 500, 000 for Ajaokuta concession in the 2017 Appropriation Act duly passed into law. We are just commencing what was passed into law by the National Assembly.
“This is why I am surprised at how we have been subjected to vitriolic attacks. The March 1 sectoral debate, which we could not attend, was the first and only one I and the Minister of State were unable to attend and we duly communicated this to the leadership of the House. “We take exception to allegations that are not backed up by evidences. Allegations that officials of the ministry have had their hands tied by the concessionaire are quite unfounded. “The Russian government has not indicated an interest in Ajaokuta. Yes, we have had offers from companies from Ukraine, Russia, Belarus and even Nigeria.
“Yes, I have met with the Russian Ambassador the same way I have met with the Ukrainian Ambassador and many other ambassadors. The Russian Ambassador told me they can offer technical, management and audit support, but not as a country bringing in money to take over the complex. “Many are saying Ajaokuta is 98 per cent completed. The ministry believes that can only be determined by the outcome of the technical audit, which should be ready in about six weeks.”
Fayemi reiterated that the President Muhammadu Buhari administration was being painstaking with the Ajaokuta Steel Complex, given the fact that it had been a victim of bad planning and poor execution by past administrations. “Our interest is to make it work so that it can create jobs and wealth, and we are ready to work with the National Assembly and other stakeholders to ensure its success,” he added.
Fayemi condemned what he called unwarranted attacks by the leadership and members of the House of Representatives on the ministry. “The House of Representatives has every right to seek for an explanation on any matter relating to what they have appropriated as one responsible for appropriation, and on any matter of public interest. There is nothing fundamentally wrong in the House and its leadership requesting our presence at the sectoral debate that was called last week,” he stated. Fayemi stated the ministry requested that the appearance of the ministers be shifted to another date.
“We did not think there was anything untoward about our request for another time, partly because this was the fourth time we were going to be speaking to the House of Representatives on the Ajaokuta Steel Complex,” he added.
Boosting mining output, along with developing agriculture and infrastructure, as part of plans to broaden the economy of Africa’s second-largest oil producer. Crude accounts for around 70 per cent of the OPEC member’s revenue and for 13 per cent of gross domestic product, according to Finance Minister Kemi Adeosun. Slumping global oil prices, from over $100 a barrel of Brent crude in 2014 to under $50 a barrel currently, and reduced output due to militants attacks on pipelines in Nigeria’s Niger River delta, have squeezed state finances and caused a chronic dollar shortage.
Nigeria will also require about $2 billion to revive Ajaokuta, a steel complex which was supposed to have an installed capacity of 5 million tons a year. Situated on the Niger River, in Kogi state, its construction began in 1979 but work was delayed by the government’s failure to pay builders on schedule and it is yet to be completed. By 2004, when it was taken over by India’s Global Steel Holdings, then a subsidiary of Ispat Industries Ltd., it still hadn’t produced any steel. Global Steel’s concession was revoked in 2008. After an eight-year legal dispute, it was agreed on Aug. 3 this year that the government will take over Ajaokuta while the Indian firm retains Nigeria Iron Ore Mining Company, which it will rehabilitate to supply the steel mill within two years.
The ministry is hiring an adviser for investments needed to increase Ajaokuta’s current capacity of 1.3 million tons of steel a year fourfold, Fayemi said. The complex also includes a 110-megawatt power plant, a 60 kilometre (37 miles) railroad and an airstrip. Just 18 of some 30 steel manufacturers in Nigeria are active, producing about 2.2 million tons a year and leaving the government with a $3.3 billion annual import bill, Fayemi said. The government is talking with companies including Russia’s Techno-promexport and Ansteel Group Corp. of China to complete and start production at Ajaokuta.
It also plans to create a $1 billion mining exploration fund from state and private capital to improve data on Nigeria’s mineral wealth. Each exploration project will be supported with about $5 million, Fayemi said. Nigeria aims to increase mining’s contribution to gross domestic product to 7 per cent within a decade, from 0.3 per cent last year, according to the minister.
Nigeria’s Iron Ore and Steel sector Consumption of steel per capita per annum Kg/yr Nigeria currently lags behind global benchmarks on steel consumption per capita with potential to grow. Egypt, Brazil, Russia, China, South Korea and South Africa are great steel countries, so, also in India. South Korea’s demand for steel is largely fuelled by increased industrial activity, between 1965 and 1970, a dramatic increase in demand for intermediate and capital goods (20kg to 175kg per capita per year) – Steel beams, flat sheets, rods, coils, bars – Rise in real estate development, construction of roads and bridges, fabrication, etc; Increased steel demand owing to increased industrialization – Building construction; power – Automotive construction; Agriculture – Road and bridge-building; Military – Refinery investments – Machinery for rubber and plastics, textiles, etc. South Korea leads the world due to high industrialization levels Nigeria can expect an increase in demand for steel in the coming decade driven by industrialization.
Nigeria’s Iron Ore and Steel sector Nigeria’s domestically focused iron ore and steel strategy are driven by our ability to serve domestic demand, as well as the challenges in export markets today. Few global steel investors have the capacity to expand into Nigeria. China: ~60 million tons of steel capacity was mothballed in 2015 as part of a plan to reduce production capacity; that has had a knock-on effect on the global commodities market. Britain/Tata Steel: Decision by Tata to sell/shut down its UK branch has also signalled the end of British steel production which declined from 18M tons/annum to 8M tons/annum between 1988 – 2015; other European steelmakers are also challenged. Private Companies: Many steel producers and suppliers from Vale to Rio Tinto to BHP are struggling due to the downturn in commodity prices and excess capacity in markets; we anticipate continued cost-cutting to rebalance the market.
Therefore, Nigeria can build a world-class minerals and mining ecosystem designed to serve a targeted domestic and export market for minerals and ores. Nigeria will focus on rebuilding its minerals and mining and related processing industry in 3 phases. Phase 1: Win over domestic users of industrial minerals that are currently importing. Phase 2: Focus on expanding domestic ore and mineral asset processing industry. Phase 3: Return to global ore and mineral markets at a market competitive price point. Hence, Nigeria will seek to build a minerals and mining sector initially focused on using its industrial mineral endowment to support its industrialization; private investors will be facilitated to lead this charge, to this end, Nigeria will invest in a range of initiatives including infrastructure investments, technical and engineering capacity, regulatory reform, reorganization of the Ministry itself, and expansion of access to financing to drive sector transformation.
The government should support the development of an institutionalized coal/gas-to-power plan for local players to guaranty affordable energy; Identify and foster locations for steel development sites/clusters; support the provision of concessional loans to current downstream players to encourage backwards integration; support incentive to local sourcing of raw materials wherever possible (iron ore, coal, limestone, scrap) using specific levers such as tailored import tariffs or subsidized prices; develop and support a skill-building program or encourage the transfer of knowledge by attracting global experts; Ensure logistics corridors with iron ore mines; offer favourable tax holiday and zero duties and levies on iron and steel. Nigeria should drive industry growth through carefully planned strategies to develop the comatose steel industry in the country.
*** Written by Jide Ayobolu.
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