Steel production: Crucial road to be travelled
Ajose Sehindemi is Businessamlive Reporter.
You can contact him on ajose.sehindemi@businessamlive.com with stories and commentary.
For long, the Nigerian government has clamoured for the growth of the non-oil sector as a pathway to the nation’s development, focusing more on trade and exportation of raw materials. However, many analysts believe that the country needs to pursue industrialisation; but industrialisation needs a robust steel sector to emerge and thrive. They say without the development of the steel sector, little or nothing can be achieved. Ajose Sehindemi, reports on what they say is wrong with Nigeria’s approach.
Nigeria, Africa’s most populated country spends about $4.5 billion (N887 billion) annually on importation of basic metals, made up of processed steel, aluminum products and associated derivatives consumed in the country, Kayode Fayemi, the minister of solid minerals development, disclosed recently. He added that Nigeria imports about 25 million tonnes per annum.
With 30 steel manufacturers producing only about 2.2 million tonnes yearly of basically scraps and billets, 90 percent of the steel used in the country are imported, mainly from China and Ukraine. But the government appears unbothered about the significance of steel development to economic progress.
International practices have revealed that a vibrant steel sector can accelerate the industrial development of any nation faster than any other sector since its materials can be for domestic and industrial uses, such as in engineering and construction, manufacturing of cars, ships, vehicle amour and general machinery.
Yemi Osinbajo, Nigeria’s vice president recently said the country is the 12th largest iron ore resource country in the world, which means that to produce steel, which is used in various applications around the world, importation of the raw materials would not be necessary since they are available in abundance.
But that wasn’t the case decades ago when the government realised the importance of steel to the development of the nation and planned towards it.
This led to the establishment of the National Steel Development Authority (NSDA) in 1971, by Yakubu Gowon, the then military head of state, to harness the country’s numerous natural resources, part of which was the estimated ve billion tonnes of iron ore reserves expected to see to the growth and development of the nation. Decades later, an abundance of easy crude oil, mismanaged by successive governments, has turned the nation’s economy backward with the steel sector in comatose.
The impact is felt down the value chain as the price of metal goods in the country has gone up, and effectively slowing the pace of industrialisation, and fuelling underdevelopment and creating unemployment and poverty across the country.
The iron and steel industry in Nigeria was developed as a public funded integral indus- try. Between 1979 and 1983, the government jump-started iron and steel production with emphasis on the importance of iron and steel in developing and driving local production of goods, as a strong iron and steel industry was projected to reduce demand of foreign currency used in the importation of steel products.
To realize the industrialisation agenda of the government through the steel industry, various steel companies were founded, notably the Ajaokuta Steel Complex in Kogi state, Aladja Steel in Delta, Oshogbo Steel Rolling Company, Osun State, Katsina Rolling Mill, Ka- duna and several others were initiated by the civilian ad- ministration of Shehu Shagari in the 1980s with the aim of making the country self-reliant in steel production, as well as serving as a bedrock to di- versify the nation’s economy, which has been dependent on crude oil.
As at 1983 when the government of Shagari was toppled by the military general, Muhammadu Buhari, Ajaokuta Steel Company was 84 percent completed. Shagari also completed and inaugurated the Delta Steel Company, Oshogbo, Katsina and Jos Steel Rolling Mills, that were in the then integrated steel development scheme of government.
Decades later, since the commencement of some of these projects, most of them were abandoned mid-way as a result of gross ineptitude, corruption, and lack of political will to ensure their full operation.
The most worrisome to Nigerians has been the abandonment of the Ajaokuta Steel complex, which was said to have the capacity to employ close to two million persons – direct and indirect beneficiaries, aside the other boost to the economy of the country, as it was deemed pivotal to Nigeria’s industrialisation, hence the reason for its construction in the first place.
Another worrying fact is that Ajaokuta Steel complex has been bandied to be 98 percent completed (from 1983 to 1984) for a very long time,
although Fayemi said last week that an ongoing audit of the complex, which report will be ready in six weeks, will show the extent of work that has been done. So far, the government has spent over $5 billion and only requires less than a billion dollars for it to become fully operational, but it has been abandoned and even concessioned to a foreign rm once, but without improvement on it. After various court cases, government reacquired it from the concessioner after it complained that the properties of the steel company were being stripped off, which left analysts bewildered as to why it was given out cheaply.
For John Ade-Ajayi, a professor of Metallurgical and Materials Engineering at the Federal University of Technology, Akure and immediate past president of Nigerian Metallurgical Society, Ajaokuta steel is affected by two major issues, which are international conspiracy and corruption from within.
In an interview with business a.m., Ade-Ajayi said: “ e reason they (government) gave the last time when asked about progress on the project was that it was a court case. They are able to use it for projects as if it is there, they vote money for it, spend it and repeat the process again and that’s the end. But if the government actually wants that place to work, it must have the political will and correct leadership. e experts must be brought together with those in Diaspora; they should be sincere about development.
“The western world will not want it to work because Nigeria is a very large market. Even the Asians, Indians and Chinese are looking for their markets. Now China is the largest producer of steel. How will you say you are constructing rail from Lagos to Kano and you are going to be importing rail from China when we can produce our own? It is the most anomalous thing.
Why don’t you let your priority first be on production of these steel for instance? We don’t produce and we are only feeding China”.
On whether the government prioritises the steel sector for the country’s development, Ade –Ajayi said: “ There are two basic important industries in the world. All the things we deal with are either products of mining agriculture. You either mine or grow them. We have di erent types of mineral resources, some are metaliferous, quarrable, gemstone, uranium, but they are all mined. e resources of the earth can only be made useful by applying resources of the head.
“If we don’t use the re- sources of the head to add value to the available miner- als, they will just be there. e development of a nation is not dependent on the amount of mineral resources it has in the earth but the amount it is able to transform. After all, there is no single mineral resource that is mined in Singapore but it is a developed country. ey import these minerals and do wonders with them. ey don’t mine iron in Japan but the brains are there, they get the raw materials, turn into products, consume and send out. Nigeria has these things on ground and then we go and import just as we do with oil. ere must be a policy on ground insisting that things we cannot produce as much as possible, we must not con- sume them. But before we do that we must have installed some things.”
David Esezobor, a professor and co-chair of the Iron and Steel Development Commit- tee of the Nigerian Society of Engineers (NSE), thinks the government should be more concerned about rounding o work on the steel company and commercialise it for some years before thinking of priva- tization.
Thee professor of extractive metallurgical and material processing urged the govern- ment to invite the original builders to complete the proj- ect as opposed to concessions and, also, that privatizing Ajaokuta Steel without completing it would amount to disposing the treasured steel firm as scrap to buyers.
Many others call on the government to invite the origi- nal builders of the Ajaokuta Steel Company, Technoprom- export of Russia, to come and complete it as their other steel companies around the world are working at full optimum and wonder why Nigeria is so di erent.
Such a position has already been discountenanced by the government. Fayemi, in a statement, said at the week- end that government will not spend a kobo again on the revival of the steel complex.
On the role of steel in na- tional development, AdeAjayi said a look at the 10 most industrialised nations of the world revealed that the level of their development has direct relationship with the level of production of steel, of course iron.
“The nation that controls iron controls the world. The day we are able to produce our steel that is the day we begin industrialisation. If you are going to build rails, re neries, automotive, even ship, you have to have steel. Without steel, we haven’t started,” he asserted.
It is not all gloomy though as a company in Nigeria, Afri- can Industries Group, founded in 1971, said it had started to export nished steel products to the outside world.
Alok Gupta, its group man- aging director, said recently that it had been exporting non-steel products to regional markets for many years, and according to him, their steel products had to compete with big produces from Ukraine, Russia, China and other de- veloped countries.
Gupta projected that the company’s target is to export between 150,000 – 200,000 metric tonnes of steel on an annual basis to start with.
He said:”Our exports of steel during rst nine months of 2017 have increased over three folds by weight and value compared to the full year 2016. To put numbers on it, our 2017 export was $25 million com- pared to $4.1million in 2016.”
He listed the challenges faced by some of the local manufacturers of steel to include logistics and fiscal policies issues. “Sea freight between Lagos and other West African countries is almost double of what it cost to bring the steel product from Ukraine or China. For example, sea freight from Ukraine to Ghana is $35-40 per MT while from Lagos to Ghana cost $65 per MT, i.e. almost 50 per cent more,” he said.