Twist in the Ajaokuta Steel tale

Despite spending over $8 billion on Ajaokuta Steel Company in Kogi State since 1979, the 39-year-old steel plant is yet to come to life. This may have turned Nigeria’s road to building a robust steel industry into a long, winding journey to nowhere. The National Assembly’s intervention has brought a twist to the tale. Assistant Editor CHIKODI OKEREOCHA looks at the intrigues over options to revive the steel plant, which have pitched the lawmakers against the Ministry of Mines and Steel Development.

Ordinarily,  the “Special  Session of the House of Representatives at the Sectoral Debate on Iron and Steel Sector” ought to have set the tone for a robust discussion on the way forward for the moribund Ajaokuta Steel Company (ASCL) in Kogi State.

But it did not. The session,  organised last February at the behest of the House Committee on Energy, Steel Development and Metallurgy, added a new twist to the sad tale of Nigeria’s seemingly endless journey to self-sufficiency in iron and steel products.

ASCL is Nigeria’s largest integrated steel plant. Tagged: “bedrock of Nigeria’s industrialisation” because of its linkages to other sectors, such as the industrial, agricultural, transport and construction sectors, the steel plant harboured Nigerians’ collective aspiration for self-sufficiency in steel.

Arguably the most ambitious national industrial project, ASCL was expected to jump-start the nation’s industrialisation and halt the importation of steel products, which cost the nation an estimated $3.3 billion annually.

While the first phase of the plant targeted a production capacity of 1.3 million tonnes of liquid steel per annum, the third and final phase was expected to push up production capacity to 5.2 million tonnes per year.

It was also envisaged that the project would directly employ about 10,000 workers at the first phase of commissioning, while the upstream and downstream industries were expected to engage over 500,000 employees, among other benefits.

Sadly, however, none of these deliverables has come the way of Nigerians and the economy 39 years down the line. Instead, ASCL, which is Nigeria’s largest single investment in any one place, has become a huge drain pipe on the nation’s resources.

According to the Minister of Mines and Steel Development, Dr. Kayode Fayemi, the Federal Government has sunk a whopping $8 billion into ASCL since 1979 without deriving any benefits from the huge investment.

It was against this backdrop that the recent House sectoral debate was seen as perhaps, a fresh vista for a productive discussion on the way forward for ASCL. But this was not the case. Instead, the sectoral debate has introduced a disturbing twist to the seemingly endless saga of Nigeria’s quest for industrialisation by riding on the back of the steel plant.

This was sequel to the passing of a vote of no confidence in key officials of the Ministry of Mines and Steel Development by the lawmakers.

The lawmakers specifically came down hard on Fayemi and the Minister of State for Mines and Steel Development, Alhaji Abubakar Bwari, following their alleged failure to appear before it for the sectoral debate on the steel plant.

The obviously combative lawmakers also instructed the embattled ministers to suspend every step towards concessioning ASCL, alleging that the proposed concessionaire had tied the hands of the ministry. The House members added that they preferred that government invest and complete the project.

According to the House, about $500 million will be required to complete the steel project, which it claimed was 98 per cent done. The House through Speaker Yakubu Dogara also urged the Federal Government to source the money from anywhere, even if it means borrowing, to complete ASCL.

 

Fayemi, other stakeholders kick

 

But the position of the House did not go down well with Fayemi and indeed, other concerned stakeholders in the economy. The Minister faulted insinuations that there were dirty dealings in the plan to concession the plant. He described as unfair allegations leveled against him and the junior minister that they were behind such shady deals.

Fayemi, who reiterated his desire to work with the leadership of the National Assembly to ensure completion of the process, however, pointed out that government has taken a principled position that Nigeria will not spend a dime on the completion of the ASCL, noting that despite spending about $8bn on the steel plant since 1979, there has not been any result.

He also expressed surprise that the same House, which turned the heat on him had earlier agreed to concession the plant and approved the sum of N2 billion for the process in the 2017 Appropriation Act.

“We are just implementing what was passed by the National Assembly. That is why we are surprised that we have been subjected to an unwarranted attack over the matter….,” Fayemi said.

The Minister explained that the ministry will not repeat the mistake of former President Olusegun Obasanjo’s administration, which undertook the re-concession of the steel plant without a technical audit and a transaction advisory service to advise accordingly as to who had the technical capacity, financial wherewithal and track record to bring Ajaokuta back to life.

The Nation learnt that before the latest altercation between the lawmakers and the ministry over ASCL, the Federal Government was considering three options to revive the steel plant. They include a direct sale, concession and joint venture.

This followed the presentation of a report by transaction consultants Greenwich Trust Limited on possible transaction routes that could be taken to rehabilitate the steel complex. But the ministry obviously prefers a concession, a move that appears to enjoy the support of stakeholders most of who argued that the government has no business in doing business.

This was why some of them believe that there is more that meets the eye in the House inquest into the activities of the ministry, particularly its insistence on investing another $500 million into the completion of the steel plant.

To them, it was against public sentiment in allowing the private sector with the financial and technical muscle to turn the facility around.

Some of them, who spoke with The Nation observed that the lawmakers’ sudden interest in the steel plant was a façade for a more sinister motive to raise money for purposes other than reviving ASCL.

A reliable source close to the House said the lawmakers’ plan to inject $500 million into the ministry’s budget for ASCL was actually a subterfuge to raise money to prosecute the 2019 general elections.

The source, who declined to be mentioned, said in making a case for the extra-budgetary allocation, the House ignored an earlier audit report, which indicated that about $1.049 billion was required to make ASCL operational.

According to experts, the $500 million being requested by the House to resuscitate Ajaokuta was a far cry from the about $1.049 billion, which the ministry said was required to put the steel complex fully on stream.

This was said to be why the ministry was curious that the House was harping on the $500 million component to complete the complex without reference to the balance of $549 million for the auxiliary facilities that will make it functional.

Perhaps, more curious was the fact that the lawmakers went ahead to pass a vote of no confidence on Fayemi and Bwari despite the two letters sent to the House to explain why both ministers could not appear before the lower chamber to shed light on the non-completion of Ajaokuta and their request for a  new date.

Besides, the ministry was said to have had cause to address the House and the Senate Committee on privatisation four times in the past, which was why Fayemi said he was surprised that the House was “this harsh this time”.

He, however, said no amount of intimidation would make the government hand the plant over to any company without the requisite financial and technical know-how.

At present, ASCL is undergoing a technical audit, which will be completed in six weeks’ time, with Fayemi indicating that four companies from Russia, Belarus, Ukraine and Nigeria have shown interest in the steel plant.

 

Steel workers root for unbundling

 

While Fayemi and the lawmakers have locked horns over whether or not concession should be the preferred transaction  route for ASCL, iron and steel workers under the aegis of Iron and Steel Senior Staff Association of Nigeria (ISSAN) have urged government to unbundle the steel plant and give it to different firms.

Its President, Mr. Itopa Bello said unbundling the steel company into different firms would ensure efficiency and competitiveness. According to him, Ajaokuta has many product entities that have the capacities to stand on their own and so should not be given to a single investor under a concession arrangement.

“The autonomous entities in the project should be unbundled and given to different serious investors and there will be competition among operators and they will function well,” Bello said last week, pointing out that ASCL was an integrated plant with 43 units and 40 of them had been completed and working effectively.

The ISSAN chief said the remaining three, which are the primary and prominent units of the steel company, have  not been completed, adding that the functioning 40 units should be unbundled because the company had the ability to start and finish a production without requiring input from outside.

The labour leader also said TPE, the Russian firm which completed the 40 units, should be allowed to finish the whole project since it had the knowledge of the production activities of the company.

While stressing the need to complete the remaining components, he added that the company had the capacity to produce materials required for constructing all the rail-lines across the country, as well as generate 15,000 direct jobs and 500,000 indirect ones.

Regardless of the option the Federal Government takes to revive the steel plant, experts said there is the need to first address some of the core infrastructural challenges around Ajaokuta and the steel sector generally.

Former Joint Managing Director/CEO, Delta Steel Company (DSC), Ovwian-Aladja, Delta State, Dr. S.O Nwabuokei, said for instance, that there was the need to dredge the Escravos water channel near Warri, Delta State, to allow bigger ships berth or access the Delta ports.

The channel connects the Warri Port to the Atlantic Ocean. But the port has become idle, as ocean-going vessels could no longer access it because of the shallow Escravos channel.

For the dredging to take place, Nwabuokei said the Nigerian National Petroleum Corporation (NNPC’s) crude oil pipelines within the vicinity of Warri Port must be relocated or lowered to a certain level.

Also, the government is yet to complete the remaining 22-Kilometre rail track from Agbaroh in Agbo to Aladja in Warri. The rail line is supposed to facilitate the movement of raw materials and finished products to and from Ajaokuta.

Incidentally, these are some of the infrastructural issues cited by Global Steel Holdings Limited/Global Infrastructure Nigeria limited (GHIL/GINL), the former Indian managers of Ajaokuta for failing to revive the facility.

They had accused the government of reneging on its obligations under the concession agreement signed with them to fix the afore-mentioned infrastructure.

Nation

by administrator News