Ajaokuta: Rekindling the Glory of an Industry
Many experts have described the steel industry as the backbone of any nation that aspires to attain industrialization, given that it stimulates industrial growth and economic development of any nation. This informed why Nigeria conceptualised the Ajaokuta Steel complex. Unfortunately, the initiative remained moribund for over three decades even after huge investments had been put into the initiative, due to bureaucratic and legal entanglements. Virtually all the countries playing big and active economic global roles have enhanced capacities for steel production. Even those that do not have the key mineral resources needed for steel making had over the years developed the capacity to produce steel. Japan and South Korea, are two examples, even though the two countries do not have raw materials like iron ore and steel, today they rank among the world top 10 countries in steel production.
However, Nigeria, blessed with raw materials including iron ore, coal, natural gas, and lime stones needed for manufacturing steel couldn’t get it right until the coming on board of the current administration. President Muhammadu Buhari has resolved all legal encumbrances that had bogged down the steel plant and the nation has since returned to the path of industrialisation as envisaged by the initiators of the project.
The idea of Nigeria’s steel industry was conceived in 1958. After an initial preliminary feasibility studies focused on establishing rolling mills, the discovery of iron ore in Abaji, Udi and other parts of the country necessitated a rethink towards an integrated steel plant.
Between 1960 and 1966, the late Tafawa Balewa and the late Nnamdi Azikiwe invited and received proposals from foreign firms from UK, U.S, Germany and Canada, on the feasibility of establishing steel complexes. The efforts of the government did not yield significant positive result.
Then in 1967, following a technical and economic cooperation agreement between the governments of Nigeria and the USSR, a team of Soviet experts arrived in Nigeria to conduct a feasibility study on the establishment of an iron and steel plant. Their report, among others, showed that the known iron ore deposits in the country at the time were of sub-standard quality and recommended that further geological surveys be conducted to see if better ore could be found.
Then in 1968, Soviet geological experts returned and after a general geological investigation, reported that there were high prospects for richer iron ore and coal deposits in the country.
In line with that, the federal government signed a contract with TYAZHPROMEXPORT (TPE), a Russian company, under which TPE agreed to provide a specialised equipment to carry out further geological survey to determine the quantity of the deposits of iron ore and coal resources in the country that could be used for the proposed iron and steel industry.
A suitable iron ore deposit was thus discovered in Itakpe, Ajaokuta and Oshokoshoko all in the Kaba-Okene-Lokoja-Koton Karfe axis of Kogi State. TPE was then contracted to prepare a preliminary report for the proposed iron and steel industry in Nigeria.
Two years later, in 1975, the report submitted by TPE was reviewed, discussed and accepted. TPE was subsequently commissioned to prepare the Detailed Project Report (DPR) on Ajaokuta. It was completed and submitted in 1977.
Between 1980 when President Shehu Shagari laid the foundation of the steel plant to 1983, the nation achieved 84 per cent completion of Ajaokuta plant. The light Section Mill of the plant was commissioned earlier ahead of the scheduled date, while the Wire Rod Mill was also commissioned in April 1984, also earlier than the scheduled completion date of December. By 1994, equipment erection work at the Ajaokuta Steel Plant had reached 98 per cent completion.
Unfortunately, even at that stage of completion, with between $8 and $10 billion invested, the complex has not produced a piece of steel till date nor contributed to the nation’s economy. The integrated steel plant was envisaged to have a multiplier effect on all sectors of the nation’s economy including industrial, agriculture, transport and construction sectors among others.
The steel plant was designed to produce 1.3 million tonnes of liquid steel per annum in its phase one even as it has a built-in capacity to expand its production to 2.6 million tonnes of flat iron and steel products in the second phase. The third phase was planned to produce 5-2 million tonnes of various types of products, including heavy plates. The plant complex also has highly sophisticated assemblage of 43 different plants made up of a web of complex iron, cable and machinery of different sizes and function. Out of the 43 plants, 40 were completed and can produce independently.
Experts insisted Ajaokuta steel has the capacity to become a major producer of industrial machineries, auto-electrical spare parts, ship building, railways and carriages. Besides, findings showed that the plant’s first phase has the capacity to provide employment for 10,000 technical staff and 50,000 unskilled upstream and downstream employment if it is in operation.
Instructively, South Korea, which started its steel construction around the same time with Ajaokuta steel, now has revenue of over $60 billion per annum and employs over 65,000 staff. Analysts insisted Ajaokuta steel would have done better if it had started operation.
According to the World Steel Association (WSA) report, South Africa and Egypt produced 6.1 and 5.0 million tonnes of steel in 2016. While South Africa is the 22nd on the list of countries on steel production, Egypt is the 27th.
However, Nigeria, blessed with raw materials including iron ore, coal, natural gas and lime stones needed for the manufacture of steel still cannot get it right with the plant. The steel plant has been bogged down by bureaucracy and legal issues. In June 2003, President Olusegun Obasanjo conceded Ajaokuta steel to Messrs SOLGAS ENERGY of USA on 10 year tenure. In August, 2004, the federal government terminated the SOLGAS Agreement due to non-performance.
The Obasanjo administration again granted another concession to Global Infrastructure Nigeria Limited (GINL), an Indian company for operation of Ajaokuta Steel and Nigerian Iron Ore Mining Company (NIOMCO) at Itakpe, Kogi State. But the company failed to really get the two companies up and running.
This caused the late Umaru Musa Yar’Adua administration to revoke the contract in April 2008, unfortunately, without meeting the requirements of the clauses built into the agreement. The company thereafter took Nigerian government to arbitration in London.
And now, it is the Buhari administration to the rescue. Whether unreported or underreported, the Buhari administration has come good with the way it has navigated the company and the nation out of the web of many challenges that have continued to bedevil steel plant over the years.
Unlike subsequent administrations since the return of democratic rule in 1999, the PMB administration has, with its intervention in Ajaokuta set the country back on the path to industrialisation with its financial and employment generation gains in sight.
In 2016, in line with its policy of economic diversification and in fulfillment of his campaign promise on Ajaokuta, President Buhari’s administration, through then Minister of Mines and Steel Development, Dr. Kayode Fayemi, settled the legal bottlenecks holding down the company out of court even as part of the out-of-court settlement was that GINL would retain NIOMCO, Itakpe, while the federal government took over Ajaokuta due to its strategic importance to the administration’s plans to diversify its foreign exchange receipts.
Although the steel plant still requires two per cent work to be fully completed, the cost of which is estimated to be between $1.5 and $2 billion dollars, there is no doubt that that the current administration has shown more than a passing determination to make the plant operational, given the efforts and energy it has expended on the plant thus far.
For the first time in over two decades, stakeholder in the sector are proud of what an administration has achieved in that space even as they urged government to provide clear and articulated plan for the development and growth of metal production sector, whilst the drive for functional steel company in the country continues.
There is huge glimmer of hope for the country in its match towards industrialisation, which many appear to be oblivious of, even if to a large extent tied to the re-election of President Buhari in February. Besides resolving the legal bottlenecks, the administration has shopped for a thoroughbred professional to drive the process of kicking life into the plant in the person of Abdul-Akaba Sumaila, a mechanical engineer who took a three year leave of absence from the Royal Dutch Shell Plc to revive Ajaokuta.
Sumaila has since set to work and determined to make a success of his time at the complex. In a recent interview with Bloomberg, he was quoted to have said, “What excites me is the enormous potential of this place. Whatever we need to do, we have to do it.”
Demonstrating his optimism about the plant getting up and running, he stressed in the Bloomberg interview that, “This is an alternative to oil. The complex can be up and running in two years after the govwernment makes the strategic decision on the direction it wants to take.”
The main driver of the Ajaokuta revival project, immediate past Minister of Mines and Steel Development and now Governor of Ekiti State, Fayemi had equally told Bloomberg in May last year that the first 30-plus years of Ajaokuta “didn’t quite work out as planned, which is the Nigerian story sometimes, adding that, “Ajaokuta is central to our diversification strategy, the least we could do for ourselves as a country and for our manufacturing sector.”
With the work he had put in, Fayemi has indeed come good on his words. Interestingly, not many Nigerians appreciated the giant stride that the Buhari administration has recorded in that area.
But the administration is set to return the nation to its path to industrialisation with what it has achieved by resolving all the issues that had hobbled the Ajaokuta Steel plant as it is doing in the area of road construction, reviving rail lines, strategic intervention in long abandoned power facilities like the Mambilla dam power project, among many others.