RECENT declaration of intent by President Bola Tinubu to “revive” the Ajaokuta Steel Complex is worrisome. According to the Minister of Steel Development, Shuaibu Audu, the government is embarking on a three-year plan to resuscitate the moribund complex as part of the President’s agenda to diversify the economy, create jobs and attract foreign direct investment. While these are desirable targets and steel is a vital industrial impetus, spending any additional money on the complex is a wrong move; the pragmatic way forward is toprivatise it quickly and transparently.
“Revitalising,” “completing,” and concessionsundertaken over the past three decades have failed disastrously, kept the multibillion-dollar complex idle, and excluded Nigeria from the club of industrialising economies. Tinubu should avoid the mistakes and chicanery of his predecessors, and spare the treasury any further waste, and Nigerians further agony.
Steel, declared the World Steel Association, “is the world’s most important engineering and construction material.” The American Iron and Steel Institute says it is an “essential material in everyday existence, underpinning transportation, shelter, water and food supply, national security and the generation of energy.” A vibrant steel industry is a sure marker of a successful economy.
Nigeria’s ambition to industrialise with a domestic steel industry as its backbone has suffered multiple shipwrecks since the government launched its ambitious steel programme four decades ago.
Statements today by the government that ASC “is nearing completion and would employ 500,000 Nigerians once designated as a free trade zone” cause apprehension because of the scandalous history of the steel projects. Indeed, they are alarming, as they suggest that the government is once more pursuing the costly and failed track of throwing more money into a venture it cannot profitably run, instead of outright asset sale to attract capable investors and foreign investments. Let private capital get the job done.
Any attempt by the government to continue with the “rehabilitation” of the moribund steel plant misplaced. The Manufacturers Association of Nigeria estimates that the country has spent over $8 billion on the idle steel complexwithout kick-starting production.
ASC was incorporated in the Fourth National Development Plan and concretised by the administration of former President Shehu Shagari (1979-1983) to be the bedrock of Nigeria’s industrialisation. An integrated steel plant, it was built on 24,000 hectares of land; it is the largest steel complex in sub-Saharan Africa by some estimates, and the coke oven and by-products plant are larger than all the state-owned refineries in the country combined.
But serially mismanaged, it remains incomplete 44 years later. Three-quarters of the complex has reportedly been abandoned, and only the light mills have been put into operation for small-scale fabrication and the production of iron rods.
An iron mining company at Itakpe, Kogi State; steel rolling mills in Jos,Plateau State, Katsina, and Osogbo, Osun State, and the Delta Steel Company in Ovwian-Aladja, Delta State, constitute the other wings of the national steel production complex.
But years of mismanagement led to massive degradation. By the late 1980s, it was no longer expedient for government to own and run businesses, which made privatising ASC and others the only sustainable option to keep the steel dream alive.
Several attempts to concession the ASC have ended in corruption scandals, asset stripping and litigation. Nigeria is a serial loser. In the last botched concession deal, the government ceded Itakpe and also paid $496 million as compensation to the concessionaire. Ajaokuta had not produced a single sheet of steel by December 2017. The light mills were finally put into operation in 2018 for small-scale fabrication and the production of iron rods. However, three-quarters of the plant has been abandoned, including heavy equipment and the internal railway.
At one point, the Federal Government invited the Russian government to rehabilitate and manage it. The Russiansthen nominated the original builder of the complex to conduct a technical audit. That deal also collapsed.
Injecting scarce funds into the steel complex on a continuous basis without commensurate production has created a cesspool of corruption, with thebillions appropriated annually wasted, and workers being paid for doing nothing. Nigeria has similarly kept on spending billions on four moribund petroleum refineries.
In 2004, a visiting World Bank team determined that the project was not viable. There should therefore be no more delay in selling the complexto any of the world’s major operators as core investor. Concession and so-called rehabilitation are a waste of time and resources.
McKinsey, a global consultancy, notes that the global steel industry’s outlook for the next decade is shaky. Nigeria should quickly unload its steel assets to competent players in the international market. Total world crude steel production was just less than 2.0 billion metric tons in 2021, a four percent increase over 2020 figures, reported Statista. Demand is forecast to rise this year after years of low demand.
The Tinubu government should therefore drop the concession option; just sell the complex to investors with the expertise and resources to turn it around and translate Nigeria’s steel and industrialisation dream into reality. This way, the government will recover some of the money it had invested over the years, and deploy the savings to critical infrastructure like roads and railways. Concessions have failed and imply a continuation of the calamitous template of state ownership.
Government should instead concentrate on regulation and creating and sustaining an enabling environment for private investment and entrepreneurship.
The National Bureau of Statistics said Nigeria imported iron, steel and other metals valued at N837.76 billion in the third and fourth quarters of 2021. Basic metal products imported within the period were worth N748.52 billion, and iron and steel, N88.23 billion.
Experts insist that since steelremains a necessary stimulus to national development and industrialisation, Nigeria should doggedly pursue that dream.Three BRICScountries – China, India, and Russia – are among the world’s five top steel producers; a fourth, Brazil is ninth largest producer, while South Africa is second largest in Africa after Egypt.
Hanging on to Ajaokuta in whatever guise is unwise; Tinubu should just privatise it transparentlyto reputable international steel sector multinationals.
•Written By Punch Editorial Board
