Cost of keeping Ajaokuta Steel in government hands
The present state of Ajaokuta Steel Complex mirrors what is wrong with previous and present enterprises operated by the federal or state governments.
The steel complex was established in 1971 to develop Nigeria’s steel sector and stimulate the exploration of God-given natural resources, especially iron ore. Luckily for the country, large iron ore deposits were found in Itakpe, Ajabanoko and Oshokoshoko all in Kogi State two years after. This was supposed to be good news for Ajaokuta as the ore was meant to serve as a raw material for the complex.
The Ajaokuta Steel Complex and Delta Steel Company were subsequently incorporated in 1979 as limited liability companies.
Between 1980 and 1983, the then federal government stated that it had achieved 84 percent completion of Ajaokuta Steel plant, having completed the light mill section and the wire rod mill.
It was also widely reported that erection work on equipment reached 98 percent completion around 1994. Ever since then, Nigerians have been made to believe that Ajaokuta is 98 percent completed.
But here lies the biggest puzzle: Why is a company that is 98 percent completed still failing to produce a sheet of steel over 35 years after its establishment?
Kayode Fayemi, the immediate past minister of mines and steel development, laughed off claims that Ajaokuta was 98 percent completed recently while addressing journalists.
“Some people will say Ajaokuta is 98 per cent completed, or that it is 90 per cent completed, but if you probe further, you will discover that you would not get any response from the campaigners,’’ Fayemi said at an interactive session with newsmen in Abuja on March 8 this year.
Despite being unproductive, government after government has continued to pump billions into the complex. Government records show that successive administrations have pumped $8bn so far into the complex since 1979. The current government of Muhammadu Buhari has joined the party of spenders on a government facility that needs to be in private hands.
In a move that shocked economists and finance experts, the federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund Ajaokuta Steel Company, despite an earlier business case in the last administration showing that the complex could only work if properly privatised.
One of Fayemi’s failures is the inability to hand over this behemoth to the private sector to manage and run. On March 8 this year, Fayemi said no fewer than 14 organisations from different countries had, since 2016, indicated interest in the Ajaokuta Steel Complex.
However, Fayemi left office few weeks ago without considering any of those firms.
Analysts say poor decision-making was responsible for Fayemi’s inability to find the right buyer.
They wonder if Ajaokuta is meant for siphoning public funds and are surprised that people get salaries at the complex despite the company not fulfilling the purpose for which it was built.
BusinessDay checks show that Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal , manganese and limestone, among others.
Due to lack of operations at Ajaokuta Steel, Nigeria today imports steel valued at $3.3 billion every year. An average of steel products such as standard plates, hot-rolled coil, cold-rolled coil and rebar is estimated at $464.7 using Chinese prices, which means that Nigeria imports roughly 7.1 million metric tonnes of steel annually. The number could have been one to five million metric tonnes lower had Ajaokuta been producing and expanding operations since 1979, experts say.
Ajaokuta and Delta Steel were incorporated the same year—1979. But the latter has, by far, dwarfed the former.
After a successful handover of Delta Steel to Premium Mines and Steel by the Asset Management Corporation of Nigeria (AMCON) in 2014, the company’s rolling mills section is today working, employing roughly 160 people.
“The company’s 1 tonnes liquid steel capacity plant is responsible for reinforcing Nigeria with steel and allied products. We are targeting at least 5,000 jobs directly and indirectly. We shall touch the lives of over 30,000 Nigerians in the first instance before we start calculating the secondary opportunities it creates,” Prasnata Mishra, managing director of Premium Steel said, at the commissioning in March this year.
Analysts say it costs Nigeria an average over N5 billion annually in real terms to maintain Ajaokuta, wondering why the government should not sell the behemoth to an interested private firm. They believe that government should follow the Delta Steel model to revive Ajaokuta and other moribund and badly managed facilities such as Ajaokuta Steel Complex, Aluminium Smelter Company, Nigeria Paper Mill, Nigerian National Paper Manufacturing Company, Federal Superphosphate Fertilizer Company and National Steel Raw Materials Exploration Agency, among many others.