Ajaokuta: Last chance for targeted sale

NIGERIA got another chance last week to revitalise its steel industry when it re-possessed the Ajaokuta Steel Complex after protracted negotiations with the concessionaire. With arguably sub-Saharan Africa’s largest integrated steel production facility back in its hands, the Federal Government is once again well-placed to kick-start a thriving industrial revolution that has been 40 years in abeyance. This administration should avoid the mistakes of the past and opt for a guided and urgent privatisation.

While credit should go to the Minister of Solid Minerals Development, Kayode Fayemi, who has restored purposefulness to the mining and steel sectors, there is little to cheer in the chequered story of steel in Nigeria. The agreement retrieved Ajaokuta from Global Steel Holdings Limited, the concessionaire that also runs Delta Steel Company Limited, Ovwian-Aladja. The pact, however, cedes the Nigerian Iron Ore Mining Company to Global Steel. Hopefully, should efforts to restart NIOMCO’s plants succeed, its ore would be available as raw materials for both the DSC and Ajaokuta.

Fayemi cannot afford to fail; he and President Muhammadu Buhari should pull out all the stops to ensure the success of the Road Map for the development of the steel and solid minerals sectors that the minister is driving.

The dream of thriving mining and steel sectors in Nigeria was conceived in the mid-1970s. The plan envisaged the establishment of NIOMCO, Ajaokuta, Delta Steel, and three rolling mills located in Jos, Osogbo and Katsina. The six state-owned companies were to be the pivot of an industrial take-off that would create hundreds of thousands of jobs, stimulate the local automobile industry, achieve self-sufficiency in steel and make Nigeria a regional hub for mining and allied industries.

But the dream was derailed almost from the scratch. Work started in Ajaokuta in 1979 and over $10 billion is estimated to have been spent on it so far. Its mandate to produce five million metric tonnes of steel per year has failed to materialise despite reaching 98 per cent completion. Its counterparts in Jos, Katsina and Osogbo have also failed, and have since been sold. Successive Nigerian governments have sabotaged the dream through policy somersaults, indifference and unbridled corruption.

First, they failed to provide external infrastructure such as access roads, railway tracks and power infrastructure as well as dredging a part of the River Niger to provide access for transporting some products and raw materials. They also failed to revive the coal mines and spur ancillary mining activities. Yet, these were integral to the master plan. Indeed, the current Administrator of the complex, Isah Onobere, reminded a team from the Kogi State Government in March that, unlike other steel projects in China and Europe, which were built in developed townships with advanced infrastructure already in place, Ajaokuta is a Greenfield project, requiring a huge investment on non-core steel making facilities.

This government should break the jinx that has kept Ajaokuta uncompleted for decades and unload it unto a first rate global brand name in steel production. It should ensure that Global Steel fulfils its part of the agreement to produce and supply iron ore to the DSC and Ajaokuta. There should be no more room for excuses. Global Steel, which first won the concession to reactivate Ajaokuta in 2004, had the contract revoked in 2007 by the government for its failure to perform. But the firm insisted that it was unable to do much because the Nigerian government failed to fulfil its own side of the deal, such as providing gas supply, rail and road links without which the plant could not be fully put to use.

We restate our preference for a guided privatisation of Ajaokuta: an outright and urgent sale of majority equity to a reputable foreign steel producer, not an emergency consortium formed by Nigerian politicians, officials and their business accomplices. There is no Nigerian company today that has the knowledge, funds or technical know-how to run a steel plant of the magnitude of Ajaokuta. Unlike its corrupt predecessors, the Buhari administration should never lose sight of the overall objectives of privatisation. These are job creation, industrialisation, attraction of foreign direct investment, technology acquisition, export diversification and revenue generation. Ajaokuta is said to be able to provide 75,000 direct jobs and one million indirect jobs in mining iron ore, coal, carbonates and refractories. Unlike the cronyism-guided power sector privatisation that has delivered darkness, debts and very meagre investment, Tiajpromexport, the Ukrainian firm that built the complex, says it is ready to invest $1 billion in it and has made proposals to the Federal Government.

Fayemi should familiarise himself with the global steel industry, which is currently wracked by excess capacity before choosing an investor. He and the Bureau of Public Enterprises should aim primarily at achieving self-sufficiency and saving the country the $4.5 billion Fayemi says it spent annually on importing steel products. Nigeria is perhaps the only country seeking to build an automobile industry without a viable domestic steel industry. With global production exceeding demand since the global meltdown in 2008/09, attracting the right investor whose interests will dovetail with Nigeria’s, will tax the ingenuity of our officials. But the critical difference will be patriotism: privatisation has been given a bad name here because corruption and rent-taking marred previous sales of state assets. Buhari should drop the idea of concessioning; it has never worked well in Nigeria. Just sell to the right investor and liberalise the operating environment.

We expect a transparent guided sale from this government, given Buhari’s reputation for integrity, Fayemi’s own track record and the principled stance of Vice-President Yemi Osinbajo, who is the statutory chairman of the National Council on Privatisation that has oversight over the discredited BPE.

Should this government get it wrong again, it could sound the death knell of our steel and mining dream.

 

(Punch Newspaper Editorial, 15th August, 2016)