[ANALYSIS] Reconciling discordant tunes over Ajaokuta Steel Complex

For the umpteenth time, the Federal Government last month assured Nigerians that Ajaokuta Steel Complex would become operational before the expiration of its tenure in 2023. Minister of Mines and Steel Development, Olamilekan Adegbite, who said this at a forum in Abuja, was repeating a promise made in 2019, 2020 and January 2021. 

Majority of Nigerians believe that non-completion of the complex is a major contributor to the continued backwardness of the economy in terms of infrastructure, manufacturing, job creation and export. 

A report commissioned by the Global Steel Association revealed the steel industry is transforming iron ore into a range of products that are sold for a total annual value of $2.5 trillion.

It employed more than six million people around the world in 2017, and the “added value” of its production processes totaled almost $500 billion. The steel industry’s productivity per worker exceeds $80,000— three times the average across all sectors of the global economy. 

“For every $1 of value added by work within the steel industry itself, a further $2.50 of value-added activity is supported across other sectors of the global economy, as a result of purchases of raw materials, goods, energy, and services. Also, for every two jobs in the steel sector, 13 more jobs are supported throughout its supply chain— meaning that, in total, some 40 million people work within the steel industry’s global supply chain, generating over $1.2 trillion of added value. This economic activity extends across multiple sectors and countries, far beyond the major steel-producing locations.” 

Steel is also a key input in the work of many other industrial sectors, which produce items essential to the functioning of the wider economy—including hand tools and complex factory machinery; Lorries, trains, and aircraft; and countless items used by individuals in their everyday lives, from cutlery to cars. Steel is also used in the construction of homes and other buildings, bridges, pylons, and transmitters. 

The report equally estimated that the industry facilitated a further $1.2 trillion of value-added output in 2017, and supported an additional 49 million jobs around the world. Nigeria’s early quest for economic development through manufacturing and infrastructure was signaled in the 1960s when a feasibility study for the production of steel was awarded to the Soviet Union under a cooperation agreement. This eventually led to discovery in 1973 of the required quality and quantity of iron ore for steelmaking in Itakpe, Ajabanoko, and Oshokoshoko all in present Kogi State. 

Government then incorporated Ajaokuta Steel Company Limited in 1979 after which construction commenced. 

It reached 98 per cent completion in 1994, with 40 of the 43 plants at the facility built. Ajaokuta Steel Complex occupies 24,000 hectares of land. About 42 years after, the project remained at 98 per cent completion level by 1994 with three quarters of it reportedly abandoned and left to rot. There were also allegations that a former concessionaire striped essential parts of the plant. 

In essence, Ajaokuta may no longer be at the 98 per cent completion stage it was in 1994 due to vandalism. 

In 2003, Solgas of Japan won concession right to the plant but this was shortly cancelled and re-awarded to Global Holding Infrastructure Limited (GHIL) of India for a 10- year period. Following allegations of massive asset stripping and cannibalism of the company without much improvement, President Umar Ya’Adua terminated the agreement with GHIL after three years. The company proceeded to arbitration, which lasted eight years. Between 2008 and 2016, Nigeria and the GSHL slogged it out at the both International Court of Justice at The Hague and International Arbitration Court in London. 

In August 2016, the then Minister of Mines and Steel Development, Dr Kayode Fayemi, said Nigeria and the company had agreed on an out-of-court settlement of the matter. He disclosed that a modified agreement had been signed, which allows the concessionaire to take back the National Iron Ore Mining Company, (NIOMCO), Itakpe and manage it for the next seven years as the balance of the 10 years initially contained in the terminated contract, thus freeing the country to recover Ajaokuta and complete it. Ajaokuta has 43 units, out of which 40 have been completed. However, the three remaining component: the blast furnace, which is the heart of any steel plant, the coke oven and the steel making shop constituting the two percent, are the very core of the plant. 

According to a steel expatriate, years of neglect means that many of the units at the steel complex might be old and obsolete, but he adds that the main stumbling block to its operation is the oxygen plant that is not in place. 

“If you want to run that plant, you have to put all the systems in order. Everything to me is spoilt, but the main issue is the oxygen plant, which is not completed. Blast furnace needs oxygen to run.” 

Some staff of the company also attributed its non-functionality to a faulty blast furnace though one of the best in the world, which failed to work when tested. 

A steel worker and unionist in the steel, Mr Okeshola Tajudeen said in an interview “If you want to talk about the body systems — the head, legs and others — and you refuse to put the heart, will the body work?” The blast furnace is referred to as the primary unit of the plant. As a unionist, he also believes that there is a conspiracy theory and or international politics behind the non-completion of the plant’s blast furnace. 

“The first test that was carried out on the iron ore here, the percentage was low. But through beneficiation, that is improving the quality, there was great improvement and that made it better than that of the foreigners.” 

He argued that the 98 per cent was not such that you can start operation. The two percent is the blast furnace and other auxiliary plants that are not ready. Despite this fact, Federal Government has continued assure impatient Nigerians that the plant would be put to work before the end of the administration. 

Following two failed concessions, Federal Government decided in 2017 to sell the plant. 

An aide to Fayemi declared that government would no longer spend additional money on the project. Since 1979, close to $5 billion has been expended on the plant while still requiring another $1.21 billion to start production. Some experts argue that this new amount required to revitalise the plant is $813 million higher than what was needed 17 years ago for its completion. Out of this new fund, $513 million is needed to complete the construction of the steel plant and $700 million for the construction of external infrastructure. 

However, during a meeting in 2019, President Muhammadu Buhari and President Vldimir Putin of Russia agreed to engage Russian experts to complete the project. 

Russia was to send experts to Ajaokuta and do an audit of the company to determine what is required. In May of 2020, FG inaugurated the Ajaokuta Presidential Project Implementation Team headed by the Secretary to the Government of the Federation (SGF), Boss Mustapha with the Minister of Mines & Steel Development as the alternate chairman. It has the mandate to prepare and submit periodic work plans and develop concession contract terms towards reviving the company. Even with this, government went ahead and secured funding from AFREXIM Bank as well as Russia Export Centre for the $1.46 billion with which to revamp the project.

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