Finance minister hard-pushed to secure required funds
Nigeria’s decades-long unending and troubled steel project, the Ajaokuta Steel Company, is primed for more complications ahead of plans to proceed with its possible completion as it faces possible funds shortages that would make the provision of $1 billion approved for this purpose take much longer, it has emerged.
The likely delay to proceed to work that could lead to the completion of the project, regarded as the country’s largest steel mill, is directly linked to what has now become widely known as the depletion of the country’s excess crude account (ECA), where much of the $1 billion was supposed to come from by a Nigerian senate approval that was given on December 14, 2018.
The senate had moved to proceed with the completion of the project by approving the withdrawal of the money from the account following a decision to take over the project after a number of failed privatisation efforts.
The steel complex project with enormous potentials for job creation and industrialisation for the country is believed to hold the prospect of creating no fewer than 10,000 direct jobs, as well as another 500,000 indirect jobs in the first phase, when fully operational.
But it now faces setback with the ECA significantly drained by the Nigerian government in the last one month leaving it with a balance of just $631 million at the end of December 2018.
Finance minister, Zainab Ahmed, had explained that $2.246 billion was withdrawn between October and December to finance a $1 billion release approved for security and also for sharing to sub-nationals as part of their Paris Club refund.
Though the Senate, in passing the bill titled: ‘An Act to Provide for the Ajaokuta Steel Company Completion Fund for the Speedy Completion of the Project’, had included other sources of funding such as loans, grants, as well as monies from other tiers of government, the bulk of the fund was to come from federal government’s share of the ECA.
It is now believed that federal government would have to wait for further accretion into the ECA before it is able to release funds for the projects’ completion, a feat that analysts describe as daunting in the face of the fall in crude oil prices, and the fact that the country is in an election year with the possibility of government shifting focus from the economy to matters patterning to the elections.
Besides, foreign investors who might be interested in the project would be awaiting the result of the elections and therefore less favourable to investing in the country.
Quality of assets at the $6 billion Ajaokuta Steel Company has been depreciating following years of neglect by successive governments.
A recent technical audit report findings had indicated that the steel complex, depreciated to 95 percent completion and currently requires about $652 million additional investment to complete it and make it fully operational.
business a.m. learnt that Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal, manganese and limestone, among others.
Due to lack of operations at Ajaokuta Steel, Nigeria today imports steel valued at $3.3 billion every year. An average of steel products such as standard plates, hot-rolled coil, cold-rolled coil and rebar is estimated at $464.7 using Chinese prices, which means that Nigeria imports roughly 7.1 million metric tonnes of steel annually. The number could have been one to five million metric tonnes lower had Ajaokuta been producing and expanding operations since 1979, experts say.
Contrary to prior information that the equipment in the ASC are obsolete, the technical audit report indicated that equipment and facilities are robust, rugged and designed with 25 percent safety factor similar to plants in Russia and Ukraine that have been running for over 100 years.
“The situation of the steel plant’s equipment and facilities are satisfactory. Mechanically, the steel plant equipment and facilities are generally in good condition, though they also indicated that some facilities like the electrics, instrumentation and insulation needs to be replaced, upgraded and modernized,” the technical audit report indicated.
