Eager for a way out of the logjam decelerating Nigeria’s steel industry, bold voices have come out to define the next step for the government. Not that their proposal is new, but the Manufacturers Association of Nigeria and some industry experts have advocated outright privatisation of the Ajaokuta Steel Company. For a complex that has been moribund for the greater part of its existence, MAN’s proposition strikes a chord.
Originally, the project was targeted at making Nigeria self-sufficient in steel, thereby kick-starting the country’s industrial development. A sound idea, it was incorporated in 1979 as a public corporation on 24,000 hectares of land in Kogi State. The plant itself occupied 800 hectares, though it was integrated with the iron ore and rolling mills in Itakpe (Kogi), Aladja (Delta), Osogbo (Osun) and Katsina (Katsina State). It was expected to produce 1.3 million tonnes of steel per annum, with an in-built capacity to double it to 2.6 million tonnes per annum and provide 10,000 direct jobs as well as 500,000 indirect employment opportunities.
But 40 years after its establishment, it is still not in operation. All attempts by the government to get it off the ground have proved futile. Strikingly, an internal technical audit between February and April 2018 concluded that the project was 95.7 per cent ready. The near-completion data has been the sing-song in government since the first phase was inaugurated in 1983, but no serious production is going on there.
To build roads and sustain our domestic industrial sectors, Nigeria depends heavily on imported steel. This is just as the country, with vast reserves of crude oil, foolishly depends on imported refined petroleum products. So much money has been sunk into Ajaokuta. In 2017, the then incumbent Sole Administrator of the ASC, Joseph Onobere, cited a figure of $4.6 billion, saying that an extra $400 million was required to complete it. Various other estimations put these sums higher.
Ultimately, Nigeria’s quest for industrialisation – manufacturing cars, high-rise buildings, railways, military weapons, aviation and other critical infrastructure – is now at the mercy of other advanced countries as they sell to us most of what the country could ordinarily have produced. In Muhammadu Buhari’s first term, a standoff occurred between the parliament and the executive on how to go about the project. The National Assembly passed a bill that asked the government to draw down $1 billion for the project from the Excess Crude Account, but the President did not buy into it, preferring a concession arrangement. His rejection was appropriate.
Earlier, in 2016, the Federal Government took over the company from a concessionaire and returned to paying salaries and benefits to its redundant workforce. Two years after that, the then Minister of Mines and Steel Development, Abubakar Bwari, raised hopes that 11 companies – he did not name them – had indicated their interest in the ASC. At the end of his tenure last May, it was all sound bite.
The Brussels-based World Steel Association states that for an economy to be healthy, it requires a healthy steel industry. For this reason, the Buhari government should quickly take a decision on Ajaokuta; sell it transparently, as MAN has pointed out. Although the global steel industry is experiencing a glut, it still plays a cardinal role in the economies of China, India, the United States and the European Union.
A study undertaken by the Oxford University Economics for WSA valued the industry, as of 2018, at $2.9 trillion or 3.8 per cent of global Gross Domestic Product, contributing about six million direct jobs and millions of other indirect jobs. China, which reached 928.3 MT steel production in 2018, was the major beneficiary of the receipts through exports, followed by India, which relegated Japan to the third position.
Without privatising its own industry, Nigeria cannot take advantage of this market. Its economy will remain underdeveloped; it will continue to import to meet its domestic steel needs, splurging precious foreign exchange on importing the product.
In all this, some critical points stick out. One is that state-owned enterprises in Nigeria are poorly run. From the Nigerian National Petroleum Corporation, which operates four refineries, to the near-moribund Nigerian Railway Corporation, it is a story of arrested efficiency. Exports and imports suffer undue delays at the seaports due to inefficient operational methodology. Before the liberalisation of the telecoms sector in 2001, the state-owned NITEL was barely able in 40 years to provide just over 500,000 telephone lines to the populace. Today, private firms provide 173.64 million lines. Since the previous administrations had privatised some steel assets, this administration should now go the whole hog.
This is where the previous experiences in privatisation become important. Identified flaws in past privatisations should not discourage the Buhari government from selling Ajaokuta. Britain, which founded the British Steel Corporation in 1967, adopted this strategy in 1988, turning the company into a private entity. Nigeria should try this to boost its sluggish economy and wean itself off the ruinous dependence on the outside world.
The government should not waste more money on Ajaokuta; it is good money going down the drain. The next move should be a radical departure from those questionable privatisations of the past. The incumbent government should infuse this privatisation with the integrity needed for reputable global steel players to identify with the ASC.
If Buhari can pull it off, it will serve as a roadmap for the privatisation of the other public enterprises that are performing poorly. Additionally, it will mark the beginning of opening up the Nigerian economy to the much-needed foreign direct investment, which declined to $2.2 billion in 2018.