Home COMMENTARY Challenges And Prospects Of Reviving Ajaokuta Steel Company, By Usman Abdulfatai

Challenges And Prospects Of Reviving Ajaokuta Steel Company, By Usman Abdulfatai


Nigeria is blessed with all the major raw materials needed for the production of iron and steel including 3 billion tonnes of iron ore, 3 billion tonnes of coal and limestone in excess of 700 million tones and 187 billion SCF of natural gas.

Meanwhile, the annual estimated per capita consumption of iron and steel in Nigeria has increased from 5 kg in 1968 to 130 kg in 2015 (Uzondu, 2016).

Planning for the Nigerian steel sector started in 1958, but 50 years after, the country is yet to establish a stable iron and steel sector despite huge investment of over $ 7 billion.

The Ajaokuta Steel Company (ASC) failed to take off while Delta Steel Company (DSC) and the three government-owned inland/satellite rolling mills in Oshogbo, Jos and Kastina are moribund, working under low capacity utilization.  According to Agbu, the reasons for the poor performance of the Nigerian steel sector include inadequate funding, poor planning and implementation and political influences.

Until recently, the nation’s steel requirement was met since independence by imports from western nations particularly US, Great Britain, Germany, Japan and recently, by relatively cheap and sub-standard steel from some Asian nations. The country is now spending a large portion of her foreign exchange for the importation of steel products, while still investing heavily in the domestic production of steel. This is double jeopardy.

The privatization that was carried out in 2004 – 2005 did not revive the sector, but rather transformed the companies to private monopolies. Because the two integrated iron and steel companies in Nigeria (ASC and DSC) are unable to produce billets for the 20 steel rolling mills in the country, the sector is dependent on imported billets. But due to the high cost of billet importation, many steel companies are unable to function. The few steel companies that is operational though at low capacities, is now dependent on recycling of scrap iron and steel obtained mostly from municipal solid wastes.

Over the years, so much had been said about resuscitating the moribund Ajaokuta Steel Rolling Mill, ASRM, but little has been done in terms of giving the place a human face. The steel is still comatose despite the fact that about $7 billion has been sunk into the plant since 1979 in a bid to get it up and running. The moribund state of the steel has been a source of worry to well-meaning Nigerians who are calling on the federal government to summon the political will and determination it requires in getting the plant back on its feet. The journey to a befitting steel plant in the country actually began at independence in 1960 when prominent leaders saw the need to produce steel locally to spur the nation’s industrial growth. However, not much was done about the policy until late 1979 when the global contract was signed by the then General Olusegun Obasanjo-led military government for the construction of the Ajaokuta Steel plant, located in the present Kogi State, with actual implementation of the idea commencing by the Shehu Shagari administration in the early 80’s. The ASRM was designed to be the driving force of Nigeria’s technological advancement. The construction of the plant began under the administration of Alhaji Shehu Shagari in 1979 and was commissioned in 1983 when the project had achieved about 95 percent completion rate.

At that time, light, billets, wire rod, medium section and structural mills were in operations. It was planned then that profits generated would provide the needed funds for the completion of the remaining 5 percent of the plant. Unfortunately, after President Shagari’s removal from office in 1983, the plant was abandoned while most of its engineers trained in Russia to work in the plant, left to join other companies and some retired.

Typical of every Nigerian project, it was stalled as government officials, especially during the military era, got bogged down with the international politics between the Western bloc and the then Soviet Union on the viability and desirability of owning an integrated steel plant by a third world country. A public affairs analyst, Isah Mohammed, in one of his write-ups, said that the four mills in the ASRM between 1985 and 1987 started optimal production, but regrettably, international politics played a devastating blow to the dream of steel development in the country which led to shut-down of the steel complex.

He went further to say that since then, successive governments had made some efforts in reviving the ailing industry, but to no avail due to lack of political will. The administration of former President Olusegun Obasanjo, despite criticisms from steel-workers and labour leaders, concessioned it to the Global System Steel Holdings Limited, GSHL in 2005, with yet another disastrous outcome. The deal collapsed as the firm failed to meet inherent contractual obligations. Workers of the company engaged GIHL in a protracted showdown over labour matters. The allegation that the Indian company was running the firm aground rather than re-invigorating it compelled the federal government to cancel the transaction in 2007. On realizing that GSHL was breaching the concession deal, former President Umaru Yar’Adua terminated the agreement in 2008 and set up an interim management committee to oversee it because the concession company was trading in iron ore and making huge sums of money without showing commitments to revitalizing the company.

However, GIHL did not go down without a fight. It headed for the London Court of International Arbitration and got some relief. One of the reprieves was that it should take over the Nigeria Iron Ore Mining Company – the raw material feeder to the steel company − to complete its tenure agreement with Nigeria.

Perhaps, this embarrassing state of the plant was the reason the House of Representatives in recent time directed it’s Committees on Steel, Privatization and Commercialization and Justice to investigate the concession and failure of the Ajaokuta Steel Rolling Mill, following the controversy and non-performance of the steel from inception. The House also expressed worry that the comatose nature of the industry had made the country to rely on the importation of iron and steel from other countries, thus spending about N1.3trn on capital flight in 2012 alone.
The lower chamber expressed concern that the employment potentials of the project had not been fully exploited, adding that the steel was capable of generating over 15, 000 direct employment. The House lamented that similar companies like Mittal Steel of India conceived about the same period with Ajaokuta were currently working at full capacity while Ajaokuta had been dogged by controversy. It further revealed that failure of the ASRM, despite the injection of an estimated $20billion from inception to date, has become a huge embarrassment.

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The committees were mandated to probe the concession and failure of the ASMR and report back to the House for further legislative action. Under the Jonathan administration, the federal government set aside N3.921 billion in the 2014 budget for the salaries of the idle workers and other recurrent expenditure at the Ajaokuta Steel Rolling Mill. A total of N4.58 billion was budgeted for the workers in 2012.

It has also been estimated that $1 billion is needed to bring the plant back on stream. Former Minister of Mines and Steel Development, Musa Sada, explained that government-owned steel construction company would also perform optimally when there are provisions for auxiliary support infrastructure. He hinted that Ajaokuta project lacked critical infrastructure like rail track between its premises and the seaport for conveyance of needed raw materials and finished products.

Experts have reiterated that the plant is not obsolete, but is yet to have the operating control fixed. They, therefore, urged the federal government to muster the political will to put the company to use, as it has the potential to generate 15,000 direct employment, even as 500, 000 Nigerians could also be indirectly engaged. These experts further canvassed that in this era of insecurity, agitation for secession and other social vices confronting the nation, making the company functional will be a way of solving the problems. They explained that over 74 percent of global steel companies have adopted the blast furnace mode of steel production and noted that the insinuation that the blast furnace technology has become obsolete was a tissue of lies and stressed that the technology remained the best source of steel-making all over the world till date.

Comrade Salihu Otori, said the Iron and Steel Senior Staff Association of Nigeria, ISSSAN, would probably resist any attempt by government to scrap the plant, adding that the new policy was induced by western countries, who do not want Nigeria to succeed.

It is unimaginable that at this age and time, Nigeria is still importing slabs, roofing sheets, simple agricultural tools such as hoes, cutlasses, glassware etc from other developing countries, thus enriching other countries. This has to stop if the country must attain its target as an industrial giant.
Surprisingly, the country is now paying dearly for neglecting the plant that would have been the envy of other industrial plants the world over. Experts are nonetheless of the view that what is required in reviving the Ajaokuta plant is adequate funding and maintenance. They cited the steel plant in Ukraine that is over 105 years old and still working perfectly with minimal maintenance.

There is no point dilly-dallying on whether to inject more funds into the plant or not. The ideal thing is to carry out a detailed feasibility study to know what it will cost to get the place operational. Whether government likes it or not, the ASRM remains one of the Nigeria’s heritages that must not be allowed to die prematurely.

Spending billions yearly in the name of paying idle workers’ wages and other entitlements is just ridiculous. Since the concession federal government entered with the Indian company failed, it is now left for the government to take a step further in ensuring that the country’s priceless asset is back on track. The Ajaokuta steel investment, which has the potential to provide about 15,000 jobs, offers the best bet for the take-off of Nigeria’s industrial age. What is required now is for the House Committees on Steel, Privatization and Commercialization and Justice should get to the root of this protracted controversy that has hampered the plant over the years. It should not be like other investigations that were swept under the carpet.

However, political pundits have concluded that our core-northern elites (North West and East) are forces restraining the revival of Ajaokuta steel company, these elites will not envisage North-central (i.e Kogi state, the seat of ASC) outshining them in terms of economic dominance and infrastructural development. To me, if this is the case, that idea is retrogressive, backwards-thinking, parochial civilism and primitively endogenous.

If only the President is sincere with diversification of the economy, it is highly expectant as part of his change mantra, to summon the political will and rare courage in reactivating the steel company.

Experts say that at optimal production level, the steel plant at Itakpe can generate over two million jobs for youths if properly funded. Imagine many cottage industries that will make use of the by-products from the steel mill. This is one sure way this government can create jobs for the teeming unemployed youths being used to perpetrate crimes.

The surest means of creating jobs in developing countries like ours is true technological initiative and advancement which often leads to industrial revolution.

Usman Abdulfatai wrote in from Ado Ekiti and can be reached via: prof.abdulfataiusman@gmail.com