Nigeria’s steel industry seeks reformation amid production setbacks

By Onome Amuge 

The global steel market has been strengthened by a surging demand in the building construction sector, industrial infrastructure and automotive machinery.

According to IMAC, a leading market research company,the steel industry rose to a value of $874.6 billion in 2021 and is expected to reach  $1 trillion by 2027, exhibiting a compound annual growth rate (CAGR) of 3.02 percent between 2022-2027.

Industry players and stakeholders in the Nigerian steel industry have also emphasised the  enormous potential of steel exploitation as a major source of revenue for Nigeria, especially at a time the federal government is knee-deep towards sourcing alternative ways of economic diversification from dwindling oil revenue. They also aver that self-sufficiency in steel production would also mean conserving the much needed foreign exchange expended in the importation of steel and raise the country’s capacity to employ a large number of the nation’s labour force both directly and indirectly.

Ajaokuta steel project wobbles amid resuscitation failures

In September  1979, the Shehu Shagari administration with the support of the Russian government, established the Ajaokuta Steel Project with the prospect of becoming the largest steelmaking plant in Sub-Saharan Africa. Designed as an integrated iron and steel complex, the first phase was designed to produce 1.3 million metric tonnes of liquid steel per annum with capacity to expand to 2.6 million tonnes and 5.2 million tonnes in three phases.

Unfortunately, the company has been moribund for over three decades  and its goal to serve as Nigeria’s main platform toward becoming an economic and industrial global power remains defeated despite the country’s large reserves of iron ore, limestone, clays/silica sand which are basic raw materials for steel production. The history of Nigeria’s attempt to develop the steel industry has been described as a cycle of white elephant projects that have engulfed millions of dollars with no significant achievement to date.

Analysts also noted that attempts by successive governments to resuscitate the industry have failed to yield desired results due to a myriad of challenges including superficial projections, lack of infrastructure support, change in political administrations and policies, among others.

Data made available on the website of the budget office of the federation showed that the Muhammadu Buharu administration has between 2016 to 2021, spent over N15 billion  into the Ajaokuta steel complex in the form of budgetary allocations.

The data showed that a total of N430 million was allocated to Ajaokuta in 2016. In 2017, the total allocation rose to N4.3bn, with recurrent expenditures at N3.9 billion, while capital expenditures stood at N354.1m. The total allocation was N4.3 billion in 2018, while recurrent expenditures and capital expenditures stood at N3.9 billion and N354.1 million respectively.  In 2019, the total allocation was N3.6bn, with recurrent expenditures at N3.3bn and capital expenditures at N262 million. The total allocation increased to N3.7 billion in 2020, with recurrent expenditures at N3.6 billion and capital expenditures at N147.2 million. Total allocation further increased to N4.2 billion in 2021, with recurrent expenditures at N4 billion and capital expenditures at N253.9 million. In 2022, N853 million was approved for consultancy services targeted at the steel complex’s concession.

The continuous failure of both the past and current administrations to bring the Ajaokuta steel mill to life has resulted in adverse implications for the economy,with the country spending $3.3 billion annually on the importation of steel products, according to a report by the Nigerian Society of Engineers.

Stakeholders in the motor vehicle manufacturing sector also noted that the inability to revive the steel industry has stalled the local automotive development agenda to promote local assembling and car manufacturing . They noted local manufacturers spend about N10 billion annually on importation of allied components used for local assembling with  steel accounting for about 60 percent of raw materials used in manufacturing motor vehicles.

Commenting on the worrisome state of the Nigerian steel industry, Mohammed Haruna,executive vice chairman, National Agency for Science and Engineering Infrastructure, (NASENI)  said the nation’s automotive aspiration would not be realised if the steel industry isn’t restructured.

“The automotive industry in Nigeria cannot function well without the steel industry. We are establishing an automotive industry park in Nigeria and looking at Nigerian professionals, providing services elsewhere in the world to come back and let’s develop our country together.

Ajaokuta steel has the capacity to become a major producer of industrial machineries, auto-electrical spare-parts, shipbuilding, railways and carriages,” he said.

Haruna, who stated this in a recent presentation to the steel council in Abuja,  emphasised that the sector can be revived if the federal government exploits the Public-Private Partnership (PPP) Model  in funding steel complexes.

He added that the government can further support local production by levying a development tax on steel imported into Nigeria during the resuscitation period to fund the establishment of a steel development fund which is accessible to investors.

On his part, Kamoru Yusuf, chairman, Basic Metal, Iron and Steel and Fabricated Metal Products sector of the Manufacturers Association of Nigeria (MAN),  urged the federal government to adopt the model used by China to transform its Steel industry in the resuscitation of Ajaokuta Steel Company.

The industrialist explained that what the Chinese government did was to indigenise one of the country’s major industries,Iron and Steel, into the hands of their people with the government holding only 25 per cent interest while local investors were allowed to own 75 per cent stake. This, he noted, created opportunities for the local investors and ensured that the wealth remained within the country, without repatriation of capital as well as dividends; thereby leading to the development of local skills and other multiplier effects that finally resulted in what the world is witnessing today as the industrial explosion in China.

“It is only indigenous investors that can make it happen so that the procedure can remain here in Nigeria and we can re-invest this into the economy. This we have all seen, was the case in the cement industry and with Nigeria now taking another giant stride in refinery and petrochemicals,” he stressed.

He pointed further that the process of resuscitating Ajaokuta Steel Company was not properly structured as owners of existing steel plants, who would have given clearer narrations of the issues in the industry  were not consulted.

Meanwhile, the federal government has allayed fears of Nigerians concerning the resuscitation of the Ajaokuta steel mill, with a promise to break the jinx.

Yemi Osinbajo, the vice president of Nigeria, made the pledge during the recently conducted Nigeria Mining Week in Abuja.

“Our vision for an industrialised nation cannot be achieved without a vibrant steel sector. We understand the huge demand for steel and iron in our domestic markets and across the sub-region. This is why we prioritised the resolution of all the issues constraining the full operation of the Ajaokuta Steel company,” Osinbajo said.

To this end, the vice president disclosed that a transaction adviser has been appointed to concession the Ajaokuta Steel Company and the Nigerian Iron Ore Mining Company in Itakpe.

Reacting to this, an expert who chose to speak under the condition of anonymity, argued that the federal government needs to implement structural steps towards reviving the steel sector rather than holding conferences with no viable result.

He  also noted that the government needs commitment to building a substantial stock of human, social and physical infrastructure by engaging indigenous companies in the steel production sector to promote value-creation investments and self-sufficiency