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The administration of President Goodluck Jonathan initiates moves to revamp the moribund Ajaokuta Steel Company which has been bogged down by political instability, policy inconsistencies and massive corruption for more than 34 years.
By Chris Ajaero
After being abandoned for several years, there appears to be a renewed effort by the administration of President Goodluck Jonathan to revive the moribund Ajaokuta Steel Company Limited (ASCL). Namadi Sambo, Vice President who restated government’s commitment to revamping the multi-billion dollars steel plant recently, was emphatic that plans were in top gear to make the plant functional within the shortest possible time. He said President Jonathan has directed the National Council on Privatisation (NCP) to restore life to the steel industry through the speedy revival of the company. “Very soon, I want to assure you that the promise Mr. President gave sometime in Kogi that the Ajaokuta Steel Industry will be brought back to life will be actualised. I want to categorically state that all the encumbrances to the progress of the project have been removed by Mr President,’’ he said.
He explained that the president was eager to ensure the revival of the steel company so as to promote the development of the nation’s automotive sector and offer viable socio-economic opportunities to Nigerians.
To demonstrate its commitment to the revival of the steel complex, the Federal Government had in March, last year signed a memorandum of understanding (MoU) with Reprom Company Nigeria Limited on conversion of billets for the Thermal Power Plant and the Light Section Mill of Ajaokuta Steel Company Limited. To make the Light Section Mill operational, Reprom has received the technical support of the original designers of the steel plant from the three major countries of Ukraine, Bellarus and the Russian Federation who have keyed into the project.
In order to save machines at the company from further deterioration, Mr. Musa Sada, the Minister of Mines and Steel Development who was on a three-day working tour of the steel complex said that the federal government would soon sign a memorandum of understanding with some investors to operate the completed facilities on short term basis. He, however, said that the investors would serve as trade partners and not core investors. According to him, the new approach was to avoid past mistakes in appointing management teams to handle the plant. The minister said that reviving the steel plant was necessary in view of its crucial role towards the attainment of the country’s industrial revolution.
Mr Sada was accompanied on the tour by Dr Olusegun Aganga, Minister of Trade, Industry and Investment. He also reinforced government’s commitment to the revitalization of the largest steel company in West Africa and other steel companies in the country in a bid to boost the nation’s economy.
Isah Onobere, new Sole Administrator of Ajaokuta Steel Company Limited (ASCL) was elated that the administration of Goodluck Jonathan has been working round the clock to ensure the completion of the project. According to him, four plants have been completed, remaining the Blast Furnace to be completed so that the plant could begin production.
The Ajaokuta integrated steel complex was conceived in 1958, when the colonial administration commissioned a feasibility study on iron ore deposits in the country. In 1967, a United Nations Industrial Development Organisation (UNIDO) survey identified Nigeria as a potential steel market; which led to the signing of a bilateral agreement between the defunct Soviet Union and Nigeria.
The Soviet steel experts that conducted a feasibility study confirmed the availability of raw materials and recommended further geological surveys. They also recommended the Blast Furnace/Basic Oxygen Furnace (BF/BOF) process, capable of producing 570,000 tonnes of rolled products per annum.
In 1971, an extra-ministerial agency, the Nigerian Steel Development Authority (NSDA), was established by Decree No.9, to work out the modalities for construction of a steel plant in the country. The discovery of large deposits of iron ore at Itakpe in 1972 by the Soviet aero-magnetic survey team catalysed the formal signing of a global contract with Messrs Tyajzhpromexport (TPE) of the defunct Soviet Union on July 13, 1979 during the reign of General Olusegun Obasanjo as Military Head of State. It was originally programmed for completion in 1986 but a combination of factors, including policy inconsistency and massive corruption were largely responsible for the failure to meet the deadline.
The actual work on the Ajaokuta Steel Company commenced during the administration of Alhaji Shehu Shagari who laid the foundation stone for the steel plant in 1980. He then commissioned it in 1983 when it had achieved almost 95 per cent completion, with most of its vital rolling mills, including light, billets, wire rod, medium section and structural mills, operational. The project was, however, abandoned after the Shagari administration was overthrown by the military in December 1983.
On assumption of office in 1985, General Ibrahim Babangida visited the Ajaokuta Steel Complex and in 1986, signed a new protocol agreement on the Project with TPE, rescheduling its completion date to 1989. This new deadline was equally never met before Babangida ‘stepped aside’ in 1993.
However, by 1994 the construction of the plant reached 98 per cent before the Russian Technical Partners left. Chief Anthony Ani, Minister of Finance during the administration of General Sani Abacha, however, told TheEconomy that in 1995, his economic team had made efforts to reactivate the Ajaokuta Steel Company that was moribund and had incurred billions of dollars of debts. “We came to the conclusion that without a viable steel industry, Nigeria’s industrialisation is nullity. You cannot industrialise without a steel industry. But here we have Ajaokuta and we had spent $4.5 billion to $5 billion on Ajaokuta and it was not working. We had coal in Ajaokuta but Ajaokuta’s coal could not on its own give you steel industry. We still had to go to Australia to get coke from that country to build the steel industry in Ajaokuta. We visited the complex and I understood the whole problem. So, we decided that we should revitalise the steel industry,” he said. Chief Ani recalled that his mandate then was to free Ajaokuta of its external and internal debts and then provide funds for its revitalisation. He explained that by that time, Nigeria owed the Russians sovereign loans and management fees. According to him, the sovereign debts amounted to about DM2.5 billion and management fees and other assets to be taken over were DM450.
He explained that early in 1996, Abacha instructed him to negotiate for the debt buy-back, which he did and cleared Ajaokuta of all encumbrances. He said that the next challenge was to provide funds for the revitalisation of the steel complex. He recalled that the Abacha administration was then discussing with an Austrian company – Voet Aspine – on the rehabilitation of Ajaokuta Steel and they put the cost at $550 million. “This amount was provided for in the 1997 and 1998 budgets and it was kept by the Accountant General of the Federation,” Chief Ani said. He explained that the money had not been released for Ajaokuta steel project before Abacha died and it was still kept with the Accountant General of the Federation when General Abdulsalami Abubakar succeeded Abacha as Head of State. He was sad that “Ajaokuta Steel Company has not been revitalised and the $550 million has not been accounted for.” Chief Ani described Ajaokuta Steel Company as “a drain pipe, a bottomless pit for corruption.” Indeed, Nigeria’s investment in Ajaokuta Steel Company as at 2004 was put at over $10 billion (about N1.5 trillion).
In 2005, the effort by President Olusegun Obasanjo’s administration to revitalise the steel company through the concessioning of the plant to Global System Steel Holdings Limited (GSHL), an Indian firm, was also futile. Obasanjo had concessioned the complex to GSHL despite criticisms from steel workers and labour leaders. The Indian firm was accused of going against the concessional agreement, which led to a face-off between the firm and the company’s workers. The agreement was terminated in 2008 by President Umaru Musa Yar’Adua, who set up an Interim Management Committee (IMC) to oversee it.
Since Yar’Adua died, the legal tussle that trailed the cancellation of the concessional agreement between the Federal Government and GSHL has been stalling commencement of work at the steel plant. It was gathered that the Jonathan administration was in the process of resolving the pending legal battle between ASCL and GSHL, hence the renewed hope that the moribund steel plant would be revived soon. It was also learnt that about $1.2billion is required to build the Blast Furnance, which is the remaining two percent component of the complex and put other facilities in place that would make it fully operational.
The projection of experts is that if the Ajaokuta Steel Plant, the National Iron Ore Company and allied subsidiaries become functional, they would propel Nigeria to actualise its dream of becoming one of the 20 biggest economies in the world by 2020. It will definitely serve as the hub of industrialisation and rapid development of Nigeria. Development experts and economists emphasize that steel technology acquisition is key to industrialisation and modernity. In terms of job creation, it has the company capacity to absorb more than 10,000 technical staff directly required for operations and the indirect employment of an estimated 500,000 people.
Ajaokuta Steel Complex is located on 24,000 hectares of sprawling green-field land-mass. The Steel Plant itself is built on 800-hectares of land. The chosen Technology for Steel Production is the time tested Blast-Furnace – Basic Oxygen Furnace route for Steel Production. The complex is meant to be used to generate important upstream and downstream industrial and economic activities that are critical to the diversification of the Nigerian economy into an industrial one.