There are fresh prospects and concerns over the revival of the multimillion-dollar Ajaokuta Steel Complex in Nigeria.
The concerns are accentuated by the raging COVID-19 pandemic with its attendant economic implications to Nigeria and the need for the Federal Government to rescue the situation through the solid mineral sector.
Friday Udoh, South-South Coordinator, Institute of Chartered Economists of Nigeria (ICEN), told DAILY INDEPENDENT that an ambitious project like the Ajaokuta Steel Complex offers a leeway to re-engineer the country’s economy in the face of looming economic recession predicted by Bretton Wood institutions.
He expressed apprehension that it was most likely that the funding obligations of the project might not be fully met as previously agreed terms, given the impact of COVID-19 on many economies and its effect on multilateral agencies’ financial disposition. Udoh argued that the Ajaokuta steel company is built with the capacity to produce 1.3 million tonnes per annum of long steel when the first phase is completed, and that if the Federal Government puts all it takes for the project to be successful, it would kick-start the nation’s economy.
According to him, “The process is based on the Blast-Furnace-Basic Oxygen Furnace (BF-BOF) route that is capable of producing up to 99.7 percent liquid hot metal with the primary inputs at larger quantity comprising of solid minerals that have been identified to be available as some are currently, but sub-optimally exploited.”
He said: “The current plan by Russia and AfreximBank to stake a whopping $1.4 billion investment in Ajaokuta Steel is expected to clear the financial hurdles that may frustrate the project.
“The Ajaokuta Steel Company in Kogi State of Nigeria was envisaged to serve as the bedrock of Nigeria’s industrialisation.
The idea of having a steel industry was conceived in 1958 by the Federal Government.
“Preliminary market studies were carried out and studies were initially directed towards the feasibility of establishing rolling mills.
“However, because of the growing awareness of the availability of iron ore in Aladja, in Delta State and other areas of the country, emphasis later shifted to establishing an integrated steel plant.”
An Economist, Bisi Adesanya, emphasised the need for the Federal Government to redesign the Ajaokuta financing model to accommodate states and other tiers of government and investors in the country to shore up equity share capital to compensate for any foreseeable shortfall on either the long term loans or offshore credit, while the state can raise such capital through bond.
“Other industrialists can also contribute through private capital placement, which will help fill any shortfall that may arise due to the impact of COVID -19 on the multilateral financing vehicle. This way the project can take off as planned,” he added.
Olamilekan Adegbite, Minister of Mines and Steel Development, was quoted as saying that the Russian government and Afrexim Bank had made investment commitments of $1.4 billion geared towards revitalising the steel company.
He said: “Afrexim is putting in $1 billion for the project and the Russians are putting in $460 million on the line. We now have about $1.4 billion for the project.
“The beauty of this proposal is that it does not involve Nigeria putting money; the project will pay for itself.
“It is taking a while because of government-to-government and the protocols and bureaucracies involved.
“It is worth it and we will get it right. Afrexim is bringing the money, the Russians are bringing in the technical expertise and we are bringing in the mineral resource which we have,” he said.
He added that the deal would have the Russian government nominate a body that has the engineering skills to complete the work and possibly the same body would run and manage it for a number of years with a reasonable profit and revert it to Nigeria’s ownership on complete, manage, and transfer terms.
Adegbite, however, said that the Federal Government was mindful of the existence of some legal challenges, but gave assurances that the challenges would be resolved before the company commenced full operations.
The minister, who said steel was produced from Ajaokuta in the past but with imported billets, expressed optimism that the steel company would start full scale activities before the expiration of President Buhari’s tenure in 2023.
He added: “Activities have been going on to keep the steel company afloat ahead of new investors’ takeover. We have been exchanging correspondences.
“All the other materials that are required to make steel are available in Nigeria. Basically, what we have come to do is working with the Russians who are the original builders of the plant; we are going back to them to help us complete it.”
The Director General of one of the Organised Private Sector (OPS) companies, who did not want his name in print, told DAILY INDEPENDENT that international politics also played a part in the failure of the company.
He said: “The failure of the project has been blamed on several factors with poor management being the leading factor. International politics also played a part.
“The USSR, which at that time was Nigeria’s main partner, was in a cold war with the USA. Thus, Nigeria found it difficult to raise funds from multilateral bodies like the World Bank and the IMF.
“Concessions to foreign private managers also proved unsuccessful due to the remaining 5% of the project representing critical infrastructure yet to be developed.”
It would be recalled that late Tafawa Balewa and late Nnamdi Azikiwe, between 1960 -1966, invited and received proposals from foreign firms, including those from the UK, U.S., Germany and Canada, most of these being on the feasibility of establishing steel complexes.
The efforts of the government did not yield significant positive results because they were based on the use of iron deposits in Aladja, Delta State which was later found to be unsuitable for direct reduction.
In 1967, a team of Soviet experts arrived in Nigeria to conduct a feasibility study on the establishment of an iron and steel plant, as a follow-up on a technical/economic cooperation agreement between the governments of Nigeria and the USSR.
Daily Indepedent