Speedy privatisation seen reviving Ajaokuta Steel plant

Nigeria needs to speedily privatise Ajaokuta Steel Complex and stop pumping money into the plant.

Ajaokuta 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.

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.

Kayode Fayemi, current Ekiti State governor, was the man in charge of Ajaokuta as minister of solid minerals development.

One of Fayemi’s failures is the inability to hand over this behemoth to the private sector to manage, analysts say

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.

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 othermoribund 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.

ODINAKA ANUDU