When the framework of Nigeria’s largest steel mill was unveiled in the late 60s and early 70s, it was as if the country had woken up to take its place in the League of Nations and was moving on the path of industrialization. But more than 50 years down the line, the hope of that dream has remained in limbo as talks about its revival failed many times.
The Ajaokuta Steel Company, located in Nigeria’s confluence state, Kogi, is unarguably Nigeria’s largest industrial project, envisioned to serve as the ‘bedrock of Nigeria’s industrialisation’.
The decision to kick-start the project could be traced to the year 1967 after a team from the defunct Soviet Union discovered large deposits of iron ore in Itakpe, Kogi state.
In 1975, a contract was signed between the Nigerian government and a Soviet state-owned company, Tiajpromoxport (TPE), and in 1979, under the then executive government of Shehu Shagari, work on Ajaokuta Steel started officially.
At the time, Nigeria became the cynosure of all eyes in the global economy, taking the center stage on academic discourse, as the project was seen as strategic for industrialisation, job creation and foreign exchange saver and earner. It was also envisaged that the project would increase the productive capacity of the nation through its linkages to other industrial sectors by providing materials for infrastructural development, technological acquisition, human capacity building, income distribution, regional development and employment generation.
The Ajaokuta steel mill has a vast complex site on 24,000 hectares and cost Nigeria about an estimated $8 billion dollars to build, according to data in a documentary by Qatar-funded broadcast agency, Al Jazeera.
The steel mill has a 68-kilometer road network and another 24-kilometer road network underground, and known to be the country’s biggest mineral resource investment with the coke oven and byproducts plants, larger than all refineries in Nigeria combined.
The project was closely situated in a location that makes it almost independent of imports as 80 percent of the raw materials needed are within the factory’s 60 kilometer radius. In order to supply the Ajaokuta Steel Mill with raw materials and connect it with the world market, a contract was awarded in 1987 for the construction of Nigeria’s first standard gauge railway, from the iron mines at Itakpe to the steel mill at Ajaokuta. There was also the dredging of the river Niger and an establishment of an inland port at Lokoja and Baro, to facilitate movement of the material.
Ajaokuta has the capacity to produce 10 million metric tons (MT) of steel per annum from its 43 different plants. This would have been a game changer for Nigeria to take the front seat among steel producers in the world.
Data from the World Steel Association (WSA) on steel production by countries shows that South Africa produced about of 6.1 million tons of steel in 2016, while Egypt (Cairo) produced 5 million tons in the period.
China, which is the world’s largest producer of steel, churned out 808.4 million MT, about 50 percent of the global steel output in the period, while Japan and India produced 104.8 and 95.6 million tons respectively within the period, putting both nations as second and third respectively.
While the Ajaokuta project would directly employ about 10,000 staff at the first phase of commissioning, the upstream and downstream industries were supposed to engage not fewer than 500,000 employees.
But it wasn’t long that hopes from this ambitious project were short-lived due to lack of political will, corruption and the juicy revenue from oil, which made the government less bothered about the project.
Successive governments turned blind eyes to the big dreams of the Ajaokuta Steel project as the country enjoyed sweet dollars coming from proceeds of crude oil sales.
That didn’t make Nigeria better. It rather made the country a mono-product economy that depends on only oil alone as the major source of its revenue.
In the 2000s, the oil sector accounted for over 85 percent of FX earnings and about 70 percent of the entire revenue of Nigeria, while the mines and steel industry was abandoned.
According to the Manufacturers Association of Nigeria (MAN), Ajaokuta could easily have supplied over 50 percent of inputs to several companies in the country. It could also have enabled Nigeria to become steel sufficient and a major exporter of the product across the continent.
The urgent need to diversify the economy away from the oil sector became more paramount in 2016 when prices of crude oil crashed to as low as $30 per barrel while average daily oil production fell to 1.28 million barrel on destruction of oil pipelines by Niger Delta militants.
The deleterious effects of this were almost six quarters of negative growth, falling government revenues and an acute dollar shortage that led to the devaluation of the naira.
This made the Nigerian government start looking at other sources than oil to grow its economy.
Although Africa’s biggest economy is still largely dependent on oil, discussions focusing on non-oil sector like mines and steel industry and the agric sectors are gradually gaining government attention and intervention.
Ajaokuta steel, a project, which started off 50 years ago, and which as of 1994 was said to have reached up to 98 percent completion level, is still uncompleted and has not produced a single sheet of steel since its creation. It is one of such that would help in giving the Nigerian economy a facelift. Incidentally, as reported by BusinessDay in 2019, some export grants were allocated to the complex last year despite that it was not even producing anything.
Nigeria will be signing a Memorandum of Understanding (MoU) with the Russian government to facilitate the completion of Ajaokuta Steel before the end of January, according to Olamilekan Adegbite, minister of Mines and Steel Development.
Speaking in an interactive session with journalists in Lagos, Tuesday, Adegbite said the completion would be on a government-to-government basis.
The MoU, he said, was a fallout from a trip made by President Muhammadu Buhari to Russia in October last year.
“By the end of this month, an MoU with the Russian government will be signed in order to enable us complete the project,” he said.
According to the minister, part funding for the project would come from Afreximbank while the repayment would come from the Ajaokuta project when it starts operations fully.
Afreximbank will be pumping in $1 billion while the Russian government is bringing in $460 million with an interest payment of less than five percent, the minister said.
He noted that the project would be on Built, Operate and Transfer (BIT) basis. The Russian government would complete the project, operate it for an agreed period of time and then transfer it to the Nigerian government.
On the benefit of the project, he said it would create jobs for the country’s population and help in achieving the government’s mandate of lifting over 100 million people from poverty in 10 years.
Nigerians expect the completion of the project and will be happy to see that all legal cases are fully resolved before the Russian deal. Also, Nigerians will be happy to see that the federal government stops spending public funds on Ajaokuta which has failed to live up to expectations. More so, Nigerians want the National Assembly not to stall this arrangement.
Michael Ani
