Nigeria’s missing $4 billion: The case for steel, rail, and building an industrial nation

Every year, Nigeria spends $4.0 billion — ₦5.50 trillion — importing steel, even though it has the iron ore, the land, and the people to produce it domestically. Every year, 90 percent of Nigeria’s freight moves by road through corridors so congested that Apapa port alone haemorrhages an estimated $2.0 billion in logistics waste annually. And every year, both solutions — a functioning steel industry and a nationwide rail network — are discussed and deferred.

This is not a counsel of despair. It is a business case.

I have developed the Nigeria Steel and Rail Transformation Initiative — NSRTI — a 15-year, ₦44.0 trillion ($32.0 billion) framework to build five modern steel mills across Nigeria’s geopolitical zones and lay 5,000 kilometres of standard-gauge rail connecting every major city and port in the country. The 20-year return in steel import savings, rail revenues, logistics efficiency gains, and tax receipts is ₦82 to ₦110 trillion ($59.6 to $80.0 billion) — a return of 2.5 to 3.4 times the investment, rising to 9 to 13 times when the full GDP multiplier is counted. And it does not begin with Ajaokuta.

Why not Ajaokuta first

Ajaokuta is 45 years old, billions have been spent, and it has never produced a single tonne of commercial steel. That is not an argument against Nigerian steel — it is an argument against that specific approach. A Soviet-designed integrated blast furnace requiring a dedicated power plant, 200-plus concentrated metallurgical engineers Nigeria does not yet have, and a political consensus that has never materialised: these are the conditions for continued failure.

NSRTI proposes instead five Compact Strip Production mini-mills — modern technology proven across India, Turkey, Ukraine, and Brazil — distributed across Lagos, Port Harcourt, Kano, Enugu, and Delta State. Each costs $350 to $600 million, produces 1.0 to 1.5 million tonnes per year, and reaches first production in three to four years. Five mills together cost $2.0 to $3.0 billion — less than half the minimum estimate for completing Ajaokuta — and produce 7 to 8 million tonnes per year, covering 75 to 90 percent of Nigeria’s current import bill.

These mills use electric arc furnace technology fed by scrap metal. Nigeria generates enormous quantities of scrap from its construction boom and oil industry decommissioning, which is currently exported cheaply. NSRTI turns it into domestic steel.

Where steel and rail meet

The fifth mill — in Delta State — is configured specifically to produce heavy rail steel: the UIC 60 profile required for standard-gauge track. Nigeria needs to lay 5,000 kilometres of rail. At 120 kilograms of steel per metre, that is 600,000 tonnes. Imported: $600 million. Produced by Mill 5: $240 million. The saving of $360 million on rail steel alone — ₦495 billion — nearly repays Mill 5’s entire capital cost within eighteen months of full production.

The rail network targets six corridors: Lagos to Kano (1,100 km) as the primary north-south spine; Port Harcourt to Maiduguri (1,300 km) passing the Itakpe iron ore deposits; the Itakpe to Warri link (300 km) connecting ore to steelworks to port – the industrial heart of NSRTI; Calabar to Lagos along the coast; Kano to Maiduguri across the north; and 1,000 kilometres of branch and urban connections. All 5,000 kilometres are in 1,435 mm standard gauge, compatible with global rolling stock and future regional integration.

The revenue numbers

At full operation in Year 15, the network generates approximately ₦1.38 trillion ($1.0 billion) per year in freight and passenger revenues. This is derived from a specific assumption: 80 million tonnes of freight per year at an average haul of 360 kilometres, charged at ₦68.75 per tonne-kilometre ($0.05). That rate is benchmarked against Kenya’s SGR ($0.06 per tonne-km), Ethiopia’s Addis–Djibouti corridor ($0.04–0.06), and South Africa’s Transnet ($0.03) — and it is well below Nigeria’s road freight cost of $0.025 to $0.040 per tonne-kilometre, making rail commercially compelling. Passenger revenue adds ₦323 billion, based on 15 million intercity journeys at an average fare of ₦20,625 ($15). The $1.0 billion total is conservative: Kenya’s 472-kilometre SGR alone generates $200 million per year.

How it gets paid for

Steel mills are structured as independent special-purpose vehicles – each financed separately, so one underperforming plant cannot threaten the others. Senior debt from the AfDB and IFC covers 50 percent of each mill. Nigerian pension funds (₦22 trillion under management) take the mezzanine tranche. Nigerian private equity takes 15 percent. A foreign strategic partner – Tata Steel, ArcelorMittal, or SMS Group – brings technology and an off-take agreement for 10 percent. Government grants cover 5 percent.

Rail is financed through a World Bank Programme-for-Results ($8.0 billion), an AfDB facility ($3.0 billion), China EXIM for the northern corridors, and sovereign green bonds backed by future access charge revenues.

By Year 10, all five mills are operating, and Nigeria retains $3.0 to $3.5 billion per year that currently leaves the country as steel import payments. That alone, sustained over 20 years, yields ₦55 to ₦69 trillion ($40 to $50 billion) in cumulative foreign exchange savings – before a naira of rail revenue is counted.

The decision

Nigeria has iron ore, scrap metal, a construction boom, a port congestion crisis, and 220 million people who need steel and railways. There is a workforce gap — Nigeria has only 1,500 to 3,000 registered metallurgical engineers and needs to import senior expertise on knowledge-transfer contracts while building domestic capacity through a National Steel Training Institute and 500 federal scholarships per year. This is a solvable problem. It requires starting now.

The investment case: ₦44.0 trillion ($32.0 billion) in; ₦82 to ₦110 trillion ($59.6 to $80.0 billion) out. The only thing that has ever stood between Nigeria and its steel industry is the decision to build it correctly.

Exchange rate: ₦1,375 = $1 USD (CBN mid-rate, May 2026). The full NSRTI policy paper is available on request.

Olusegun “Rex” Ayo-Adebanjo is a venture capitalist and a graduate of philosophy (B.A. Hons, 1989) from the University of Ife, now Obafemi Awolowo University. He holds a law degree from Columbia University, New York (J.D., 1999), where he was a Harlan Fiske Stone scholar and articles editor of the Columbia Business Law Review. Prior to venture capital, he practised corporate law in New York at Davis Polk, Clifford Chance, and Sidley Austin. The NSRTI is his original independent policy framework. Contact: [email protected]