A pledge by the Minister of Solid Minerals Development, Kayode Fayemi, to hand over the Ajaokuta Steel Complex in Kogi State to private operators this year, in order to jump-start mining and industrialization, is cheering. The project has for three decades remained a sad advertisement of the waste, corruption and avarice of government officials in Nigeria and it partly explains why manufacturing contributes slightly less than 10 per cent to the Gross Domestic Product despite the nation’s abundant raw materials and human capital. Success will be achieved, however, only if the process deviates from the corrupt, fraud-driven attempts made in the past to activate the complex.
First, we suggest clarity in the policy objectives and the strategy to be adopted. While Fayemi tried to answer the former on the sidelines of a conference held in Cape Town, South Africa, recently, he was short on his detailed strategy for delivery. He needs to come out clearly to commit the government to privatisation. Revitalising sub-Saharan Africa’s largest steel project to kick-start industrial and mining industries and create jobs is laudable and should be vigorously pursued.
Experts say that steel production and consumption levels are indices of national power. Steel, says the World Bank, is a major indicator for measuring economic progress and a key driver of other high investment and job-creating industries. These include mining, which supplies the raw materials − iron ore, coal, bauxite and limestone. It is important in construction, housing, railways, shipping, defence, manufacturing, power and water supply, automotive/transportation and agricultural (for machinery and implements) industries.
The minister was justifiably clear that the Ajaokuta Steel Complex would be transferred to private operators this year. Also, he has said that the government would complete the project, which it puts at 98 per cent completion, before private managers take over.
Greater clarity is, however, needed on strategy, given the sordid history of the Ajaokuta Steel Complex. Started in 1979 as the lodestone of the national steel programme, estimates of what the government has spent on the steel complex range from $4.5 billion to $10 billion. Designed to produce five million metric tonnes of steel per year, it has produced nothing, just as its counterparts, the Nigerian Iron Ore Mining Company at Itakpe, Delta Steel Company in Aladja, as well as the rolling mills at Jos, Katsina and Osogbo, have similarly failed to deliver.
Efforts aimed at privatising the Ajaokuta Steel Complex have been mired in fraud, just like the other state-owned steel assets. Ajaokuta’s case has been traumatic: fraudulent concessions have been tried and partial sale to a shadowy firm, going by the name Ispat Industries Limited of India, was reversed after the succession of concessionaires were accused of asset stripping, mismanagement and failure to produce steel in meaningful quantities.
We need a definite plan. We oppose any further concessions; we prefer the outright sale of majority shares to a reputable global steel producer who will put in investment and have a long term stake in the growth of the steel industry in Nigeria. Also, we are apprehensive that the desire to complete the construction will not further delay its privatisation.
The law allows for direct negotiation with a preferred investor. We submit that no Nigerian company currently has the expertise, financial muscle and global synergies for such a gigantic steel enterprise. Fayemi and President Muhammadu Buhari should never allow the emergency consortia floated by local cabals that have ruined the privatisation process come near the steel industry again.
We strongly suggest that reputable market leaders be wooed from the West, South-East Asia − Japan, South Korea, Taiwan − and Brazil or other emerging markets. We should also seek consortia to develop the Nigerian Iron Ore Mining Company at Itakpe, the Nigerian Coal Corporation and to dredge the River Niger channel over which Ajaokuta Steel Company is built, as well as to construct the crucial railway links as provided for under the steel master plan. Without these supporting infrastructure led by the private sector, reviving the Ajaokuta dream may not succeed.
Experts say that the steel industry, properly placed, can generate two million jobs in multiple industries. Olugbenga Okunlola, a professor of geology, says since Nigeria has most of the minerals needed to produce steel, putting Ajaokuta Steel Company to work will stimulate productive activities in mining, including the revival of coal mining, job creation and reduction of the country’s dependence on imported steel.
As the second largest in the world after oil and gas, the steel industry had an estimated turnover of $900 billion in 2014, according to the World Steel Association, employing over two million persons directly, engaging two million contractors with another four million people in supporting industries. Although The Economist of London reported production declines in the last few years brought on largely by the slowdown in China, for years the largest consumer, experts project steel use to rise 1.5 times by 2050. In its 2015 report, the WSA predicted that the industry would re-emerge from its current “pause” to pick up from emerging markets.
Nigeria should not miss out on this rebound. It should very quickly implement plans to kick-start mining, steel and manufacturing. When policy makers imbibe a sense of urgency to make job-creation the ultimate objective of every economic plan, it will be easier to pursue privatisation and liberalisation with dispatch, accompanied by heavy and sustained investment in infrastructure. South Africa and Egypt are our only rivals on the continent to catch up with and aim to surpass with their 7.2 million tonnes per annum and 6.8 million tonnes per annum, respectively, in 2013 that earned them the 23rd and 24th positions in global production by country, according to the World Steel Report 2015.
While the steel consumption per capita in the United States is in excess of 700 kilogrammes, Japan’s about 500kg, Nigeria’s steel consumption per capita is a lowly 25kg. Demand for steel in Nigeria is very high, but there is no local steel. Fayemi should therefore infuse clarity, doggedness and urgency into the steel revitalisation agenda.
